Browse Forums Building A New House Re: Building price increases 3Nov 18, 2021 11:54 am Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 5Nov 18, 2021 12:17 pm Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 7Nov 18, 2021 8:30 pm Ashington Homes Just reading about the Privium collapse in Queensland and it wouldn't surprise me if we see similar ones in NSW. For all the builders who have signed construction contracts with customers ( most of them have very low net margins prob 4-5%) if you have hundreds of contracts locked in and prices go up by 50%, the math just doesn't work. Hi Simeon and all, Isn't there is a clause in a MBA standard contract to allow the builders to pass the increased cost to the owners? How can the builders get bankrupt if they are always able to do that? This clause makes me very worried as a homeowner, indeed. I quote the clause here. Many thanks for the advice. 13. DELAYS AND EXTENSIONS OF TIME a) The Builder is entitled to a reasonable extension of time if the Works are delayed by: i) variations; ii) suspensions under clause 23; iii) inclement weather (including the consequential effects such as inaccessibility to the Site); iv) proceedings taken or threatened by, or disputes with or objections made by neighbouring owners or residents; v) civil commotion or industrial disputes affecting any of the trades employed on the Works or the manufacture or supply of material for the Works; vi) any act, default or omission on the part of the Owner; or vii) anything else beyond the control of the Builder, such as, but not limited to trade contractor shortages or material shortages which affect the Builder’s ability to do the Works. b) The Builder must serve a notice on the Owner within five (5) Business Days of a delay described in clause 13(a) occurring. The notice will identify the extended Construction Period (Appendix A, Item A13) and the extended Date for Practical Completion (Appendix A, Item A10). c) If requested by the Owner, the Builder must supply supporting information as to the cause of the delay as soon as reasonably practicable. d) The Builder is entitled to an increase in the Contract Sum if the delay results in an increase in Actual Costs. Such costs must be submitted to the Owner as a variation notice pursuant to clause 15, to be included in the Builder’s next progress payment claim. Re: Building price increases 8Nov 19, 2021 4:13 am htn2021 Ashington Homes Just reading about the Privium collapse in Queensland and it wouldn't surprise me if we see similar ones in NSW. For all the builders who have signed construction contracts with customers ( most of them have very low net margins prob 4-5%) if you have hundreds of contracts locked in and prices go up by 50%, the math just doesn't work. Hi Simeon and all, Isn't there is a clause in a MBA standard contract to allow the builders to pass the increased cost to the owners? How can the builders get bankrupt if they are always able to do that? This clause makes me very worried as a homeowner, indeed. I quote the clause here. Many thanks for the advice. 13. DELAYS AND EXTENSIONS OF TIME a) The Builder is entitled to a reasonable extension of time if the Works are delayed by: i) variations; ii) suspensions under clause 23; iii) inclement weather (including the consequential effects such as inaccessibility to the Site); iv) proceedings taken or threatened by, or disputes with or objections made by neighbouring owners or residents; v) civil commotion or industrial disputes affecting any of the trades employed on the Works or the manufacture or supply of material for the Works; vi) any act, default or omission on the part of the Owner; or vii) anything else beyond the control of the Builder, such as, but not limited to trade contractor shortages or material shortages which affect the Builder’s ability to do the Works. b) The Builder must serve a notice on the Owner within five (5) Business Days of a delay described in clause 13(a) occurring. The notice will identify the extended Construction Period (Appendix A, Item A13) and the extended Date for Practical Completion (Appendix A, Item A10). c) If requested by the Owner, the Builder must supply supporting information as to the cause of the delay as soon as reasonably practicable. d) The Builder is entitled to an increase in the Contract Sum if the delay results in an increase in Actual Costs. Such costs must be submitted to the Owner as a variation notice pursuant to clause 15, to be included in the Builder’s next progress payment claim. That's a fair question. I haven't seen the MBA contract before so not sure which areas this contract is used in. As far as I am aware, in NSW the majority of builders use the HIA contract with a smaller number using the NSW Fair Trading contract. The standard HIA contract and the NSW Fair Trading contracts don't include this clause, and are Lump Sum Contracts which means that other than new Govt taxes, or variations by the owner or latent conditions, the contract price is the total price payable. The builder has the risk of trades and material pricing. There are