12 Tips & Traps to check prior to signing your building contract
Our team offer Geelong building contract reviews to ensure you get the best possible outcome from your build. A Building Contract or more formally known as a Major Domestic Building Contract can come in a number of formats. For example;
New Homes Contract
Home Improvement Contract – for renovations
Minor Works Contract – typically for bathrooms/kitchens small extensions
Cost Plus Contract – As it sounds, the build cost plus a percentage. Used in limited circumstances due some legal restrictions i.e. works are to be in excess of $1m, complex renovation/restoration/refurbishment works where it is unable to be priced without carrying out some domestic building work.
Typically, the contracts that come across our desks are Master Builders or Housing Industry Association (HIA) templates where your chosen builder will add in the job specific information.
The below tips and traps are common elements which can affect your build:
Fixed Site Costs
So, you’ve paid $10-$40k additional for fixed costs – great. The problem we see often is simple clauses like: “You have fixed site costs including the below items…”. Any item not noted as ‘included’ is considered excluded therefore it is not fixed! Depending on the location of your land, soil type and its typography (slope) this could leave you exposed to variations.
An interesting term, however it has significant meaning within the Domestic Building Contracts Act. Ideally your contract documents will incorporate as many reports and research as possible to validate how the job has been estimated. The more specific reports on the land there are, the less likelihood of variation. If a variation was to be raised, then it can be assessed against this documentation. Examples of such reports:
i. Level/existing conditions survey (ground levels/heights, what is on/near the block)
ii. Soil report (which can include Wind Classification, BAL assessment)
iii. Energy Report
iv. Engineering drawings
Ideally and ultimately, specific Engineering drawings are included in the contract. These basically tell the builder what the house structurally requires from footings, framing, bracing and drainage.
If no engineering drawings, the next-best thing is a Soil Report. This establishes what soil type is present, wind rating and a BAL assessment. The builder then has some relevant information on the specific allotment.
If none of the above have been completed, considerable risks are involved. This is often the case when finance is required and/or to obtain the First Homeowner’s Grant and the building owner has to enter/supply a Major Domestic Building Contract. You will want to ensure you have good coverage of Fixed Site Costs with minimal “limitations” in the contract.
Detailed drawings with no discrepancies
Detailed and correct documentation is a key step to a successful project. Ensure the specifics of the contract and selections clearly reflect the contract drawings to eliminate disappointment. These documents have an order of precedence outlined in the contract; the typical order is:
i. Contract – winner winner
A simple example of a discrepancy between the drawings and specification that we often refer to is “if gold taps are noted on the plans but the specification nominates chrome, you will receive chrome taps”
Passive heating and cooling
Consideration at design stage with regards to orientation, eaves, window type is an investment to reduce the energy consumption of your house. Some great advice can be found HERE
Bare minimum inclusions. Our advice is to simply walk through the house you are currently living in. What works? What is lacking? Do you have any exciting technology that requires extra consideration? If so, ensure it is incorporated into the estimate/contract
What heating/cooling system do you currently enjoy? What is the energy rating?
What is included in the contract? Typically, ducted gas systems are included however cooling systems or more energy efficient systems will cost significantly more. Typical variations range from $1k-20k
If dealing with a salesperson and it is not noted within the contract documents, it is not included
Some, but not all sales people just want their commission and may promise changes can be made… read the contract document carefully to ensure they are included
Research your selections and in particular any upgrades. Often model numbers can be researched and cross checked. If you have upgraded items, ensure you have been credited the original amount.
Special Conditions – usually there are a number of special conditions within a contract. Typically, these attempt to change the meaning of standard clauses throughout the contract. Ensure these are all read and understood.
Don’t be pressured
A document that should legally be within your building contract is the “Director of Consumer Affairs Victoria Approved Domestic Building Contracts Checklist”. One of its questions is “Have you had this contract long enough to read and understand it? Find the checklist and more information HERE
Ensure you are fully aware and understand everything before you sign this legally binding document.
We know receiving your keys seems like an eternity away as you haven’t even signed your contract yet however be sure to refresh yourself with your contract obligations just prior to taking possession. For example, you may be excited to complete your own landscaping or engage a contractor. There will be a number of clauses outlining specific “owner’s obligations” within your Contract, Soil Report, Engineering drawings (if supplied – if not these should be obtained) and if not followed could compromise warranties
Lastly – enjoy the process!
It does take time, but crossing your t’s and dotting your i’s from the very beginning is critical to avoid disappointment with your building experience.
Want to get your build off to the best possible start?
For an independent Building Contract Review from a builder’s perspective, please don’t hesitate to speak to our friendly team. Looking for support throughout your build? Our thorough independent building inspections at each stage will ensure your home meets the relevant standards for quality.