Builder Contract Negotiations

nfaisal · May 08, 2020 3:18 am

Hello Gurus,
I am new to this forum, so plz excuse me if you find some of my questions dumb/stupid.
I am about to sign my building contract with one of the Volume builders in Victoria. They have sent me a modified version of HIA contract. Here are some areas where I need some guidance from the experts on this forum;

1: I have an FSC agreed already. But they want me to sign a clause which covers them for extra cost in case some contamination is discovered on site. My question is, aren't they responsible for investigating the same during Foundations data collection ( Via soil testing) prior to signing a contract with me.

2: They have recommended a building Surveyor from their side in the contract and want me to sign him as if I had appointed him. is there any difference between the Site surveyor and a site inspector( that I was hoping to appoint for stage wise inspections).
Also if a building surveyor is needed, who pays for it? Builder or owner.
How much cost are we talking abt here in case I have to pay for him.

3: They want me to sign the final stage and make the final payment but without installing the appliances. They are saying that they will install the appliances later when I have settled in to prevent theft and damage. Is this a regular practice as I find this strange.

4: Is it normal for builders to ignore Method 1 and force the owners into signing on Method 2.

5: What sort of delay penalties are a normal practice. They are suggesting 250/week which is much lower than my actual cost. What is a recommended and achievable number?

6: Is it normal in today's time that the builder is requesting for 300+ days to build a house.

7: Who is responsible for Planning approval. They want me to do this.

8: How much time is reasonable nowadays to get a bank to approve finances after you sign the contract.

Too many questions

but I am really hoping for some help and feedback. Many thnx Guys!

SaveH2O · May 08, 2020 9:19 am

2. If you are in Victoria, the builder is trying to circumvent legislation and what they are trying to do is illegal. Unfortunately, many project builders do this and are only successful because of the weakness (and maybe laziness) of those who have supposed positions of power within the VBA.

https://www.vba.vic.gov.au/consumers/ho ... g-surveyor

A building surveyor is a building surveyor...full stop. There is plenty of information online about their role.

Site inspector? There are building inspectors who work with the building surveyor and there are building consultants who do stage inspections. It is the latter that you privately employ to do stage inspection reports. Building surveyors and building inspectors have little concern for adherence to Standards or the quality of workmanship but these are areas that a good building consultant concentrates on.

KameGame · May 08, 2020 10:15 am

I've recently been through this, so here's my experience.

1.My builder did a few projects in my estate, including my next door neighbour. They knew about the soil classification & report beforehand and included relevant costs in the fixed site costs.

2. Same in my case, this is the response I received "Every builder will have their on preferred surveyor of course, if we rely our clients to find their own, we will expect a massive delay. Now, it is the clients prerogative to get their own surveyor if they wish, however, the following points will need to be considered prior in doing so"
Their reasons were Cost Factor, Delays & an owner's ability to get the best qualified surveyor. I even got tis reviewed with a private contractor reviewer and it seem this has become a common practice now.

3. I've not come across this

4.Method 1, the builder can change the amount they charge per stage. My builder did but the Lender knocked back to defaults.

5.300/week. Most like to stick to defaults, you can negotiate with them.

6.Is it a double storey, still 300+ contingent days is high.

7.You should have it already if it's an established estate. If not, it's the owner's liability.

8.I had 14 day on contract, changed that 28 days post discussing with them. But my builder was not fussy at all, due to Christmas /New Year my approval came in about 40 days since signing the contract. There were no issues.

Norfolk · May 08, 2020 10:38 am

5. Liquidated damages - according to the HIA this amount is fully negotiable (even more so in the current depressed market), if the builder is confident they can build your home to the agreed quality within the contract time they should have no problem agreeing to a realistic amount here to cover your particular financial costs of delay. Ask them to back themselves.
6. The Australian Institute of Quantity Surveyors estimates a typical $500k house would normally take 23 weeks to construct. Each $100k adds or subtracts 1 week to this estimate. 300 days is very generous. If you agree to 300 days they should have no problems agreeing to realistic liquidated damages if they exceed this. Most building materials and services are sourced locally so COVID19 supply issues should not be a concern.

KameGame · May 08, 2020 11:21 am

Norfolk

5. Liquidated damages - according to the HIA this amount is fully negotiable (even more so in the current depressed market), if the builder is confident they can build your home to the agreed quality within the contract time they should have no problem agreeing to a realistic amount here to cover your particular financial costs of delay. Ask them to back themselves.
6. The Australian Institute of Quantity Surveyors estimates a typical $500k house would normally take 23 weeks to construct. Each $100k adds or subtracts 1 week to this estimate. 300 days is very generous. If you agree to 300 days they should have no problems agreeing to realistic liquidated damages if they exceed this. Most building materials and services are sourced locally so COVID19 supply issues should not be a concern.

Is this 23 calendar weeks ? Builders calculate week to 5 work days, which make it ~32 calendar weeks.

nfaisal · May 08, 2020 11:28 am

SaveH2O

2. If you are in Victoria, the builder is trying to circumvent legislation and what they are trying to do is illegal. Unfortunately, many project builders do this and are only successful because of the weakness (and maybe laziness) of those who have supposed positions of power within the VBA.

https://www.vba.vic.gov.au/consumers/ho ... g-surveyor

A building surveyor is a building surveyor...full stop. There is plenty of information online about their role.

