Browse Forums Building A New House 1 Jun 13, 2014 2:23 pm In most cases we speak with people after they have signed their contract. I think the below would give you some handy tips on contracts that you need to know before you sign and could help you from misinterpreting clauses and in most cases help you with the smooth running of the construction of your home with your builder. In most cases a Builder or Contractor will provide you with their contract ( Builders and Contractors usually use the standard HIA Building Contract or a MBAV Building Contract). Unless you have a building lawyer provide you with advice regarding your contract you wont know about the 5 crucial terms of the contract. NUMBER 1: If you vary your Domestic Building Contract after signing the Domestic Building Contract, you will be charged the cost of the variation, builders margin and GST that will be added to the next progress payment payable. If the variation allows for a credit, you will receive the cost of the credit plus GST that will be deducted from your final payment payable. To save yourself a lot of money make sure you remove any items from your Domestic Building Contract that you do not wish to proceed with before you sign the contract. This will save you up to 35% of the builder margin. By removing the item before you sign you will save the cost of the item plus the builders margin and you won’t have to argue about obtaining a credit later on. NUMBER 2: NO CHARGING CLAUSES A Builder or Contractor cannot add in a provision in the Domestic Building Contract which provides the Builder or Contract with an interest in your land that allows them to place a caveat or charge over the title of your land. The Builder or Contractor cannot have any security over your land or the site where the works are being undertaken to pay off any of your debts outstanding to them. Having said that, the Builder or Contractor may ask for a charge independent of the contract that may arguably permit the builder to lodge a caveat over your land. You should never sign any document that seeks to have you charge your interest in any land without first having taken legal advice. NUMBER 3: COST ESCALATION CLAUSES THE BUILDER OR SUB CONTRACTOR MAY RELY ON OTHER PROVISIONS IN THE CONTRACT TO INCREASE THE PRICE OF THE CONTRACT EVEN IF THE CONTRACT IS DESCRIBED AS A FIXED PRICE CONTRACT If you have entered into a lump sum Domestic Building Contract with your Builder or Contractor, it does not mean that the contract price for the works cannot increase. The builder or contractor may still rely on any number of the following standard types of clauses to increase the price of the contract. 1. Increase in Taxes 2. Provisional Sums 3. Prime Cost Items 4. Variations 5. Interest on Overdue Payments 6. Boundary Survey. Be careful of any Provisional Sums in your contract which are for works for which the builder or contractor is unwilling or unable to fix a price, such as rock breaking equipment during excavation . In such circumstances a provisional allowance is included in the contract price if the allowance does not cover the cost of the works and you as the owner or owner builder must pay more. The provisional sum would usually be the Contractor’s or Builder's estimate, wich the law requires to be a reasonable estimate. However sometimes the Domestic Building Contract will provide for an allowance that is insufficient which means that you would have to pay the additional cost of the work together with the builder’s margin, usually 20 per cent or more of the actual cost to the builder of doing the work. Provisional sums should be avoided where possible. Some provisional sums are necessary on occasions but you should be wary where the builder seeks to include more than just a few items of provisional sums or prime cost items (see below). Whilst most builders are reputable and do their best to provide reasonable estimates, sometimes some less scrupulous builders Builders/Contractors who compete may underestimate the provisional sums well aware that the owner will be obliged to pay any excess to them in order to win the contract. NUMBER 4: SPECIAL CONDITIONS Special conditions are those terms that are added to the standard terms and conditions contained in the HIA and MBAV standard form contracts. Usually they are written into the contract bu hand. You should always seek advice before signing a contract with special conditions so that you understand the legal effect of any special condition and whether you should agree or not agree to its inclusion in the contract. NUMBER 5: LIQUIDATED DAMAGES & DELAYS Each stage should have a completion date noted in the Domestic Building Contract. It is often the case that the Builder or Contractor does not provide you with a clear completion date for each stage. Usually the number of days for construction work is stated however no fixed date is noted. The Builder or Contractor must send you a notice requesting an extension of time claim in accordance with the Domestic Building Contract to make sure that they have placed a cap on liquidated damages. What the case usually is, is building work is delayed which could cost you a lot of money and loss if you are renting (as well as holding costs such as interest etc). You should ensure that the amount noted for liquidated damages and the amount you are paying for interest on the cost of building and/or accommodation prior to execution of your Domestic Building Contract to make sure you are covered for any delays. It is most important that you note your liquidated damages since should the matter proceed via the Victorian Civil and Administrative Tribunal, the Tribunal usually does not make any orders in excess of the liquidated damages amount noted on your Domestic Building Contract. Re: What do I need to do before I sign a building Contract? 2Jun 13, 2014 4:13 pm Not all Special conditions are handwritten iespecially witht he bigger contractors Another issue to watch out for is the value of the progress payments many builders tend to want to overclaim on the earlier payments which could leave you short if they go bust. (See http://www.anewhouse.com.au/2012/01/how ... yments-be/ for more information) The Harder You Try - the Luckier You Get ! Web site http://www.anewhouse.com.au Informative, Amusing, and Opinionated Blog - Over 600 posts on all aspects of building a new house. Re: What do I need to do before I sign a building Contract? 3Jan 12, 2015 10:51 pm Hi, I just signed the contract for a double story house with a reputed builder, during sales I was assured it would take only six months to complete, but on the contract they just mentioned 300 days ( including delays) when I spoke about it I was told it is only a standard practice, No where have they mentioned about the build period in the contract, As I was leaving on a overseas project I was compelled to sign the contract, but now I am worried, why do they take such long time, Do I have avenues for claim if they overly exceed. ? Re: What do I need to do before I sign a building Contract? 4Jan 13, 2015 6:22 am shamon Hi, I just signed the contract for a double story house with a reputed builder, during sales I was assured it would take only six months to complete, but on the contract they just mentioned 300 days If it says in the contract 300 days that is going to be the build period. Any assurances pre-contract don't apply once you have 'accepted' the contract. 300 days would be a typical period for a 2 storey house. shamon Hi, Do I have avenues for claim if they overly exceed. ? Only if there is an amount in the contact for liquidated damages, which could well be a nominal amount (see http://www.anewhouse.com.au/2012/01/und ... d-damages/ for a more detailed explanantion. The Harder You Try - the Luckier You Get ! Web site http://www.anewhouse.com.au Informative, Amusing, and Opinionated Blog - Over 600 posts on all aspects of building a new house. Re: What do I need to do before I sign a building Contract? 5Jan 20, 2015 4:02 pm Can someone advise what evidence needs to be provided with provisional sum reconciliation? I know they need to show receipts, but how can they prove the actual variance if their contractor has just invoiced them in a single invoice? For example invoice says 10 loads of soil removal and you are charged in full for this. This is for the whole job, how must they demonstrate that they only allowed for say 6 and you really only need to pay for 4? Would the law consider actual PS cost at 4 times higher than the contract allowance to be an accurate estimate? 1 2992 You talk about deletions, are they variations or PS and PC adjustments? pleas list them 1 16571 I have posted this before: We hired Darbecca to do every stage inspection, and I strongly recommend them to anyone that asks me. They were amazing. Thorough reports… 2 4518 |