possibly some amended HIA contracts that have a clause that allows the builder to put up their price, which is why if the builder tries this, always get a specialist construction lawyer to give you advice. But speaking to industry colleagues, there is wide agreement that none of us have ever seen market conditions like these, and that there is a real risk of builders who have sold building contracts or land and housing packages on fixed contracts 12 months ago, will struggle to deliver these without having a mechanism to raise prices significantly. My personal opinion is that over the next 6 -12 months we are going to see a greater number of builders default and insurance claims increase. I have been running my NortH Ryde duplex blog, we are building 4 duplexes in the area and I think we have pretty tight pricing and we run really low overheads. I know what I can buy materials for and we negotiate hard, but I hear about project home companies who are still selling packages for half of our prices. Half!! I know what concrete costs, what timber costs, what roofing costs etc and it's beyond my comprehension how this is feasible. I know of one builder who is offering duplexes at $1000/sqm, They must be operating on a super low margin high volume operation where they need to keep selling lots of volume to fund their overheads, dont want to use the term ponzi but it has to be similar. As long as you keep that volume of deposits coming in you can stay ahead of invoices for a while but eventually it has to collapse. But then on the other hand, customers need to be slightly aware of what things costs and know that if you are signing a building contract for $1000/sqm it has to be too good to be true. Anyway, I could talk about this all day. Best way to avoid issues is have your builder do what we do and go to trade pricing just before you start building so you are getting a fair market price in your contract. Cheers Simeon Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 9Nov 19, 2021 7:47 am Ashington Homes htn2021 Ashington Homes Just reading about the Privium collapse in Queensland and it wouldn't surprise me if we see similar ones in NSW. For all the builders who have signed construction contracts with customers ( most of them have very low net margins prob 4-5%) if you have hundreds of contracts locked in and prices go up by 50%, the math just doesn't work. Hi Simeon and all, Isn't there is a clause in a MBA standard contract to allow the builders to pass the increased cost to the owners? How can the builders get bankrupt if they are always able to do that? This clause makes me very worried as a homeowner, indeed. I quote the clause here. Many thanks for the advice. 13. DELAYS AND EXTENSIONS OF TIME a) The Builder is entitled to a reasonable extension of time if the Works are delayed by: i) variations; ii) suspensions under clause 23; iii) inclement weather (including the consequential effects such as inaccessibility to the Site); iv) proceedings taken or threatened by, or disputes with or objections made by neighbouring owners or residents; v) civil commotion or industrial disputes affecting any of the trades employed on the Works or the manufacture or supply of material for the Works; vi) any act, default or omission on the part of the Owner; or vii) anything else beyond the control of the Builder, such as, but not limited to trade contractor shortages or material shortages which affect the Builder’s ability to do the Works. b) The Builder must serve a notice on the Owner within five (5) Business Days of a delay described in clause 13(a) occurring. The notice will identify the extended Construction Period (Appendix A, Item A13) and the extended Date for Practical Completion (Appendix A, Item A10). c) If requested by the Owner, the Builder must supply supporting information as to the cause of the delay as soon as reasonably practicable. d) The Builder is entitled to an increase in the Contract Sum if the delay results in an increase in Actual Costs. Such costs must be submitted to the Owner as a variation notice pursuant to clause 15, to be included in the Builder’s next progress payment claim. That's a fair question. I haven't seen the MBA contract before so not sure which areas this contract is used in. As far as I am aware, in NSW the majority of builders use the HIA contract with a smaller number using the NSW Fair Trading contract. The standard HIA contract and the NSW Fair Trading contracts don't include this clause, and are Lump Sum Contracts which means that other than new Govt taxes, or variations by the owner or latent conditions, the contract price is the total price payable. The builder has the risk of trades and material pricing. There are possibly some amended HIA contracts that have a clause that allows the builder to put up their price, which is why if the builder tries this, always get a specialist construction lawyer to give you advice. But speaking to industry colleagues, there is wide agreement that none of us have ever seen market conditions like these, and that there is a real risk of builders who