Builder Relations – A New House

Contracts – Site Possession

Under the terms of a “Standard’ Building Contract you will be required to grant the builder ‘Exclusive Possession’ of the site once the builder is ready to start.

This means that the builder is responsible for, and is able to control, all people coming onto the site during the construction period.

The reasons for this are:

Safety – The builder is responsible for the safety of everyone on site.
Scheduling – Its harder to effectively schedule trades when you could be delayed waiting for other people to complete work.
Cost – If the builder’s workers are delayed by having other workers in the way it can mean extra costs.

Practically what ‘Exclusive Possession means for you is:

Before you go onto the site you should contact the builder, who may only allow you on site if accompanied by the Site Supervisor.
If your bank, or building inspector, want to go on site to check on the works they also need to make an appointment with the Site Supervisor.
You may not be able to have other work done at the same time by other people. For instance:
- Landscaping.
- Home Automation.
- Swimming pool or Spa installation.
- Additional Electrical work.

If your builder says your other tradies or contractors can go on on site make sure you get their permission in writing with any conditions clearly stated!

Rural and Large Blocks

If you are building on a rural block, or just a large urban block it can be worth marking out, and even fencing, the house building site.

You then give the builder possession of the house building site only, and work on the remainder of the block.

Did your builder allow you to bring your tradies on site?

For similar posts see Contract Conditions

Costs for Variations Compared with Retail Price

One area of annoyance for home buyers is when they want to vary something and the variation price is much more than the difference between retail prices.

For Example

An example is the builders standard oven may be $700 at your local discount store while the oven you want is $1100.

When you ask for a variation you may be quoted an extra $700 or more.

Even if you buy the oven and supply it to the builder he may only offer a cost reduction of $400 rather than the $700 you expected!

Why?

What’s the reason for the extra $300 over the retail price difference? . . . . . . .Well its not always the builder ripping you off.

A big builder is possibly buying over 100, or more of the same type of oven so he may be able to buy them direct from the manufacturer for less than $500.

When it comes to buying the different oven the builder is only buying one so he might be unable to get much if any discount.

The difference in price to the builder is thus around $600. Even if you buy the oven the builder only saves $500.

They may also have extra costs due to

Organising and administration of a single purchase,
Installation costs because the different oven may not build into the kitchen cupboards as easily as the builders standard oven.

I hope this helps you understand that some ‘additional’ costs can sometimes be justified.

Working With Your Site Supervisor

If you are building your new house with a big builder once the contract is signed the most important person in the build is going to be the Site Supervisor(SS).

The site supervisor is responsible for programming the works, ordering materials, selecting who will carry out the various tasks (from the tradies contracted to the builder), and supervising the works as well as liaising with you.

To get the best results for your house building a good relationship with the site supervisor is important.

I am not saying that you have to be best friends, but you should aim for an atmosphere of mutual respect.

Here are a few thoughts:

When you are first contacted by the site supervisor why not suggest buying them a coffee to start the relationship off in a good way.
Let them know what things are important to you.
Arrange site meetings during the working day. – Typically the building trades works from 6.30am until 4.00pm. It’s your house so if you can’t make the effort to meet during their work hours don’t expect the supervisor to use their family time to meet you.
If you are given a mobile number that doesn’t mean you can ring in the evenings and at weekends.
If you spot a problem be firm but don’t go off the handle. “I noticed that ‘X’ was different to the required specification” is going to get a better response than “YOU SCREWED UP!”
The typical site supervisor will be involved in building several houses at once so sometimes they can’t get straight back to you.
If during construction you are told that something you wanted can’t be done ask to be shown the regulation that doesn’t permit it. On our last house I wanted the gas meter and electrical meter together. One night I checked the site and the plumber had installed the pipework to another location. When I was told that they couldn’t be together I asked the question about the regulations and the meter location was moved without further discussion.
Sometimes it can be worth waiting a bit longer for the better tradesman to become available, rather than rushing the build.
Always go through the site supervisor, don’t try to order the tradies around if you visit the site.

How have you got the best out of your site supervisor?

For more info while the build is underway see Construction

The Biggest Threat Our Construction Companies Are Facing

Guest post by Andre Smith

Towards the end of last year a Chinese PhD student was in Australia to research ways construction companies could optimise the way they worked. In the process of doing so, he discovered the biggest risk the entire industry currently faces.

In the end, it was discovered the biggest risk was the construction companies themselves. The reason for this is because they’ve become dinosaurs unable to keep up with the pace we’re progressing at.

It’s not that they’re not capable of changing, but they are simply set in their old ways and don’t see any problems as things currently stand.

Only this week a Queensland building company went into administration with a number of half built houses.

Better understanding is needed in Residential Building Contracts

Builders quote a price for a building which the customer then pays a deposit on.

Some weeks later when the builder carried out his investigations the price may have increased by more than 30%.

This immediately creates a sense of conflict between the builder and the customer.

Let’s use steel sheds as an example.

The customer expects to see a low price.

