Australian Standards

A lot of people people misunderstand how Australian Standards apply to Contracts so here is a quick guide.

Standards Australia

All Australian Standards (AS) are published by Standards Australia. which is a non-government organisation.

It’s role is to meet Australia’s need for relevant standards for quality in goods and services that are also consistent with international standards.

Individual Standards

Each standard is a document specifying how a product, service or system can be practically obtained safely, reliably and consistently.

Role of Standards in Law

Australian Standards are not ‘Legal Documents’ and there is no automatic requirement to carry out any work or service to an Australian Standard unless:

A Government Law, or Regulation, (Such as the Building Code of Australia BCA) requires that an Australian Standard applies; or
The Specification for the project states that an Australian Standard will apply.

Even where an Australian Standard is mentioned you will quite frequently see words like: “or alternative that is deemed to satisfy the intent.”

Summary

Just because you are building in Australia don’t assume that Australian Standards will protect you as they may not even apply to the contracted work.

To understand the role of the Specification see: Contract Documents

Contract Meeting Advice

It can seem like an age since you paid the initial deposit for your new house.

You have spent ages going through everything at Selection.

Surely you can just sign the contract and get started?………….That’s what the builder wants,………… but in my opinion you shouldn’t rush this step.

Time To Examine Contract

Most people aren’t familiar with looking at Contracts so they need time to take it all in in, or perhaps check with someone more experienced.

Let the builder know you want the documents a few days before the signing day, so you can have some time to examine them.

If they can’t provide the contract documents in advance be prepared to take the documents home without signing. You can always schedule another meeting.

Things to Check

Here are things I look out for:

Changes to Standard Conditions of Contract. Having built using both the Master Builders and HIA Conditions of Contract I consider these documents are reasonable to both parties. Make sure you ask the builder if they have modified the conditions, and look through the modifications carefully as they won’t be in your favour!

Stage Payments Not paying until after the work is done is your best protection against builder insolvency. Click on the title of this paragraph for more information.

Contract Period. How long will the build take, and has the builder taken into account bad weather and holidays.

Liquidated Damages Unless the Builder has to pay you a reasonable amount of compensation for delays there is little incentive for them to meet the Contract Period

Responsibility for Access. Most Standard Contract Conditions require the builder be responsible for ensuring the footpath is not damaged. I find some builders are trying to transfer the responsibility to you. I believe this is unacceptable as the the Builder is the only one who has control of the situation.

Contract Estimate (Statement of Costs) This details how the cost of the house is calculated. Make sure that all upgrade items are correctly described and the price is as previously stated or agreed.

Schedule of Inclusions. Are all the Inclusions / ‘Free’ Upgrades, mentioned at the time of paying the initial deposit, mentioned in the documentation.

Specification Check that the specification also correctly describes what you want from the house. Often this will be a fairly standard document which will refer to the Contract Estimate, Schedule of Inclusions and Drawings.

Drawings Check all the drawings to make sure they show what you want including:

- Correct facade.
- Roof Details.
- Room arrangements and sizes.
- Electrical fittings layout.
- Window sizes and types.

It’s much better to make sure everything is covered at this stage than try to deal with it later!

Finally

If the builder says he will reprint the whole document before you sign. . . . you need to check all the amendments you asked for are in the reprinted document. ( A friend of mine didn’t check and got caught out!)

My E book Guide to Selection/Pre-Start includes checklists that you will be able to refer to during Contract Checking.

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.

Find out about the issues of Using Friends for Building works

Post Contract Variations

The best advice I can give is:

“Avoid making Post Contract Variations”
The reasons are:

Cost

Basically the builder holds all the cards once the contract is signed.

They can quote you the top price for the change…..plus a percentage for the variation which you will find in your contract (normally 20%)

If you deduct something you only get a reduction for the cost of the item and may have to pay an admin charge for any drawing changes.

There is a saying in the building industry the basic price is the Milk but the variations are the Cream!

Delay

Once you ask for a variation the gives the builder the reason to require an extension of time on the contract.

I have known of some high end builds to have doubled the cost and time of the build on Post contract variations.

Don’t rush signing the contract!……..It’s well worth taking some time and making sure you have made your mind up about what you want!

Also see When You Find Out the Cost

Final Cost – When Do You Find Out?

