Contracts – Page 2 – A New House

Contract Documents – Order Of Importance

Of course the contract documents are the most important thing when organising the building of a new house.

However not many people realise that some parts of the contract document are more ‘important’ than others.

All three of these parts of the contract are normally bound together and presented for signing.

The order of importance are:

1. The Conditions of Contract. Usually either HIA or Master Builders Conditions.
2. The Specification. Which details in words what is included and the quality.
3. The Plans. Shows in diagram form what the house looks like and how the various structural elements are assembled.

As long as their are no inconsistencies the order of importance doesn’t matter. However if there is an an inconsistency then the more important document is the one that counts in law.

For Example.

Say you had asked for windows to be double glazed. Although the plans may have been changed to show double glazing the builders standard specification which is based on single glazing may have been inserted in the documents by mistake. The builder then installs single glazed windows. Legally they could leave those windows in without reducing the price.

Although most builders would rectify such an error its well worth checking through all the documents thoroughly before you sign.

Don’t let the builder rush you…….take the documents home and spend a few hours looking through them!

Have you had problems with your contract documents ?

For similar posts see Contract Documents

No Rush To Sign

I hear a lot of people saying the builder has tried to get them to sign the contract at the selection meeting.

They also worry about whether they can change anything.

Don’t Rush

It’s not as though the builder is going to start the next day.

They have got to get the building permits, and then start planning.

It can easily take a couple of months before anything happens on site.and then there is build period of several months.

So what’s a few days extra while you take the contract home and check it?

Can You Change ?

When the Builder gives you the contract to sign what they are doing is making an offer to build your house for a quoted price.

There is nothing to stop you making a counter offer of what you expect them to do for the money.

Both parties are equal in a negotiation to arrive at the final contents of the contract.

The builder has an advantage as they will be Theremuch more experienced than you.

You can even the playing field by taking the time to study the contract and check the specification against what has been previously agreed.

Establish the Rules For The Build

If you quickly sign the Builder may think they will be able to bully you to their advantage during the build.

Taking you time tells them you aren’t going to be pushed around.

You can read this post to see what you should be checking Contract Signing

Contract Security Clauses

Did you realise that there are clauses about a ‘Security Account’ in a Standard Building Contract?

No mortgage?

If you aren’t planning on a mortgage because

You are downsizing, or
Got a house loss insurance payout, or
Getting a bank loan. or
Received an inheritance, or
Won the Lotto

The builder is likely to require money to be deposited in a Security Account.

Money deposited in the Security Account is to cover the cost of the build, and is released to the builder when Progress Payments are due.

As the Security Account will have large sums of money depositedmake sure that all interest is payable to you.

If You Have a Mortgage

If you have an approval from your mortgage provider the builder normally is happy to accept the approval as adequate security.

Do You Need A Lawyer?

I hear a lot of people suggesting they get a lawyer to review their house building contract.

I”m not that sure that is a great idea, and its going to cost a fair bit of money.

Issues using a lawyer

Contract law a specialised area so your local lawyer may not have the expertise.
Builders tend to use either the HIA, or Master Builders, Standard Contract and most are unwilling to negotiate changes.
Although a lot of people feel the Standard Contract favour the builder I have managed a lot of contracts and my view is that they are reasonably fair to both parties.
A key consideration in contracts is that the drawings and specification match what you want, and I’m not sure a lawyer is the most appropriate person to advise you on that.
Standard Contracts are in ‘Plain English’ so don’t be afraid to read through yourself.
Generally you first port of call in a dispute will be the Fair Trading Department of your State

What does need checking?

Any Special Conditions that vary the Standard Contract. The Builder has a duty to point these out.
The Payments Schedule is fair.
The builder’s registration and Insurances are in place.
The drawing and specification correctly record all your requirements.

Alternative sources of advise

If you don’t feel happy checking the documents yourself I know that many independent building inspection services offer pre-contract reviews.

As these companies check on builders every day that are well experienced in what can go wrong with a contract.

They may also be able to give you an assessment of your builders quality standards.

I would expect to to pay up to $700 for a review.

