Contracts for home building projects – do we really need them?
Perhaps because of an existing relationship or thinking that it will save money, many people get building work done without a written contract between themselves and the builder or without having the contract reviewed by an independent expert.
Our construction practice regularly deals with disputes where it has all gone wrong and there isn’t so much as a note to show what was actually agreed between the parties or where the owners or builder thought that they had agreed to one thing, but the contract says something completely different.
This is a disaster regardless of whether you’re the builder or the owner.
A written building contract between a home owner and a builder is absolutely critical to any size project, whether it be building, renovating, extending or repairing a home. In most instances it is required by law that a written contract, containing specific information, be entered into.
The type of contract you should choose for the project will depend on the size and complexity of the matter, and also on whether there are any special requirements for the specific project.
There are several template building contracts available in the Australian construction industry, some of which are more ‘builder’ friendly, and some of which are more ‘home owner’ friendly. The major organisations in Australia producing building contracts are:
- Queensland Building and Construction Commission (QBCC)
- Master Builders Queensland (MBQ)
- Housing Industry Association (HIA)
- Standards Australia (SA)
- Master Builders Australia in conjunction with the Australian Institute of Architects (ABIC)
All of the above industry organisations have various template contracts and knowing which one will be best suited to your project is not always an easy task. It is always recommended that you seek legal advice around which contract would protect you best and reduce your risk as a builder or home owner. Amendments are also often recommended to ensure that the contract is tailored to your specific needs and to the specific project.
We often have clients come to us advising that a hand-shake agreement was struck prior to entering into the contract, but the contract does not reflect that agreement, or it does not reflect it accurately. One consultation with an expert construction lawyer could save you thousands of dollars and lots of stress.
Our top five tips for when you are about to enter into a contract (for both builders and home owners) are:
Conduct a Queensland Building and Construction Commission licence search to ensure that:
- the builder or a company director is a registered building practitioner with the appropriate licences
- check the licence is for the appropriate type and value of building work being contracted
- the builder or company does not have any disciplinary records against it, which could include a QBCC Direction to Rectify Defective Work, Tribunal Disciplinary Orders, Infringement Notices Issued and/or Exclusions, Disqualifications or Bans from the industry
2. Capacity to pay
Enquire into each party's financial ability to pay or complete the work and make sure that:
- they have capacity to enter into a legal contract at the outset
- if they don’t have the ability to pay at the outset, that the contract has an appropriate ‘subject to finance’ clause
- throughout the life of the contract you regularly test the owner’s financial ability to pay
3. Check who is accountable
Review the contract and ensure that all building approval, permit and/or other responsibilities have been assigned to the appropriate party accountable for its compliance.
4. Understand extensions and variations
Review the contract and ensure that you understand how the extension of time and variation clauses operate.
5. Clear start and finish dates
Review the contract and ensure that the commencement and practical completion dates are clearly stipulated and/or calculable.
The above is not by any means a comprehensive guide to selecting and reviewing contracts and we always strongly recommend that legal advice is sought from the outset to maximise your chances of project success.
Clifford Gouldson has a dedicated Construction law practice which deals with these issues every day. Contact us for advice that will save you money and heartache.