Some people think that when they pay an initial deposit, and leave the Builders Sales Office they know how much their house will cost…………..If you are unlucky, and/or don’t know how the system works you could be hit for unexpected costs in the order of tens of thousands of dollars.

These are the times when you find out about costs:

Initial Deposit

Unless you ask at this stage all you will know is the basic house price.

It will pay to spend sometime asking about what any alterations to the plan, brick and roof choices, and upgrades will cost.

Although you will get some information it is unlikely to be complete.

Pre-Contract

When you find out about site costs including:

Any Excavation /Fill
Additional Foundation Costs.
Restricted Site Costs – Generally for Demolish and Rebuild, and Battle Axe projects.
Potential Rock Cost.

You should also get the costs of any structural changes.

If you have got a flat site with good soil the extra costs can be minimal, an additional $5,000 wouldn’t be unusul for a typical site. If you have a difficult site it might be an extra $30,000 or more.

Selection*

The stage when you make all the “little” alterations such as:

Electrical fit out
Heating
Bathroom Fittings
Kitchen Fitings
Etc, Etc.

Be very careful at this stage, if you go for minor upgrades to the standard fit-out it could increase the costs by $1-2,000. Try to duplicate the Display Home and you can increase the base costs by 50%.

For more details why not get the Selection/Pre-Start Guide for only $4.

*Some Builders don’t do the selection of final fittings until the Pre-Start Meeting (after you have signed the Contract)

Contract

You will get an ‘Overall Build Cost” of the build with the site costs, together with all your amendments and upgrades.

A few things to check that might change the cost are:

Provisional Sums-Typically rock or Concrete piers
Prime Cost Items – Unusual items the contractor hasn’t been able to price.
Cost of Service Connections – Normally the contractors price will cover a distance of 5-6m. If you have a larger setback you may be charged separately.

Completion

This is the time when you find out what the total payments to the builder will be.

Unless you have made a number of Post Contact Variations, or the Provisional Sums haven’t been enough for the conditions encountered, it should be very close to the Contract Sum.

6 Months Later

I don’t know about you but I find there are lots of costs when I move into a new house.

For the first couple of weeks I seem to visit Bunnings at least every day for picture hooks, toilet roll holders, door hooks etc. etc.

Some of the bigger costs are:

Additional paths
Clothes hoist
Plants, and turf if you want an instant lawn
Curtains

For more information see What Will it Cost?

For help with Pre-Start/Selection see the anewhouse Guide

Contract Documents – Vehicle Access

All Weather Access

You will notice in the contract documents a clause relating to ‘All Weather Access’. This normally requires the Landowner to provide all weather access to the site.

In other words a hard access from the nearest road to the site of your house wide enough to take a delivery truck. Typically this will be a shaped gravel track.

On sloped sites the access should be to the construction pad level. which may be either higher or lower than the existing ground level. (May require considerable excavation, or fill)

As well as rural blocks this clause can apply to Battle Axe Blocks.

I would advise against doing this on the cheap if the road becomes deeply rutted or a truck becomes bogged you could be faced with:

The cost for towing trucks off the site.
A claim for additional costs due to delays and repairing the track.
An extension of time on the building contract.

Access Over Footpath

Most suburban blocks will require site vehicles to cross the kerb and footpath within the road reserve.

Damage to the footpath and kerb should be covered under the insurance clauses of the building contract ……………………Usually the words are “ 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. If you don’t see these words in your contract, or see an exemption for footpath damage BEWARE.

Although a good builder will normally protect paths by installing a timber mat over the footpath that may not stop all the sub-contractors driving over other other parts of the path, and causing damage.

One useful check is to take photographs of the kerb and footpath before the start of construction. Send copies of these photos to the site supervisor saying these are a record of the condition of the councils assets.

If you see any damage to the footpath before work starts I would also send copies of the photos to the council pointing out the initial defects.

For similar posts see Contract Conditions

Builder’s Bankruptcy – Finance

So the builder has become insolvent and the house is half built…………..what are the financial implications?

To finish a partially built project using another builder is going to cost more than if your original builder finished the project. For an idea of possible costs see Is The Insurance Enough?

Builders don’t like taking over half built projects and you aren’t in a buyers market so rates will be higher.