This is a general opinion only and not to be considered legal advice

Why You Might Not Find A Builder Rating

Can’t find a quality rating for your builder?

Perhaps you should check your contract before you sign it.

Apparently some builders require customers to sign a contract that: ‘Prohibits them from publishing anything about the builder without the builders express permission.’

That could include sending a rating to a ratings website, or commenting on an internet forum.

It seems to me that any builder that has a clause like this has something to hide on the quality front.

You have been warned.

Want to find out more then check out the story at this link : Sydney Morning Herald

Update

Perth Home Builder 101 Residential removes “Unfair” clause banning customers from writing unapproved reviews
The Deputy Chair of the ACCC, who brought forward this case said “Consumers should be free to have their say about their experience with a business and must not face penalties for doing so.”

Obtaining Quotes 2

I recently posted about using ‘Get Quotes Services’.

As a follow up here is my experiences with 2 different companies we asked for quotes from, for our air conditioning. ( We did contact 3 companies but only 2 responded)

Staycool Heating and Air Conditioning

Following a google search we found this company only a few km away.

We visited their industrial unit and talked with their representative about units and decided that Daikin Units with a high star rating are what we required.

The representative made a booking to come out to our house and talk to my wife.

The representative discussed the locations respectfully with my wife. He mentioned that a couple of shrubs would need to be removed and asked whether the old box air conditioners would need to be removed and whether we wanted the holes fixing. My wife told him the shrubs would be removed by me and as long as the old units were removed I would repair the holes.

He returned to his office and later that day we received a detailed quote including model numbers of the units.

The Advert From The Newspaper

We also found an advert in the paper saying:

Air conditioners supplied and fitted, ask for seniors discount, with a mobile number,

So we thought we would give that a go.

The representative called round, had a cursory look around and handed my wife a handwritten quote basically just Saying “2 Daiken air condition units” and a price, which was less than Staycool.

My wife said he treated her like ‘The Little Woman’ who wouldn’t know anything.

When I got back I phoned him and asked if the units were of the required star rating which he verbally confirmed.

I then asked for a written quote containing the model numbers, to which I still haven’t had a reply. . . . obviously customers who want written accurate details are too hard.

Summary

Here are some thoughts about getting quotes

If you are getting quotes make sure the quotes are on the same basis. . . For instance the same model number, or a convincing reason why a different model is being offered.

Make sure the quote is detailed for example:

Model Number
Location of Units
Additional Work/Work by Owner

Remember accepting a quote is really accepting a contract. . . . Verbal information about a quote ‘Isn’t worth the paper it isn’t written on.

If you are getting work done and there is a problem it is much easier if you know the address of the supplier.

Finally

We used Staycool who turned up at the agreed time, did a fast and neat installation, and even lent me a nail gun to make a temporary patch of the holes where the old air conditioners were removed.

Disclosure: I have not been paid, received a discount, or any got any other benefit from Staycool for writing this post.

Obtaining Quotes 1

I recently moved into a new house and wanted both solar power and reverse cycle split air conditioning so I decided to try a couple of those ‘We will get you quotes’ services with mixed results.

Solar Quotes – Reasonable Outcome

What was good about the service

Great site with absolutely lots of free unbiased general information for anyone thinking about solar power.
Lots of references from customers on the contractors that ‘Solar Quotes’ recommend.
Lots of information on the various solar panels and inverters including quality ranking.
Ability to communicate with the owners of the site and ask questions.

What was disappointing

I only received a single quote rather than the three I was expecting. . . . We live in Dandenong not a rural area!

Overall

The quote I received from the Solar Quotes Company ( Essential Solar ) was less than the quote from the company that installed a system in my last house, for comparable quality. so I used Essential Solar

Melbourne Air Conditing Quotes – Hopeless

What was good

Nothing.

What Was Disappointing

Poor website with very little information about selecting units or any sort of references.
In spite of sending my details twice I did not receive any contact from companies wanting to quote.
No way to communicate by email, or phone, with the owners of the site to resolve the problems.

Some Final Thoughts

All these ‘We will get you quotes’ sites rely on the company that gets the work paying them a finders fee. . . . This means that good companies that mainly rely on word of mouth may not use these service.

