Browse Forums Building A New House 1 Feb 17, 2007 3:31 pm HI All,
New to the new house building plot. Am interested in understanding the typical gotcha's that you need to keep a mind when negotiating (and hopefully signing) the terms of the final building contract. I'm sure that there are many within the forum who have Had difficulties at various stages of the building contruction where due to ambiguty or differing interpretations of various clauses within the contract. Additionally, I'm sure that there are many who may have wished they had included various clauses in retrospect. I'm sure that a compilation of such nature would be useful to most people, especially those who are newbies like myself ST Re: Building Contract Gotcha's 2Feb 19, 2007 3:34 pm Hi Madison,
This is probably going to be very general but just ensure that you have everything how you want it before you sign a contract down to the wall socket in the garage. Ask how much a "varation" will cost after you sign. For example for us it was $250 for an internal varation E.g we'd like feature tiles under our mirrors now. (Builder) Okay that $60 dollar strip is going to cost you $250 before we do anything plus labour plus materials = $600. Structual variation are $1000 bucks. I've also be informed that some builders won't do variations after the contract is signed. Another example was we wanted the house close to our boundary which required a low retaining wall 700cm . In QLD you don't need a engineered design for one that high( on our salesmans advise). But when it went to council it came back that it did have to be engineer designed and was going to cost $5000 plus as it was within 1.5m of existing wall. But if we moved the house 1m we didn't need one , so we moved the house. So because we had to resubmit to council and have the plans redrawn this was a variation and therefore $250 plus design fees plus resubmission fees. We aruged the point and had them waived but we still had to pay for resubmission. Another thing is site access . Your builder "owns" your block until he's finished building your house , our contract has clauses that you can't talk to subbies or go on site with out builders permission. It hasn't been a problem yet , but if you want to install your own A/C or run cabling it might be. We're doing our own driveway and tiling so that has to wait until the house is handed over (this we knew) ,but the cut of our block has meant we need a retaining wall(not the one above), so this can't be built until after the house is done, which isn't a drama but it would have been nice to do it before the house went up. We thought we had everything covered, so i guess my advise to you is make sure you know your house back to front before you sign the final contract as it'll cost you to do it afterwards. We're newbies as well and it's a long road so if you want to mail me direct feel free and remember they work for you, although at times it makes you wonder. Cheers :D Re: Building Contract Gotcha's 3Feb 19, 2007 8:42 pm That's interesting about the builder 'owning' your block during construction. I never thought of that. I guess that's fair as they are responsible for any accidents that happen on site. They can't have unauthorised people wandering around the site.
I wander if any builders use this excuse to keep the owners away from inspecting ******* works? Perhaps there should be a clause in the contract stating that you and your consultants/inspectors/lawyers/accountants/hairdresser have 24 hr access to the site, as long as they abide by the site rules. But then, the builder could make up some stupid rule to keep you out if he wanted. Re: Building Contract Gotcha's 4Feb 19, 2007 9:11 pm One thing to ensure is that there is a penalty (liquidated damages) for late completion.
