The 10 Tricks & Traps You Need to Look Out For When Signing A Building Contract

Below are a few things you should keep an eye out for, of course please seek your own legal advice from your conveyancer:

1. Schedule 1 – Particulars of Contract 

If the information in this section is blank, get your Builder to fill it out before signing. Never sign a blank Contract. You wouldn’t sign a blank cheque would you? The same rules apply here.

2. Schedule 2 – Progress Payments 

Double check the percentages and that the amounts add up to your contract price. You will be surprised how often this is wrong! If there is a discrepancy, sort it out prior to signing to avoid any dramas later on.

3. Clause 27 – Final Certificate 

Confirm with your Builder that they will be providing you with a final occupation certificate for your new home. If not, why not. At the very least, you should get an interim occupation certificate from them.

4. Clause 29 – Defects Liability Period 

There is a standard period of 13 weeks after your new home is completed, where the Builder will come back and fix any defects on the property. Whilst this is the contractual arrangement, by law the Builder must guarantee their work for a period of 6 years for any “major defect” (being defects to a major element of the house) and a period of 2 years for all other defects. Bear this in mind if there are any defects after the 13-week period.

5. Attachment A – Form 1 (Checklist)

Go through the checklist. It is definitely worth doing. The important thing is that you ask the questions and you understand the answers. If you still don’t understand, keep asking.  

6. Special Conditions 

The “Special Conditions” included in the Building Contract will differ from builder to builder. It is for this reason why it is so important that you either familiarize yourself with the conditions or alternatively, seek independent legal advice. This is because, the Special Conditions can amend the standard terms of the HIA Building Contract by either varying or deleting the existing terms or adding new terms to the Contract. There may be additional costs set out in the Special Conditions or other conditions which may not be in your best interest.

6.1 Please also ensure that things such as build costs and variations are discussed and if possible included in the package prices regardless of the industry changes. Not all builders will agree to this however getting some sort of an agreement is usually helpful so you know what to expect start to finish.

7. Consumer Building Guide 

If this is your first time building, we suggest that you check out the “Consumer Building Guide” prepared by NSW Fair Trading. It is a great little guide that is generally attached to your Building Contract. If it is not included for any reason, you can download a copy of the guide here:  https://www.fairtrading.nsw.gov.au/trades-and-businesses/construction-and-trade-essentials/consumer-building-guide

8. Sign and counter-sign 

As a matter of correctness-  check that every page and every blank space has been filled in correctly, or lined through as not applicable. Have the contract witnessed properly, and initial every single page and document that you will be relying upon to complete your project, and make sure that the builder follows suit. Counter-signing means that both parties have had a meeting of minds at the time of signing, and means pleading a lack of understanding, or responsibility, can’t be used later down the track. The golden rule with the contract-signing process is check twice, and sign once.

If you are unsure of a clause, don’t sign until you are 100 per cent comfortable that you have ensured as much certainty as possible. Nobody wants to have to enforce a contract, but if you end up in a dispute you will be thankful you took the time to make sure things fall in your favour.

9. Timelines & Payment stages 

It’s unlikely that everything will run like clockwork. Building sites rarely do. However, this shouldn’t stop a reasonable builder agreeing on a timetable with you.

If a deadline is essential to you, make sure you agree on timelines before you sign, allowing some slack time to cover for bad weather or delays beyond the builder’s control. Never sign a contract without an agreed timeline. There is a clause available to use in this instance called a “Sunset Clause” this means any time that the builder has gone over for you – he is required to pay for this extension and fees from his own pocket – not yours. Alot of builders won’t agree to this clause as they can get a lot of extra money off people who are unaware of their rights.  You want to give him leniency as best you can, but also not be taken for a ride. 

9.1 Quantity Surveyors & Payment stages

Building contracts work on milestone-payment terms, meaning payment is made when the builder reaches a certain point in the process. Don’t rely on the builder to tell you when that point has been reached. Instead, appoint an independent professional to look at the work and confirm that what you are paying for is worth the money, and is complete to building codes. Usually a Quantity Surveyor is given to you in alignment with the bank you have used. Make sure this builder has given you the QS number, or you have received this from the Bank to stay in touch with them as you go along. If a builder goes bust and you have overpaid at any stage, you will end up paying a replacement builder for work you’ve already forked out for.  Money spent checking on quality and progress is worth every cent.

10. Inclusions and exclusions 

Make sure that the plans, specifications and any other documents important to you are listed in the contract. Most contracts include an exclusion clause stating that only matters covered in the contract will be relied on.

Sales pitches and deals to incentivise you to sign up are almost always left out (to see if you pick up on it), so double and triple-check that anything you were told, or want to rely on, is in the document. Or will be honoured within the package price for you, so you’re not left with an extra few “variations” that are completely left field. Please see this link if you’d like to double check what “variations” can legally be about https://www.designingbuildings.co.uk/wiki/Variations_in_construction_contracts.

By Karly Reimers 

If you have any questions,  drop me an email or call with your questions. I’m here to help!

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