Without publishing reviews of customers on the web site how will you know those providing quotes are capable of providing a quality job rather than just competing on price.

Unfair Contracts

Did you know that there is legislation in Australia that protects you from unfair contracts?

Fair Contracts

The two most common house building contracts are:

The HIA Standard Contract.
The Master Builders Association Standard Contract.

Both these contracts are considered to be fair, and over the years many of the clauses will have been tested in Court.

Some people say both ‘Standard Contracts’ protect the builder too much; but I have managed construction contracts for much of my working life and feel they are both reasonable to Builder and Client.

Changes, or Additions to a ‘Standard Contract’

Any changes to a standard contract have the potential to be unfair; however the Builder has a duty to identify any changes to a ‘Standard Contract’.

One of the first things you should check before signing your build contract is whether there has been any changes to the ‘Standard Contract’ and if you are happy with the changes.

You can usually buy a copy of your State’s version of a blank ‘Standard Contract’ for less than $20 dollars to compare your contract against.

What makes a Contract Unfair

A contract term is unfair if:

It would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
It is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
It would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Examples of unfair conditions would be:

The builder unreasonably making it difficult to have an independent inspector visit the site and/or charging a fee to accommodate independent inspections.
Giving the builder the final right to determine the quality of their work.
Allowing the builder to make variations without getting client approval.

What happens when a Contract is Unfair

If you have signed a contract not realising is was unfair all is not lost.

The first step is to Contact the Australian Competition and Consumer Commission.

A finding that a contract term is unfair, and therefore void, means that the term is treated as if it never existed.

However the original contract will continue to bind the affected parties to the extent that the contract is capable of operating without the unfair term.For more information click on the ACCC link above.

When Did Your Construction Contract Start?

If there has been delays in a house building contract the question of compensation comes up (see this link: Liquidated Damages )

A key factor in assessing damages is knowing when the construction contract started; as it isn’t written in the signed contract.

In order to avoid paying out damages many builders will dispute when the start date is!

They may argue about the date, or even try to say the start date is when the slab is constructed.

Here is some information to make you better informed about the start date.

Definitions

Well here are the definitions in the two most common forms of contract for new houses

Master Builders Contract (2015 Victorian Edition) :
“Commencement Date – means the date by which the Builder will commence to carry out works on the land” ( according to the standard contract the builder is supposed to advise you of the start date, but this doesn’t always happen)

Housing Industry Association HIA (2015 Victorian Edition):
“Commencement – means the day on which the Building Works commence on the Building Site”

To me that means ‘The day the builder erects a temporary fence, and installs a portable toilet’.

Recording the Date

Once you know the temporary fence goes up make sure this is recorded by:

Taking a photo with a camera with a date stamp; or
Taking a photo with a phone camera and Emailing it to your self.

It also doesn’t do any harm to Email the Builder saying you have noticed the contract started on a particular date. . . . This will put the builder on notice that you are aware of the issues relating to delays.

Delays

To check up about delays during the build follow this link: Contract Period

Protecting the Footpath

An issue that can result in grief from the Local Council and additional costs to you is damage to the footpath.

Legally

The last time I built any damage was covered by the Clause which says “The Builder must indemnify the Owner in respect of, and insure against liability for personal injury, death, property loss or damage arising out of the Building Works.”

I have heard that some builders now modify this clause to exclude damage to the footpath.

If this is the case in the contract presented to you I would suggest that you make sure that the words “will take all reasonable steps to prevent footpath damage” are included.

NB, If there was originally no footpath crossing at the location of your driveway you will still have to pay for a new section of reinforced footpath at that point.

Method Of Protection

Normal practice is for the builder to use a timber mat, like the one pictured, at any point where they move vehicles over the footpath.

The mat is simply 95mm x 35mm, or similar, timbers held together by galvanised steel straps. The ends of the timbers are cut at an angle of 45 degrees to minimise the tripping hazard.

By spreading the load from delivery trucks there is much less chance of cracking, and the timber mat prevents scarring from caterpillar tracks.