There are no definitive rules in regards to site specific engineering, so a customer could ask for it to be placed anywhere.

On the top of a hill and there will be extra costs due to high wind forces.

In a valley and there may be soft ground meaning larger and more expensive foundations.

The Residential Market Is Huge

Thanks to nearly two hundred thousand residential dwellings being built it beats out the non-residential market at a rate of nearly two to one.

Customer are pouring around $66 billion per year into the industry so it needs to be efficient.

Building should be a Partnership

When it comes to construction projects, the companies with decades of experience are experts.

They shouldn’t just be quoting a cheap price…….they should be educating their customers to ensure that their customers have a realistic expectation of price.

If they don’t the customer may be over optimistic then run out of money before the house is completed leaving a half built ‘Ghost House’ . . . . with the builder still being owed a substantial amount of cash.

What Is Eventually Going to Happen

With land prices continuing to increase the pressure to build cheaply will remain but the number of people able to afford to build is likely to drop.
It’s been predicted more than half of current residential builders in Australia won’t be able to survive over the next decade, because they’ll not be able to handle less profits.
Builders that survive will need to be able to educate their customers and better manage expectations.

Builder’s Christmas Shutdown

Every Year I hear complaints of “Everything has stopped on my House Build for a month”

What can make it worse is when the builder ‘Tries’ to claim an ‘Extension of Time’ for the Build.

What Does The Contract Say?

Well I have looked through the HIA Contract for my last build and here are the relevant parts.

Schedule 1*

Schedule 1 is the place that the builder states the time for completion of the build.

It specifically provides the builder with the opportunity to show how many days are included for; Weekends, public holidays, rostered days off, and other foreseeable delays. (Christmas, and Easter, shutdowns come round every year! . . . .You can’t tell me they are not foreseeable!)

Builders Right to Extensions of Time (Clause 34*)

Acceptable reasons for ‘Extensions of Time’are:

The owner requests a variation.
Suspension due to the Owner Breaching the Contract.
Inclement Weather. (Bad weather during a foreseeable closure doen’t count! . . . unless it is at the end of the period and leaves the site too wet for a quick start.)
Disputes with neighbours that are not the builders fault.
Civil Commotion or industrial action (Annual shutdowns are not industrial action!)
Anything not done by the owner or their agents.
Approval delays that are not the builders fault. (It is foreseeable that there may be a delay in getting approval over the Christmas and Easter periods!)
Anything the builder can’t control (By making appropriate allowance in Schedule 1 the Builder controls the situation!)

What You Can Do

Before Signing The Contract

Ask the Builder to provide in writing the details of the allowance for foreseeable delays to Schedule 1*

If The Builder Claims For A Christmas, Or Easter, Shutdown Extension.

Write back stating “Building Industry Shutdowns during the main Holiday Periods are entirely foreseeable events that should have been allowed for in the Build Period”.

* In your contract documents the numbers may be different but you should find similar sections.

See Contract Conditions for more posts

Virtual Build?

I recently saw an advert for ‘MyPlace’ a ‘Virtual Build Information System’ by Burbank.

What Is A Virtual Build Information System?

MyPlace is a virtual construction site which provides a visual aid in the progress of your home’s construction. It lets you check out what’s happening on-site of your new home without having to leave your couch.

If you build your new home with Burbank home you will be able to log into ‘MyPlace’ at any time. You will then be able to:

Download documents.
See photos of your home being built.
See updates from the Builder.

Is it A Good Idea

Well it sound ‘Modern’ and ‘High Tech’ but I’m not convinced.

I always like to be able to have signed document in my hand, not electronic documents!
Is it just a system to try and keep you away from the site, and stop you asking awkward quality questions?
How much detail will the photos really show to help you gauge the build quality?

Many people building have problems in getting a weekly phone update from the Site Supervisor, so how frequently and up to date will the information be?

I might be interested if I was having a house built a long way from where I lived, but in my mind nothing replaces regular site visits during the build.

If you have used one of these Virtual Build Information System I would like to hear about your experiences.

See: Relations With The Builder for similar posts.

Builders Excuses

Lets face it, building isn’t always easy. Each house has its own problems and the builders have to deal with the weather.

Things do go wrong . . . so the measure of a good builder is how they resolve the problems.

Here are some excuses you shouldn’t have to hear. . . . together with some suggested responses from me.

“That’s the way we always do it” – Response “Well why did you do it differently in the show house?’

“You don’t understand.” – even “You’re a women you wouldn’t understand.” – Response – “I didn’t think you needed to be a brain surgeon to get a job as a builder, so explain it to me.”

“The Regulations say its got to be like that.” – “Response “Show Me the Regulation” This one was tried on me. After the Site Supervisor heard my response he said “OK it will be fixed tomorrow.”

“The delay is due to the weather” – Response – “As the standard contract requires you to make allowance for bad weather you had better show me the records the weather has been worse than usual.”

“We build them outside in all weathers – not in cosy factories” – Response – “I thought you were an experienced builder familiar with the problems of working on site”

You can’t get good tradies around here, so quality suffers. – Response – “You contracted to build to that quality so it sounds to me you are just trying to save money by not paying the going rate, and/or not supervising them properly.”