have sold building contracts or land and housing packages on fixed contracts 12 months ago, will struggle to deliver these without having a mechanism to raise prices significantly. My personal opinion is that over the next 6 -12 months we are going to see a greater number of builders default and insurance claims increase. I have been running my NortH Ryde duplex blog, we are building 4 duplexes in the area and I think we have pretty tight pricing and we run really low overheads. I know what I can buy materials for and we negotiate hard, but I hear about project home companies who are still selling packages for half of our prices. Half!! I know what concrete costs, what timber costs, what roofing costs etc and it's beyond my comprehension how this is feasible. I know of one builder who is offering duplexes at $1000/sqm, They must be operating on a super low margin high volume operation where they need to keep selling lots of volume to fund their overheads, dont want to use the term ponzi but it has to be similar. As long as you keep that volume of deposits coming in you can stay ahead of invoices for a while but eventually it has to collapse. But then on the other hand, customers need to be slightly aware of what things costs and know that if you are signing a building contract for $1000/sqm it has to be too good to be true. Anyway, I could talk about this all day. Best way to avoid issues is have your builder do what we do and go to trade pricing just before you start building so you are getting a fair market price in your contract. Cheers Simeon Thanks Simeon, Even in the HIA contract, there is a clause similar. This is in Canberra though. Clause 22. Delays and extensions of time 1. The completion time will be extended if the building works are delayed because of:(a) a variation; (b) any suspension of the building works beyond the builder's control or under the contract; (c) bad weather conditions that affect the building works; (d) disputes with neighbouring owners or residents or proceedings brought or threatened by them, that are out of the builder's control; (e) civil commotion or industrial action affecting the work of sub-contractors, tradespeople, a manufacturer or a supplier of materials for the building works; (f) anything done or not done by the owner; (g) delays in getting any approvals that are out of the builder's control; (h) the industry shutdown during the 25 day period beginning on or about 22 December each year; (i) delay in the supply of materials selected by the owner; (j) an 'act of God', fire, earthquake, or explosion; (k) any discrepancy in the plans and specifications which is not the fault of the builder; or (l) the need for a survey of the site. 2. The builder must notify the owner in writing within 5 days of becoming aware that the building works will be delayed. The builder must set out in the notice the reasons for the delay and how much extra time is needed. 3. Except for the industry shutdown referred to in Clause 22.1(h), the builder shall be entitled to an increase in the contract price, but only if the delay results in an increase to the costs of the builder. The builder must include this amount in the next progress claim. Re: Building price increases 10Nov 19, 2021 8:13 am Htn2021 Can you email me that contract as a whole as it is different than the 2 HIA contracts I have in my possession? Also need to see what is allowed for in the variation clause as that is very relevant. My email is simeon@ashingtonhomes.com.au Seems that the HIA contract is getting modified builder by builder, could also be a new or older version, but what that tells me is that when you find a builder who uses that contract, get that deleted. However: Unless I am not reading it correctly I can't see how it can be interpreted to give the builder the right to just increase their price because supplier prices have increased. That goes completely against the intent of a lump sum contract maybe thats the point My interpretation is that reads that costs can increase in the following circumstances: 1. Variations - without reading the variation clause you would assume that they would be the standard by the owner or latent conditions 2. Civil unrest & Industrial disputes 3. Disputes with neighbours 4. Materials supplied by the owners 5. Delays in council approvals 6 Discrepancies in plans supplied by the owner 7. Acts of god 8. Weather Part 3 is basically saying that if any of these events cause an increase in price then the builder can make a claim. It doesn't say that if material prices increase or labour prices increase builders can pass on these costs. Lets get John the legal experts advice on this. If I am wrong, this would mean I could start quoting jobs at half price to win them and then when I cant find tradespeople to build the half price homes we could claim a shortage of tradespeople and submit a variation. Maybe you have found a loophole please email your contract as I want to compare against my versions and check out the variation clause. Final thought, have a read of the NSW Fair Trading contract and you will