Builder charging 14% surcharge delay in start date

Nickstar · Sep 25, 2021 9:28 am

We chose Oracle platinum home a little over 6 months ago to build on a piece of land. We had an anticipated start date of late July but due to DA delay we missed the 4 week grace period by a couple of weeks (I would argue it's been a total mess of council approval etc).

Anyway we get an email asking for 42k because that's the cost of delay (on a 300k home) with no explanation of what is costing that much for the delay. No phone call or anything, just asking is this expected behaviour or should I be worried they either want to cancel the contract or that they might be having money problems?

Ashington Homes · Sep 25, 2021 10:01 am

Nickstar

We chose Oracle platinum home a little over 6 months ago to build on a piece of land. We had an anticipated start date of late July but due to DA delay we missed the 4 week grace period by a couple of weeks (I would argue it's been a total mess of council approval etc).

Anyway we get an email asking for 42k because that's the cost of delay (on a 300k home) with no explanation of what is costing that much for the delay. No phone call or anything, just asking is this expected behaviour or should I be worried they either want to cancel the contract or that they might be having money problems?

Hi Nickstar

Unfortunately this is happening to a lot of people at the moment as building prices have literally gone through the roof in 2021. On average they have increased around 25% since January.

We have seen a doubling in timber costs, so this affects framing, joinery, doors, jambs, skirts and architraves. We have had 2 carpentry crews walk out mid job as they couldn't get the timber for the price they quoted and we had to pay an extra $30-35,000 on each job just to finish.

I know it hurts, but what people don't realise is that a lot of these volume builders are operating on a very low net margin circa 4-5% ( they charge a much higher percentage on variations to try and make up for the low base cost), so I would imagine that if they don't increase prices now they might not be able to finish your build as there are more increases forecast in the coming months with steel and other items.

So from what I am hearing in the volume industry, it's often better to put prices up now and risk customers cancelling so the builders aren't forced to build homes for below cost.

It's very tough I know when you have budgeted for $300,000, but it's the time we are living in.

In fact one of the biggest challenges my business is facing is that of tradies coming down with COVID and not being able to finish the contracts they have signed. Just yesterday my painting crew has been put into quarantine and to meet programs we are having to bring in new crews with higher prices. This eats directly into our bottom line. But there is nothing we can do as we have customers who have booked removalists and we need to finish their jobs.

We cant pass these costs onto customers.

That doesn't excuse them not communicating with you properly, so I am guessing you can always cancel and try your luck with a new builder.

Anyway, unfortunately it is a symptom of the crazy times we are living in and we all have to roll with the punches.

All the best.

Simeon

kelsey · Sep 25, 2021 10:18 am

That seems pretty unreasonable to me. On a 300k build, 42k is like an almost 15% increase.
As the above poster pointed out, they do actually have a right to charge you for the delayed start time (which is ridiculous, as it was outside of your control, but that’s how these contracts are written).
A lot of people are being stung by this at the moment. Builders are taking advantage of the increased wait times around council and bank decisions. You can thank the grants and the building boom.
Have a look at your specific contract, because I know in WA our standard building contracts don’t allow for a price increase of more than 5% of the total build cost in one bill.
I had a quick look at the standard contact for QLD builds (which is where your builder is based) and section 16 of your contract outlines what to do in this situation, but there maybe specific stipulations in your individual contract. At the very least you are entitled to a breakdown of reasonable costs that have caused the increase. If you want to investigate and go ahead with the builder, do not sign anything until they can outline what these reasonable costs are. Make them explain what each part of the 42k is about. Your contract states they have to be reasonable costs, so they should be able to justify it.
Can’t help much more than that unfortunately, but good luck. It’s a hard fight but you may be able to get them to reduce that amount to something more reasonable if you’re willing to fight or push back.

leeleezee · May 17, 2022 7:33 pm

Hi Nickstar - how did you go in the end?