Contract Meeting Advice

Contract Meeting (2)

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.

 

If The Builder Goes Bust

House Building can be a high risk business…………..so what happens if the builder of your new house goes bust?

Legally

Your house building contract should have clauses included for the eventuality of the builder becoming insolvent. Read the contract carefully but make sure you get in touch with your solicitor.

There should also be a Builder Insurance Policy,  in your name, so check the contract.

Practically

If a builder goes into administration it’s still technically trading and may be bought by another builder so the best thing is to keep in contact with the administrators.

If the builder is being liquidated remember the house is on your land and you have paid for a large part of what has been built through the stage payments, so the first thing you need to done is to protect your money and assets. Here are some steps you should think about after you have talked to your legal representative:

  • If you can, put a stop on any stage payments which may be going through.
  • Go to the site and change any locks.(It’s illegal for tradesmen to remove items from a house in lieu of unpaid bills but that doesn’t stop them trying.)
  • If the site has temporary fencing talk to the fencing supplier about paying for the fence to remain.
  • Secure any materials stored on the site.
  • Organise insurance for the house for fire, vandalism and theft.

Once everything is secure you can work with your solicitor to formally terminate the contract and engaging a new builder to finish the work to the original plans.

Have you ever had a builder goes bust building your new home? and did it all turned out OK?

 

For the next step see Getting Information Together

For more legal posts see Contracts

 

Contracts – Site Possession

Under the terms of your 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:

  1. Safety – The builder is responsible for the safety of everyone on site.
  2. Scheduling – Its harder to effectively schedule trades when you could be delayed waiting for other people to complete work.
  3. 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 other work can go on on site make sure you get their permission in writing with any conditions clearly stated!

If you are building on a rural block its 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

 

Your New House Contract

The most important document you sign is the ‘New Home Contract’. This document describes the house to be constructed and provides remedies to deal with any defaults by the builder or the house owner. The more you understand the contents of this document the better you can sleep at night.

This post will briefly describe the contents of a typical ‘New House Contract’ . Future posts will go into more detail about the individual parts of the contract.

Bound into a single package you should see.

  • A New Homes Standard Contract. This is most likely to be either; a Housing Industry Association (HIA) Contract or a Master Builders Association Contract. Both the above documents are reasonably fair to the Owner. If the a different contract is offered or the contract has been heavily amended beware.
  • Various Schedules and Attachments. These describe things like specific details of payments, naming legal entities legal rights etc.
  • Conditions of Contract.
  • Copies of Builders documentation. That is Registration, Structural Guarantee and Insurances Check these are up to date, especially Insurances.
  • Contract Estimate This should show how the price has been calculated including any variations in cost from the initial cost.
  • Copy of the Site Investigation (Geo-technical Investigation)
  • Specification, describing the construction, type of fittings, and finishes, of various aspects of the house in words.
  • List of the builders standard inclusions.
  • Full set of contract drawings including plans, elevations and structural details.

Make sure you read the whole contract before you sign. If any of the above are missing ask for them to be included before you sign.

Remember if problems arise the first thing you should to do is go back and read the contract.

For similar posts see Contract Documents

 

Standard Building Contract or ‘Owner Builder Contract’

Some small builders may suggest they can package build a house cheaper for you if you become an ‘Owner Builder’*.

* Not be confused with True ‘Owner Building’ where you have the skills and propose doing a lot of the work yourself

Here are 8 reasons why you should think very hard about doing this:

  • You remove the protection of the standard building contracts.
  • The whole exercise is about removing responsibility from the builder if this is their attitude at the start how confident are you they are going to take responsibility for any problems during the build..
  • Do you fully understand the responsibilities and risks which can include extra costs that can blow your budget.
  • Do you have all the knowledge, skills and time to manage the build properly.
  • You will have to take a course (May be available on line) which is going to take time. This will only give you the most basic understanding of the process.
  • Most banks are very reluctant to lend to owner builders so finance is going to be an issue.
  • You won’t have the advantage of any of the standard builders guarantees which means that if problems arise later you will have to meet the full cost.
  • When you want to sell many people can be reluctant to buy an Owner Built House without guarantees.

I have heard of several cases where this type of job went wrong but it may be successful for you.
 

For Similar Posts see Choosing a Builder