Home Building Tips for Builders in NSW
Protecting your business -
It’s all in the fine print
It is not surprising that some builders mistakenly believe that all standard home building contracts are the same, and offer the builder the same levels of protection. All home building contracts must comply with the Home Building Act 1989 (this is a must), however, it is important to note that different standard contracts that are available in the market offer different levels of protection for the builder.
Standard contracts that are available from Fair Trading are fair for both parties, yet these contracts do not give the builder the power to refuse a variation request by the owner, a power that HBBC strongly recommends is in all contracts used by a builder.
Standard contracts that are available from industry associations do offer builders higher levels of protection, however, there is still room for even more protection, particularly in relation to the common traps that builders find themselves in.
In addition to having a whole range of standard home building contracts available online (you will never have to purchase a hardcopy contract ever again), HBBC’s standard home building contracts have been designed to offer builders the highest level of protection, particularly in relation to the common traps that builders find themselves in.
The summaries of our ‘protection clauses’ below have been used from HBBC’s New Homes Construction Contract.
Commencement
Although builders usually plan ahead and allocate a contract period that allows them plenty of time to complete the building works, a delayed commencement may mean that it is a race against the clock to finish the project before liquidated damages take effect.
HBBC’s contracts provide that the contract period commences one month after all building permits and planning approvals have been obtained, and the owner has provided the builder with all necessary documentation. This means that even if the builder commences the building work the day after all building permits and planning approvals have been obtained etc, the contract period will not actually commence for another month, giving the builder up to one month in addition to the contract period to complete the project before liquidated damages take effect.
Extensions of Time
Most standard contracts provide that where a builder is entitled to an extension of time, the builder is to provide the owner with a written notice detailing both the cause of the delay and the extension of time, within 10 working days after becoming aware of both the cause and the extent of the delay.
However, given the busy nature of a building business, it is common for builders to complete the project, and then to hand over all notices for extensions of time at the end of the project. This practice may make the builder liable to pay liquidated damages, because the notices were not issued within the time stipulated under the contract, and therefore, they have no effect.
Is there a solution? HBBC have added an additional clause into its standard contracts, which simply states that any failure on the part of the builder to issue a notice of extension of time within the time stipulated under the contract will not in itself affect the builder’s entitlement to a reasonable extension of the contract period.
Materials and work provided by the Owner
It is common for owners to exclude certain work and products from the contract, so that the owners can do this work themselves, or engage their own contractors directly to do this work. The problem for the builder is, given that the builder has exclusive possession of the building site, such a practice usually results in the builder losing some control over the building site, particularly control that relates to the management of time and contractors on site.
HBBC’s contracts contain a clause that spans over one-and-a-half pages, which directly addresses this issue and provides the builder with complete control over the building works in such cases, including the power to require any contractor engaged directly by the owner to immediately leave the building site if such a contractor fails to comply with a direction given by the builder.
First right of rectification
Described below is a common scenario:
A project is completed, and months later, the owner discovers alleged defects, engages another contractor to rectify those defects without even notifying the original builder, and the owner then takes legal action against the builder to recover the costs of engaging that other contractor. Sound familiar?
HBBC’s contracts contain a specific clause to address this issue. The clause states that:
- if the owner believes that any defect exists in the building works, they must immediately notify the builder in writing, and allow the builder access to the site to assess the alleged defect; and
- if, after an assessment by the builder, it becomes apparent that there are defects, the owner must allow the builder absolute first right of rectifying any alleged defects.
Summary
The above ‘protection clauses’ seek to go beyond all other standard home building contracts on the market, and offer builders with the highest level of protection. If you are looking for such levels of protection for your business, and you do not wish to spend large amounts of money on legal fees, then HBBC may have what you are looking for.
HBBC’s CPD Seminar Building Contracts Made Easy also takes you through a range of different construction contract terms to help you understand a building contract and how it should operate to protect you and your business (see below for more details).
Click here for more information relating to our standard home building contracts.
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