One person I know had his architect convince him that it was OK to delete this clause in a standard contract since "it is in the builders interest to complete as soon as possible". It took this guy 5 years to have his house finished. One builder in Sydney is setting the liquidated damages rate at $1.00 per day. This may be worse than no clause at all since you "agreed" to a rate. Once you start paying out money, it's important that the building is completed on time. You pay interest on this money and if the building is not completed on time (or a reasonable time afterwards) you're paying interest on whatever you've paid to the builder so far. In addition, you're paying interest on the land component or, if you like to look at it another way, you’re also paying rent. The fair liquidated damages would be interest for the entire cost of funds expended for land + building (or rent + building). This would put liquidated damages at about $100 to $150 per day. Re: Building Contract Gotcha's 5Feb 19, 2007 9:16 pm Hey Bud977
Another issue to consider re the builder owning the site, is the HIA building contract has a clause if you do anything to the house during the construction, the builder can use that to waive the warranty…. That’s a big one… As for the builder owning the site, well...mmmm….If you didn’t pay the rates/water/power….will the builder be pursued for these?? As long as you provide the builder unrestricted access, then I fail to see how you doing some raised garden beds for example...how that will effect things...All I can say discuss this with the builder. Another catch I found is the "time frame for commencement" and the "time frame for completion". You will find after 45 days for the commencement in a lump sum building contract, if not on site the builder can...AND WILL I SAY apply a price increase. After that, contractually, there is no penalty therefore incentive for the builder to get to site. We experienced this and after the price increase had been applied, which I disputed but we settled for 50/50... It still took them over 4 months to get to site despite the General Manager giving me an understanding that we would be to site within 3 weeks from the end of July…On Ste was November 06... And there was nothing else that we had or could do to speed this up, everything had been approved, and all we were told is we are waiting for your job to come out of scheduling… I found that even when I made notations on the building contract, the builder wouldn't accept the contract as they wouldn’t accept ANY notations on the contract. Therefore it's their terms or no way...... Another suggestion is to seek clarification on ALL items listed in the addendum that state “from the builders standard range”. Ask the builder to provide a picture Or whatever as to what is currently within their standard range…. Hope these help, as I think of more, I’ll let you know… that’s because the pre-start experience is one I am trying to arrange from my memory. I must say, our salesman was very helpful with his explanations and knowledge on the contract, but it’s a shame to see his experience hasn’t been extended To the staff in the office. Re: Building Contract Gotcha's 6Feb 19, 2007 9:45 pm Beaner,
You mentioned: "Another catch I found is the "time frame for commencement" and the "time frame for completion". You will find after 45 days for the commencement in a lump sum building contract, if not on site the builder can...AND WILL I SAY apply a price increase. After that, contractually, there is no penalty therefore incentive for the builder to get to site. " This sounds interesting, but I didn't quite catch the meaing. Do you mean that if the builder (or owner?) delays the start by more than 45 days the builder can then charge a price increase and there is no penalty for late start? Re: Building Contract Gotcha's 7Feb 19, 2007 11:25 pm Casa
Yes.... If you have a fixed price...sump sum standard HIA building contract and you are not on site within 45 working days after you sign your final variation.... There is a clause that allows the builder to increase the price...usually citing cost of materials has gone up and there has been an industry price increase and such Delay is beyond their control..... They can and as I said…I suggest they WILL put the price up.. I would be very interested if any others within the forum were to site within 45 days and they were not subject to a price increase?? If they put it up by more than 5%, then you can exercise provisions within the contract to terminate it. You will find 2 things are certain re this... 1) From ALL the numerous people I have spoken too re their experience with various Builders.... The price ALWAYS seems to be under 5%……surprise, surprise…. 2) If you seek to terminate, you will lose your deposit... (I was more than prepared to walk away $2 000.00 dollars short for this experience) But it was the builders subsequent claim for $18 000.00 for loss of profit and preparation of plans that made me think twice. I might say, not withstanding this, I contested that part of the claim and it was only after the General Manager spoke to me and said other than my deposit he would not make any further claims and was happy to part company. He gave me an understanding he was committed to building a quality home for us and he would like the opportunity for him to build our house.... I accepted this…..so we proceeded…. Can’t believe I feel for that....and do you think I can get the GM on the phone again??? In one case, the builder left 9 things out we wanted, they sent the plans...I noted this and posted two days later and they amended them and sent them back over 3weeks later.... And that was a delay I caused???? When you get your license, check with the Shire. I caught our builder CLEARLY ****** as they told me due to a subsequent variation, they had to refile the license and were waiting for that… therefore this was a delay beyond their control.. I telephoned the Shire and confirmed no further license application had been filed by the builder, but as the variation was for tiles, patio brackets and a change in design...not re-positioning… of two windows... the Shire would not require the builder to resubmit the plans and the builder well knows this. When I confronted the builder with this, they retracted their previous statement and said there were mistaken and were about the resubmit the plans. Again, when I informed them the Shire advised there was no need for this... my answer was our plans are in drafting for completion...hopefully in 3 days.... Well 4 weeks later...plans done... builder got his price increase…well we settled for 50/50 as I claimed any delays during the 45 days was 30% attributed to me and the remaining 70% was the builder…some of which was accepted by them…. In order to dispute it further was going to cost $1000.00 in legal fee’s. Simple maths meant it was more than the builder offer of 50/50 and it was on that basis I accepted it. Another point on the increase, the builder must demonstrate that YOU have caused delays beyond the builder’s control. Keep a log of when you receive plans from them and send them back via registered mail. Re: Building Contract Gotcha's 8Feb 20, 2007 8:46 am WOW beaner sounds like you had a real rough trott there.
