Home Building Online News

Although retention money is not common in residential building contracts (mostly because the law makes you give the client an automatic seven year warranty on the building works), here are some tips if the clients insists:

• Make sure that the retention percentage is not more than 5% of the contract price; and
• 50% of the retention amount should be payable to you upon practical completion, and the other 50% should be payable to you at the end of the defects liability period (which should be 13-26 weeks); and
• There is always the option of having in place ‘bank security’ rather than cash retention.

The Progress Stages as stated in the contract usually determine when you will be entitled to a Progress Payment.

Make sure your contract entitles you to progress payments after the “substantial” completion of each progress stage, as this will prevent the client from arguing that you are not entitled to a progress payment because you have not completely finished a progress stage.

When setting the percentages of the contract price that you will be paid at each progress stage, you should always take into account deposits that you have made for goods and / or materials that you have purchased, but will not be installed onsite for some time.

When setting the percentages of the contract price that you will be paid at each progress stage, always keep the final progress payment percentage as low as possible (usually 5-10%).

The changes to Home Building laws will mean that builders will have their licences suspended, and be exposed under home warranty insurance, if they fail to pay money to a client under a court or tribunal order.

As these new laws will have a significant impact on builders and their businesses, it is advisable to always comply with the order of a court or tribunal in this sense, or risk having your licence suspended and allowing the client to make a claim under the home warranty insurance policy.

Home building laws require that a builder’s licence number must be displayed in “any advertisement of any kind to the doing or contracting to do any residential building work”.  Could your website be considered ‘an advertisement of any kind’?  Be safe and include your licence number – it will also make you look more of a professional.

Continuing Professional Development (CPD) is in place for most professionals in Australia, including doctors, lawyers, accountants, engineers and other professionals.  In 2004, the Office of Fair Trading recognised builders as also being professionals in today’s world, and introduced a CPD system for builders and swimming pool builders (although that CPD system has changed a number of times since it was introduced in 2004).

Builders should always keep records of their CPD records, and ensure that they earn 12 CPD points in each year.  Random audits are always being conducted by the Office of Fair Trading, and being caught out could mean that your licence is suspended until you earn the necessary CPD points to comply.

A home building contract must have a clause that states all variations are to be in writing and signed by the parties.  It is common these days for the parties to document their variations by email, where the emails contain an electronic signature.

The nature of signing a document involves writing your name on a document or a mark representing it, and this unique mark will demonstrate the link between you and the signature.

It is very possible for emails containing electronic signature to be sent by a person other than the person whose electronic signature appears on the email.  Given this, an email containing an electronic signature may not be considered to be “signed”.

If you wish to continue to use emails to document variations, it is best to simply print them out, and have both parties physically sign those pages to avoid problems.

Home building laws state that if you, as a builder, have contracted to do any residential building work, you cannot then contract out to or sub-contract to another person for that other person to do all or part of that work unless that other person holds the appropriate licence.

The laws for doing this are very severe, so always check that the person you are about to engage has a current licence, or both you and them may be handed hefty fines.