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Building Contracts

If you are doing building or renovating work on your home, it may be a good idea or even necessary to have a building contract.  But what exactly is a building contract and why do you need one?

A building contract gives you peace of mind in the case that you are not happy with the work completed or if the job is not finished.  It also helps to outline the steps involved in the building project, as well as the costs.  Always ensure that you enter into a contract with a licensed, registered or accredited builder.

Where can I obtain a Building Contract?

Before any building work commences, the builder or architect should provide you with a contract, as well as any other documents that make up part of the contract.  There are standard contracts available from many agencies, including the HIA – HIA contracts are the most commonly used and comply with the requirements in the state which they are to be used.  They can be easily obtained from the HIA office in your state.

You can also obtain a building contract from The Office of Fair Trading, which exists in every state and territory.  They have two types of plain English contracts - a home building contract for work over $25,000 and all residential swimming pools, and a home building contract for work up to $25,000.  These contracts can be purchased over the phone, from a Fair Trading Centre, from Australia Post in NSW, or in some local council offices.

The Master Builders Association in your state also publishes a range of contracts and supporting documentation that you can use for your building project.
 

Architects and Building Contracts

Architects also use building contracts extensively and a range of contracts is available from the RAIA – the Royal Australian Institute of Architects.  The RAIA makes a range of contracts available in order to ensure that the contract will suit the project.

An architect administered building contract features professional assistance in building matters from someone other than the builder. It also allows for monthly payments to the builder, based on the actual value of the work completed as assessed by the architect.  During the construction phase, up to 5 percent of the amount of the contract is held as security that the builder will conform to the terms of the contract.  Once the project is completed, up to 2.5 percent of the amount of the contract may be held as security that any defects will be repaired within the defects liability period set out within the contract.  The owner will also be compensated if the builder goes past the completion date set out in the contract without justifiable cause.

What do I do once I have the Building Contract?

It is important that you understand all the things that have been lined out in the contract.  If there is something that you don’t understand, seek clarification or ask for an explanation from another source. Ensure that you take a note of any changes to the standard contract.  These changes need to be priced and in writing, and should not be made without first seeking the advice of a professional.  Be aware that some changes cannot be implemented due to statutory requirements.

Also, be aware of what is included and what is not included in your contract and how it may vary.  If the building project needs to run for a longer period of time, how does the contract deal with this?  Also, how does the contract deal with any changes that may need to be made to the work?

What should the Building Contract Include?

Ensure that your building contract includes the following:

• that the commencement and completion date of the project is clearly stated or easily able to be worked out
  
• that your name as the homebuyer and the contractor’s license number is included
  
• a description of all the work to be carried out during the building process, including plans, specifications, and any particular requirements that you may have
  
• the necessary insurances
  
• the contract price
  
• a clearly stated cooling off period
  
• a checklist of 12 items and a caution about signing the contract if you can tick yes to all 12 items
  
• a place for the buyer to acknowledge that they have read and understood everything in relation to the contract
  
• prime cost or provisional sum items are clearly stated 
  
• progress payments are outlined
  
• a clause that states that all work will comply with the Building Code of Australia as well as the other standards required by law
  
• that the contract begins on the day when the last party signs the contract and the other party is made aware of this signing – this is the contract date and should not be confused with the starting date for the project.

In some states, there must be a cooling off period in the contract by law.  During the cooling off period, you are able to withdraw from the contract but you may still be liable for the expenses that the builder has already incurred.

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