see why I am a big advocate for it. Cheers Simeon Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 11Nov 19, 2021 8:20 am Ashington Homes Unless I am not reading it correctly I can't see how it can be interpreted to give the builder the right to just increase their price because supplier prices have increased. That goes completely against the intent of a lump sum contract maybe thats the point The clients aren't going to test that in court LOL, they have run out of money Besides the govt and regulators are backing this sort of behaviour-> OBG and they can't say we didnt see it coming? What's really sad is they are spruiking inflation is around 3%? If you are homeless it's 100% (humour) my2c Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Building price increases 12Nov 19, 2021 8:23 am It will be pretty hard for any builder to rely on those clauses if the owner disputes the delay. They require notice to be provided within 5 days of the builder becoming aware of a delay. The delays attributed to material shortages have been in newspaper articles for the last 12 months. A builder waiting until they're on site and slab down before claiming a delay in timber likely hasn't been proactive enough to rely on those clauses, any builder has known about the delays for months. Re: Building price increases 13Nov 19, 2021 8:24 am StructuralBIMGuy Ashington Homes Unless I am not reading it correctly I can't see how it can be interpreted to give the builder the right to just increase their price because supplier prices have increased. That goes completely against the intent of a lump sum contract maybe thats the point The clients aren't going to test that in court LOL, they have run out of money Besides the govt and regulators are backing this sort of behaviour-> OBG and they can't say we didnt see it coming? Chris I don't disagree with you in terms of clients not pursuing it court, but being the former GM of one of these companies I never came across anyone who ever had this interpretation either. These guys spend heaps on lawyers and if it was possible to unilaterally increase prices during a build they would be doing it all the time. Cheers Simeon Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 14Nov 19, 2021 8:26 am Spazzen It will be pretty hard for any builder to rely on those clauses if the owner disputes the delay. They require notice to be provided within 5 days of the builder becoming aware of a delay. The delays attributed to material shortages have been in newspaper articles for the last 12 months. A builder waiting until they're on site and slab down before claiming a delay in timber likely hasn't been proactive enough to rely on those clauses, any builder has known about the delays for months. Agreed. But the only significant delay of materials at the moment where I am is framing timber and some various selections of taps and toilets that are in containers somewhere. The main issue is that supply prices have increased, and under the design and construct concept ie the builder designs and constructs you a home, the risk is 99% on the builder. Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 15Nov 19, 2021 8:45 am Ashington Homes These guys spend heaps on lawyers and if it was possible to unilaterally increase prices during a build they would be doing it all the time. Cheers Simeon We both have been in the industry long enough, to know what really goes on.... Builders can delay the projects, Change things by variation to the contract, etc,etc Clients always pay Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Building price increases 16Nov 19, 2021 8:50 am StructuralBIMGuy Ashington Homes These guys spend heaps on lawyers and if it was possible to unilaterally increase prices during a build they would be doing it all the time. Cheers Simeon We both have been in the industry long, to know what really goes on.... Builders can delay the projects, Change things by variation to the contract, etc,etc Clients always pay Lol true! we are on the same side of this discussion Chris. The industry is so slanted away from consumers, and I appreciate how you advocate for the mums and dads who arent experts Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Building price increases 17Nov 19, 2021 9:02 am Ashington Homes I appreciate how you advocate for the mums and dads who arent experts You and I are on the same page Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Building price increases 20Nov 19, 2021 2:16 pm Attached are the sample HIA and MBA contracts from two different builders in Canberra. See Clause 13 in the MBA and Clause 22 in the HIA Link: https://drive.google.com/drive/folders/ ... sp=sharing Wow I hadn't realised things had gotten that pricey in just a couple of years since I built, that is crazy with how much land is now costing if you aren't lucky enough to… 3 7439 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35869 Just to makea point about this, an approach that some people have found sucessful in negotiating these rises down, Is to provide some workings to the builder, specifying… 4 82089 |