Separating building contracts from agreements to appoint a building certifier
From 1 October 2019, a new regulation will help consumers by separating the contract for building work from authorising someone to act on the owners' behalf in relation to the building certifier. Read more...
Before engaging a builder or building company for construction work, have your plans and define your specifications. If you are hiring a business to both design and construct the building, have your requirements and budget set.
Before you choose a builder:
- get at least three different quotes for the job
- view the builder’s previous projects or talk to their previous clients if possible
- read the fine print of any quote or contract
- ask lots of questions
- be clear about arrangements for contract variations or other changes
- understand who is responsible for arranging approvals and certification
- be clear about fees and costs
It can also be a good idea to get independent legal and/or financial advice before signing a contract.
It is important that you understand and are happy with all the details in your building contract, or contract to buy off-the-plan. If you do not understand what is included or are not sure of your responsibilities and rights, you should not sign it.
To help avoid disputes, contracts for building work should be made in writing.
Important inclusions in a contract are:
- it is signed and dated by you and any other parties to the contract
- your name as owner and the names of any other parties to the contract
- the address where the work is to be carried out
- the start and completion dates
- the payment arrangements
- the plans, specifications and inclusions
- the total contract price and provisions relating to any contract variations
- any specific requirements you have negotiated
It is in your best interest to ensure that the work that has been agreed to is stated fully in the contract. This will help prevent any misunderstandings and minimise the risk of potential disputes. It is important that you are aware who you have entered into the contract with, whether it is directly with the licensed builder or with another party who will arrange for a licensed builder to do the work
For some residential building work, your contract may also include, or be taken to include, a statutory warranty.
Payment arrangements and costs
Most building contracts are called ‘fixed price contracts’, but the final contract sum can vary due to fluctuations in what are known as prime cost and provisional sum items. Find out more about building costs.
The contract should detail the stage of completion when payment is required. If you are not sure what work is included in each stage, such as lock up stage, ask for an explanation in writing or in the contract.
For work covered by residential building insurance (sometimes called warranty insurance), it’s a good idea to keep stage payments at or close to the maximum you can claim. In the ACT, this is $10,000 for a deposit for work, and $85,000 for completed work.
You can negotiate with your builder to make sure that no stage exceeds this amount, whilst still ensuring you are not overpaying for a stage. This may require the negotiation of additional stages.
Other than the initial deposit, it is important to never pay for a stage of building work before it is completed as this may expose you to financial risk if the builder goes into administration, fails to complete the job, or does not complete the job to the agreed specifications.
You should also make sure that if your building certifier is inspecting a stage of building work, they are satisfied the work complies with approved plans and the building code, prior to payment.
Your project may also be subject to statutory warranties.
If things go wrong
In the unfortunate situation where there is a dispute between you and your builder or other practitioner, there are options for you to resolve your dispute or make a complaint.
Find out about:
- organising approvals
- licensed construction practitioners
- regulatory fees
- managing construction
Contact us for more information.