Building can be a complicated area of law, and many builders either don’t know or don’t want to tell you what your rights are. However, you’ll be in a much better position to negotiate with the builder if you know the answers to the following key questions:
- What do I need to know when signing building contracts?
- What should I check before building commences?
- When should I pay the builder while the works are in progress?
- When do I pay the final payment to the builder?
- Is the builder allowed to charge extra for variations?
- Is the builder allowed to charge extra for Prime Costs or Provisional Sums?
- What can I do if I think the builder is not building the works properly?
- How can I get out of a building contract?
- The builder is taking too long to build the house, what do I do?
- Can I make a Home Warranty Insurance claim?
1. What do I need to check before signing a building contract?
The golden rule is that everything must be in writing. Make sure that the contract specifies exactly what will be built, and never rely on verbal promises. The builder must give you a Contract Information Statement (CIS) which contains important information that you need to read and understand. You should always have your contract reviewed by an independent building law expert prior to signing. Visit Contract Owl to get your contract reviewed by building law experts.
2. What should I check before building commences?
Local government zoning regulations govern what you can and can’t build, so it pays to check whether a Development Application (DA) is needed before plans are drawn up. You will need to make an application to the Planning and Environment Court if you want to appeal the council’s decision to reject a DA, so try to resolve any potential issues first. The builder is often responsible for preparing the plans and obtaining Building Approval, however always check your contract.
3. When should I pay the builder while the works are in progress?
Payments made during the building period are usually called “Progress Claims”. Only pay for building work that has been performed in strict accordance with the Payment Schedule set out in the contract. Read and understand the definitions of the building stages, and never pay the builder ahead of time, as this may prevent you from claiming Home Warranty Insurance if things go wrong.
4. When do I pay the final payment to the builder?
The builder can only ask for the final payment once the building works are “practically complete”. This means everything has to be completed in accordance with the contract and all regulations, except for “minor defects or omissions”. Payment does not have to be made until the builder provides you with a signed Defects Document stating when the minor defects or omissions will be fixed.
5. Is the builder allowed to charge extra for variations?
Any change to the original scope of works is called a “variation”. The change might be requested by you, or the builder may request a variation because of unforeseen circumstances. You are under no legal obligation to pay for a variation that you did not agree to, however the builder can make an application to have an unsigned variation approved by the Queensland Civil and Administrative Tribunal (QCAT) if the need for the variation was not the builder’s fault.
6. Can the contract price increase because of Prime Costs or Provisional Sums?
Many building contracts have Prime Cost (PC) and Provisional Sum (PS) allowances. If the building expenses are more than the allowance the extra cost will be added to the contract price, but if less is spent then there should be a deduction. When making a Progress Claim the builder must provide you with written evidence for any PC or PS costs that were incurred during that building stage, otherwise you are under no obligation to pay for the unsubstantiated amount.
7. What can I do if I think the builder is not building the works properly?
First, check your contract. You can only take action if the works are not being built in accordance with the contract plans and specifications. The builder must also comply with all statutory requirements such as the Building Code of Australia and any local development regulations. Be careful not to do anything that might jeopardise your legal position, such as invalidly terminating the contract or refusing to pay for legitimate progress claims.
8. How can I get out of a building contract?
The builder needs to be in breach of a specific term of the contract, and you must follow the correct termination procedures in the contract. Once properly terminated, you can then tell the builder to leave the site. The QBCC strongly recommends that you seek legal assistance to terminate a contract
9. The builder is taking too long to build the house, what do I do?
Many building contracts have a “liquidated damages” or “late completion damages” clause that entitles you to claim a set amount from the builder for each day that the works are delayed after the end of the building period. Make the builder aware that you intend to deduct liquidated damages from the last payment if the works are delayed. Often the builder claims to be entitled to an extension of time, however if the builder has not followed the correct contract procedures then the extension of time may not be valid.
10. Can I make a Home Warranty Insurance claim?
In Queensland a special scheme called Home Warranty Insurance (HWI) has been created to compensate residential owners for incomplete or defective building work. However, the QBCC will not compensate you for incomplete work that has already been paid for, and you cannot bring a claim until the contract has been properly terminated. The QBCC recommends that you seek legal assistance to terminate the contract. There are strict time limits for different categories of defective work, so it pays to act quickly.
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PLEASE NOTE: This guide does not constitute legal advice and is provided as a general information source only. You should not rely on any information contained in this publication without seeking professional advice in relation to your specific circumstances.