I must say that that rang true with us as well. Once everything was finialised after being submitted to council twice the builder wanted finance vefication almost immediatly to avoid us delaying the start of the build an incurring a price increase / penalty .The bank dragged there feet as they we waitng for there copy of the plans from the builder yet it was our fault for the delays. So yeap that one threw me, there delays yet it's my fault. Sorry if previous posts implied they "owned" the block , what i meant was they have the liablity insurance on the house they want resticted access so effectivly your not allowed access unless you tell them your going there. But i thought external works was a bit rough, we'll see how we go once we've built a better relationship. I can see there point they don't want you hassling subbies or doing cashies with out there 20% mark up. But also if you do work then it's not covered by there warranty. Casa: we had a $50 dollar a day clause in our contract for late completion which they wouldn't budge on. It was a 210 days completion time with 65 extra for rain and weekends. Madison : I've started a diary of the build on this forum ,we've only just started ,the block got cut last week , just to document any issue we come across if your interested. Cheers Re: Building Contract Gotcha's 9Feb 20, 2007 11:33 pm Hey Marshy….no biggie….. I well knew what you meant by “own the site”….. I just find it hard to come to terms with.
As for rough trot….. Have you seen my other posting under “thoughts on construction quality” I already have some pictures of what I say is poor workmanship by the brickie. ….Perhaps I shouldn’t say - the brickie…… as it appears the builder, Is also happy with his job…to date… therefore it may be more appropriate to say poor workmanship by the Registered Builder – Plunkett Homes. After all, my contract is with Plunkett Homes not the brickie???? Speaking of contract….. isn’t it strange how in most other contracts, the parties agree on the terms mutually acceptable to both and then a contract is Formulated and entered into……but not so with building contracts… It seems to me there are a number of provisions contained within the Building Contract that certainly appear to be “stacked” in the builder’s favour. Another point……. I understand the maximum ceiling for contractual disputes (currently $200 000.00) that allows the “ordinary person”, that is everyday working people, to access a structured forum with a grievance, is under review. I’m looking into this and when I get additional information, I’ll post it…but I would encourage people to support this limit to be lifted. As is the case in Perth, WA with the building boom….. There are a fair percentage of homes over $200 000.00 contract price. Is means…the “Ordinary Mum and Dad” is faced with having to file a claim at the Magistrate’s Court for ANY contractual issue….. It is more complicated… legal fee’s are likely to be higher, the process is not mapped out as well as it is for the “ordinary person” to follow through with and so on. So….for example…if you have a contractual issue…for example…a builder installs something different to the contract during Construction and workmanship is ok…. Builder goes over the construction time etc…. and your contract is over $ 200 000.00, you will not have the benefit of the resolution process of the Builder’s Despite Tribunal….(this is what WA have)…I’d be interested to here what system our Eastern States counterparts have??? You talk about deletions, are they variations or PS and PC adjustments? pleas list them 1 16556 I've decided, after a period of confusion (my building broker told me it's probably not worth it to use a lawyer, but others have said it is a must) that I definitely will… 7 27953 |