What excuses have you heard?

Too many excuses and it could be worth getting your own Building Inspector involved

Using Your Own Building Inspector

I frequently hear of people being told by their Builder “You can’t use your own Building Inspector!”

If your builder says that, he is trying to Con You! ……or Breaking The Law!

Here is an explanation based on my last House Contract (HIA Standard Contract) . . . . . .

Possession

The builder does have ‘Control’ of the site see; Contracts – Site Possession.

But one of the contract clauses states . . . . . . “The OWNER or an authorised officer of the LENDING BODY is entitled after giving the BUILDER reasonable prior notice, to go on the LAND to inspect the BUILDING WORKS at reasonable times provided that such inspection does not delay or interfere with the progress of the BUILDING WORKS.”

Owner

A key element in the above clause is the word OWNER so lets look at how the contract defines OWNER . . . .

‘OWNER‘ means the person, partnership, or company named in the Particulars of the Contract and whenever appearing in this Contract includes their AGENTS, executors and administrators.

This means you can appoint anyone you want to act as your AGENT in the matter of inspecting the works.

Action

Don’t ask, write a formal letter to your Builder informing them that you have appointed a Building Inspector as your Agent.

If you find the builder has put in a clause in the contract saying you can’t use your own building inspector this is illegal. You can have that clause struck out. (see this link: Unfair Contract Terms)

To find out about inspecting a new house see

Practical Completion Inspection

Understanding Builders

“The Builder is ripping me off!” and ‘The Builder is overcharging for upgrades!” are two comments I hear regularly. Some of these cries may be justified, but a lot are because the customer doesn’t understand the Builder.

Why A Builder Is The Same As Other Businesses

Profit

The aim of all businesses is to make a profit so don’t expect a builder to be any different. Its not that easy to achieve and if you follow the press you will see plenty of builders don’t, and go bust.

It is in your interest that the builder makes a profit. If the builder goes bust while building your house its likely to cost lots of money and cause major delays in completing your new house.

Marketing

Builders want to get customers in and then up-sell them. They do this by providing a keen initial price for a standard house. Once you have signed you find there are extra costs for: site works, nicer bricks, different roof tiles, trendy bathroom fittings, swish kitchens, etc,etc.

Of course the builders profit margins are higher on these extras. This is the builders cream. Make sure you understand as much of the costs as possible before you sign.

For much more information on choosing upgrades from the standard see my Selection Guide

Outsourcing

You hear a lot about big business outsourcing and builders are no different

The majority of new house builders outsource most of their work to sub-contractors. This may be to either smaller specialist suppliers or individual tradies. In some cases the sub-contractor may buy the materials then contract the actual work to a labour only subcontractor.

Why a Builder is Different to Other Businesses

Extended Delivery

Nearly everything you buy is made when you buy it. If it’s a car, or electrical goods. and you know its been built in a factory under tight quality control measures. You know no matter how hard you bargain it won’t affect the quality of the item you buy.

But it can take a year or more to build your new house. During that time the builder will make many decisions on who is employed during the build and what quality is expected. If you bargained the price down heavily do you think the builder is going to pick the better tradies or the cheapest?

Unique Product

No house is the same. Even for the same house design all the following can affect the build:

The topography (shape of thesite)
The type of soil
The weather during the build
The individual fitments selected

All this means that there is a lot of risk about the final cost of the build. To cover this risk the builder will want to ensure there is enough profit to cover any unforeseen circumstances, or have an out that allows extra costs to be charged to the home owner.

Have you had problems understanding your builder?

Using Your Own Tradies

When you look at some of the prices that builders charge for things it makes you wonder if you can get things cheaper by employing your own tradies during the build.

Examples are things like:

Refrigerated air conditioning.
Extra lighting.
High end bathroom fixtures.

Unfortunately its not always that simple. Some builder will allow you to bring in your tradies, many refuse point blank, some will allow it if you pay an Admin/Supervision Fee.

Reasons for Refusal.

Safety and Security The builder is responsible for safety and security of the whole site. Through long contact with their existing sub-contractors they have developed trust. They will have concerns about having someone on their site that they don’t know.
Time delays Because the builders regular contractors depend on the builder for ongoing work he can put pressure on them if things fall behind schedule. The builder is less likely to be able to pressure independent tradies who could take their time and delay things further.
Loss of Profit Builders like any most business make higher proportion of their profit on extras. if this opportunity is lost their overall return on the job will drop.

Admin/Supervision Fee

The Administration/Supervision Fee is to provide additional supervision, and security, and have an allowance for risk.

As a fee of up to $1,000 per trade is not unusual you need to be saving a lot of money before going for separate tradies for part of your new house build.

Also you may not get the price reduction you thought by deducting items from the contract as there is a Difference between contract prices and retail prices.

Check Early

If you think you may want to go down this route you need to check whether you builder is likely to agree before you get too far along the path to signing a contract.