When you contract someone to build a new house you are required to make regular payment as each STAGE is completed. . . . But how much?
Well builders want to get paid as soon as possible so they will want the early payments to be as big as possible.
You as the purchaser need to make sure you aren’t paying for work that’s yet to be done. (See this link: If The Builder Goes Bust) You will need enough money to finish the house!
A good guide to what’s fair is found in a Victorian Government Act which lay down the following percentages of the full contract price:
In Victoria many builders will ask you to sign an agreement accepting that the above payment levels don’t apply and the percentages will be similar to those shown below.
In other Australian states where there is no Act controlling the amount of progress payments then the builder is more likely to want the following values of progress payments.
- Deposit 5%
- Base 20%
- Frame 20%
- Lock Up 25%
- Fixing 20%
- Completion 10%
Think very carefully before you accept these different payments, as it increases your level of risk if things go wrong.
Before you make each progress payment, you need to check the work comprising the stage is:
- Meets your contract requirements
- Meets the building regulations
If you are not confident checking the work it may be worthwhile using an independent building consultant to check everything before you make progress payments.
If you want to check yourself you may find this link: PCI Guide useful
Whatever happens do not pay any money in advance of when the contract requires it.
For more information about when Progress Payments are made see Construction Stages
For similar posts see this link: Contract Documents