Home Building Tips for Builders in NSW
Delays and Compensation for the Builder
It is common for events to arise that delay the progress of the building works in any construction project. It such circumstances, where the builder can demonstrate that such an event is deemed ‘acceptable’ under the contract, the builder can claim an extension of time, which legally extends the contract period and protects the builder from having to pay the home owner liquidated damages for completing the project after the time stated in the contract.
Where the builder cannot demonstrate that a delay event is deemed ‘acceptable’ under the contract, the contract period will remain the same despite the event, and the builder will be under pressure to complete the project within the contract period to avoid being liable to pay the home owner liquidated damages.
But what if the delay has been solely caused by the home owner?
Time and money go hand-in-hand. If a contract has been signed that guarantees the builder a certain profit margin within a certain period of time (e.g a contract period of six months), then any delay caused by the home owner that extends that time period causes the builder to lose money, because the builder will be making the same profit, but over a longer period of time.
Every residential building contract should contain a clause that states if a delay in the carrying out of the building works is caused by the home owner, then the home owner is to be liable to pay the builder compensation for causing such a delay.
The compensation is to be calculated as being the total of the actual increase in cost to the builder to carry out the building works as a result of the delay, plus the builder’s margin applied to that cost.
Such an amount of compensation should be due and payable by the home owner to the builder on demand, although the builder may need to wait until the completion of the project to calculate the exact amount before making such a demand.
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Tips for builders:
- Always advise the home owner upfront when the contract is being signed that the builder has other projects lined up afterwards, and that any delay caused by the home owner will result in compensation being payable because the commencement of the other projects will be delayed, which will cause the builder to suffer loss
- If a delay is caused by the home owner, immediately document it, and write to the home owner, advising that a delay has been caused by him or her, and that compensation may be payable.
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