There should to be a couple of things that could help you:

Unless progress has been slow there is likely to have been a fair bit more work done than you have paid for since your last Stage Payment. – Under most contracts you don’t have to pay the builder for work completed prior to the bankruptcy until the house is completed and you can deduct any additional costs from any payments due to the builder, or his administrator.
Many states now require the builder to have insurance against insolvency. This insurance should allow you to claim up to a percentage (typically 20%) of the total contract value to have the house finished by another builder. This completion must be to more than the original specification.

I’ve spoken before about the importance of records and when dealing with completion of your house it is vital that you keep good records of all costs associated with the completion of the house.

Make sure your costs include all professional advice from lawyers, project managers, and other building professionals that you may need to engage.

If you want to find out more about Builders insurance Its worth looking at the QBE website.

A friend of mine whose builder went bust told me that the recovery added another $30,000 to the cost of the house………………How much did it add to your house?

For more legal posts see Contracts

Bankrupt Builder – Will The Insurance Be Enough?

I have previously talked about dealing with the mess when a builder goes bust.

To make the financial aspects clearer a worked example follows:

This is based on a contract for a house to be built for $300,000.

A typical building insurance is 20% of the contract cost so it will be $60,000.

Assuming the builder becomes insolvent during the construction of the frame.

You should have already paid out
- $15,000 (5% Deposit)
- $30,000 (10% Base Stage Payment)
- $45,000 Total Payments
A new builder is going to charge more than the remaining $255,000 to finish the job as they will have to do quite a bit of extra administration and estimating. Say plus 20% ($306,000).
You have probably had some legal costs say $10,000.
The total cost of building the house is now:
- $45,000 Initial payments for Original Builder.
- $306,000 New Builder Cost
- $10,000 Additional Legal cost
- $361 ,000 Total.
You will be reimbursed up to $60,000 by the insurer so the total cost to you will be $361,000, which is $1,000 more than the original cost.

Conclusions

As any new builder will probably charge a percentage on the remaining work its possible that if you are in the later stages of a build the insurance will be enough. If you are right at the start it may be best to walk away and start again with a new builder.
If you have allowed the builder to charge more than the Standard Progress Payments there is more likely to be a shortfall in insurance money increasing the amount you will need to find.

For the next stage see Finishing Off, or to start at the begining go to If The Builder Goes Bust

Bankrupt Builder – Getting Finished

If your new house is under construction a typical procedure to finish the house with the insurer is:

The insurer should appoint a building consultant.
The consultant will inspect the house and work out the scope of works to complete the house.
The scope will be passed to you for acceptance.
Three quote will be required based on the scope of works. These quotes can be from builders nominated by the insurer or you can seek quotes yourself from licensed builders.
Once quotes are received the insurer will work out the amount of their liability and make an offer of the amount they consider appropriate.
Assuming you confirm your acceptance of the offer you can then accept a quote and sign a new building contract with your choice of builder.
The contract will include a new house warranty insurance policy which should be issued to you. (You then have two policies; one for the original builders work, and one for the new builders completion work).
Normally the insurer will make stage payments as required under the new contract on your behalf until the amount of the agreed insurance settlement funds are spent.
Your mortgage provider will then continue making stage payments until the house is completed.

Remember its important to keep your mortgage provider aware of the progress of the claim and the proposed new building contract.

To follow the whole process start at If The Builder Goes Bust

Contracts – Contract Period

In your house building contract it will quote a Building Period. This starts when the contractor actually starts work (Site Clearance)

The period will be in days. (Calendar days not working days)

The time should allow for any expected loss of productivity due to:

None working days including
- Weekends.
- Public Holidays.
- Rostered Days Off.
- Christmas and Easter shut Downs.
Inclement weather including;
- Heavy Rain.
- Waterlogged site following heavy rain.
- Strong Winds.
- Excessive Heat.

An example would be my last Building Contract………… This had a time for completion of 260 days which included allowances of:

25 days due to inclement weather.
71 days for weekends Rostered days off etc.

The only time the builder has ground for extending the contract period is if: there has been unexpected delay that could not have been reasonably predicted. Such as:

Industrial Action – May be at a suppliers factory or be be something like a truck drivers strike.
More Inclement Weather – For instance a much wetter winter than average.
Delays Caused By You – Asking for Variations after contract signed, or not getting permits in agreed timescale, are examples.

If the builder want to claim an extension of time due to an unexpected delay he has to tell you of the delay as soon as he becomes aware of the delay.
Putting in a claim for an extension to avoid Liquidated Damages at the end of the contract is not acceptable.