Site inspector? There are building inspectors who work with the building surveyor and there are building consultants who do stage inspections. It is the latter that you privately employ to do stage inspection reports. Building surveyors and building inspectors have little concern for adherence to Standards or the quality of workmanship but these are areas that a good building consultant concentrates on.

Thnx Mate! Do you have any idea about the cost of employing the Building Surveyor . My builder has asked me to bear the cost without mentioning it.

nfaisal · May 08, 2020 11:31 am

KameGame

I've recently been through this, so here's my experience.

1.My builder did a few projects in my estate, including my next door neighbour. They knew about the soil classification & report beforehand and included relevant costs in the fixed site costs.

2. Same in my case, this is the response I received "Every builder will have their on preferred surveyor of course, if we rely our clients to find their own, we will expect a massive delay. Now, it is the clients prerogative to get their own surveyor if they wish, however, the following points will need to be considered prior in doing so"
Their reasons were Cost Factor, Delays & an owner's ability to get the best qualified surveyor. I even got tis reviewed with a private contractor reviewer and it seem this has become a common practice now.

3. I've not come across this

4.Method 1, the builder can change the amount they charge per stage. My builder did but the Lender knocked back to defaults.

5.300/week. Most like to stick to defaults, you can negotiate with them.

6.Is it a double storey, still 300+ contingent days is high.

7.You should have it already if it's an established estate. If not, it's the owner's liability.

8.I had 14 day on contract, changed that 28 days post discussing with them. But my builder was not fussy at all, due to Christmas /New Year my approval came in about 40 days since signing the contract. There were no issues.

Thnx a lot dear. very helpful.
6) Its a Single storey house. 550 sq me land and 29 squares of constructed area.

nfaisal · May 08, 2020 11:35 am

Norfolk

5. Liquidated damages - according to the HIA this amount is fully negotiable (even more so in the current depressed market), if the builder is confident they can build your home to the agreed quality within the contract time they should have no problem agreeing to a realistic amount here to cover your particular financial costs of delay. Ask them to back themselves.
6. The Australian Institute of Quantity Surveyors estimates a typical $500k house would normally take 23 weeks to construct. Each $100k adds or subtracts 1 week to this estimate. 300 days is very generous. If you agree to 300 days they should have no problems agreeing to realistic liquidated damages if they exceed this. Most building materials and services are sourced locally so COVID19 supply issues should not be a concern.

Thnx Norfolk!
6) Does this 23-week benchmark include weekends/holidays/provision for weather-related issues etc?

Norfolk · May 08, 2020 11:59 am

Good question! The document I have "The Built Environment Economist" by AIQS does not detail this however I would expect their estimate to include weekends. Public holidays like easter and xmas / new year are known non work periods and can be added by to the base 23 weeks by the builder. Weather related delays are not included as these are added to the agreed contract time as they occur, subject to timely advice and justification of the delay by the builder. They cannot just look at the area's rainfall records and claim rain delay days at the end, although many builders will try this on.

nfaisal · May 08, 2020 8:14 pm

One more question guys; What happens when they finish a stage and send you a letter of confirmation. If you inspect( via building specialist of your own) and find issues, does the clock stop until they rectify these faults?
They have proposed 7 days for the payment after issuing a notice of a stage completion.

Norfolk · May 09, 2020 7:19 am

nfaisal This is a good question for the 3rd party inspector members active on this forum. I understand, however, that based on the HIA contract, the builder is not obliged even to read your inspectors report, respond to their professional opinion or rectify any faults you identify during the various build stages before PCI. They are required to fix 'defects' before final payment though but many ignore, avoid, bluff and delay doing this. Once each stage is deemed complete by the builder you are required to make the progress payment, irrespective of the inspection. The clock does not stop on contract timeframe. If you delay payment you are breaching the contract. If you want to make your progress payments contingent upon faults identified by your inspector being fixed before proceeding then you will need to get a variation included in the contract for this. Its unlikely a typical volume builder will agree to this. Without this type of variation there are ways to dispute that the progress stage is complete and therefore payment is not due but you will need good legal advice and balls to challenge a builder this way as they are very experienced at this.

KameGame · May 09, 2020 10:26 am

Norfolk

@nfaisal This is a good question for the 3rd party inspector members active on this forum. I understand, however, that based on the HIA contract, the builder is not obliged even to read your inspectors report, respond to their professional opinion or rectify any faults you identify during the various build stages before PCI. They are required to fix 'defects' before final payment though but many ignore, avoid, bluff and delay doing this. Once each stage is deemed complete by the builder you are required to make the progress payment, irrespective of the inspection. The clock does not stop on contract timeframe. If you delay payment you are breaching the contract. If you want to make your progress payments contingent upon faults identified by your inspector being fixed before proceeding then you will need to get a variation included in the contract for this. Its unlikely a typical volume builder will agree to this. Without this type of variation there are ways to dispute that the progress stage is complete and therefore payment is not due but you will need good legal advice and balls to challenge a builder this way as they are very experienced at this.

Absolutely right, Private Inspections are more for your own satisfaction but does not guarantee the builder will follow up on fixing any of the defects reported unless they’re too evident. These days few builder charge you an administration fee when you hire an inspector as a deterrent. If you’re
planning on hiring a private inspector use them wisely at particular stages rather than having them inspect at every stage.