Building contracts are a legally binding agreement between you and your Builder.
Before signing any contract make sure you fully understand what you are signing and if unsure seek professional legal advise.
Builders registration and the requirements and conduct that they must adhere to is overseen and regulated by separate State and Territorial bodies and together with this the statutory requirements for the format of Building Contracts varies throughout Australia.
Detailed information specific to your location will be readily available from the relevant Government Authority or through the Housing Industry Association or the Master Builders Association in your State or Territory.
The following information gives a broad outline of some of the important aspects to look for in Building Contracts.
Check to see that the work you want your Builder to do has been fully and accurately set out in the contract including the plans and specifications.
Do not rely on verbal promises or agreement.
If you want to change the work to be done at a later stage, you will have to reach agreement with your Builder, and they will normally be entitled to make a separate, additional charge as a variation to your contract.
A'rise and fall clause' entitles your Builder to pass onto you increases (or reductions) in the cost of performing your building work after you have signed your contract, whether those costs relate to labour, including relevant overheads or to materials.
The formulae used in building contracts to determine the amount of the additional costs that can be passed onto you vary. Check your contract carefully. If you have any questions, ask your Builder to explain, or seek advice.
Be very careful about signing any contracts that contain a rise and fall clause.
Your agreement with the Builder will normally be for them to supply certain goods and services. For example, kitchen stove, hot plate, sink, bathroom tiles etc.
These items may be designated 'prime cost items', so that if the standard or price of the items you select is higher than that provided for by your Builder in their quoted price, then you may have to pay an additional cost over and above that provided for, plus a surcharge, which may be up to 15 per cent of the cost of the item.
- see section 3.0 Selecting a Builder, for more information on Prime Cost items.
'Provisional Sums' are amounts your Builder has determined as "best estimates" of the cost of doing certain building work under your contract.
For example, if your building site has a slope and no contour survey has been carried out, your Builder may not be able to prepare a final price for the earthworks needed to provide a level site for your home.They may include an estimated figure in the contract which is subject to change when a survey plan is provided.
Concrete for footings is another item many Builders will include as a Provisional Sum. They will in most cases calculate a cost for excavating and pouring footings based upon details supplied on the working drawings and if the unexpected occurs such as part of your site being on unstable ground requiring extra concrete etc. then the additional cost would be added
If costs are less than the Provisional Sum nominated they are deducted from the contract price. If they are higher they are added to the contract price are are generally required to be paid with the next progress payment.
Progress payments intervals and amounts will be nominated in the contract - contracts generally have a maximum deposit amount that your Builder can request and certain stages when progress payments can be requested and the amount to be paid.
For example a contract may nominate a 5% deposit of the contract price to be paid on the signing of the contract, a 10% progress payment at completion of the base stage, 15% at frame stage, 35% at lockup stage, 25% at fixing stage and the balance at completion of the contract.
Progress payments should not be made in advance under any circumstances.
Never sign a Contract unless you completely understand all the clauses of the contract and are fully aware of your resposibilities.
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