DELAYS & LIQUIDATED DAMAGES

Discussion in 'Development' started by AnneC, 1st Oct, 2018.

Join Australia's most dynamic and respected property investment community
  1. AnneC

    AnneC Well-Known Member

    Joined:
    26th Jul, 2018
    Posts:
    95
    Location:
    Melbourne
    Trying to understand liquidated damages to us and liquidated damages to builder.

    Liquidated damages to the the builder

    What sort of delay would be caused by us to allow liquidated damages to be paid to the builders?

    Would asking for a variation cause a delay and hence trigger liquidated damages? How can a variation be asked for and not trigger liquidated damages?

    What are the allowable delays for the developer?

    What are the allowable delays for the builder, so that they can extend the time to complete?

    When are these liquidated damages payable?

    Any comments would be appreciated.

    Thanks
     
  2. JDM

    JDM Property & Conveyancing Lawyer Business Member

    Joined:
    19th Jan, 2016
    Posts:
    446
    Location:
    Brisbane
    The answer to all of your questions depends on the contract you sign. You need specific advice on your contract and you should have it reviewed by a lawyer before signing.
     
    Ethan Timor and Tufan Chakir like this.
  3. MTR

    MTR Material Girl Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    16,803
    Location:
    My World
    Yes contact
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    15,923
    Location:
    Sydney or NSW or Australia
    Any decision which lies on the critical path may be a cause of delay. Eg. Brick or roof tile or window powder coat colour selection may cause a delay.

    Asking for additional works may cause a delay (depends on when you ask too) eg landscaping or building a pool.
     
  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    13th Jun, 2015
    Posts:
    6,970
    Location:
    Perth
    Allowable delays will be set out in the contract and/or specified by agreement. It may include things like
    - wet days - any day where there is more than x millimetres of rain then trades might not work and even if they do the day is still not counted as
    - acts of god - floods, earthquakes, plagues of locusts :p
    - strikes/union action - affecting trades and/or supply
    - things outside the control of the builder - national shortage of bricks/timber/blah blah
     
    Tufan Chakir likes this.
  6. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    15,923
    Location:
    Sydney or NSW or Australia
    LDs are only payable at the end of the contract ie after all variations have been agreed and extensions of time granted. It is not applied during the contact.
     
    Tufan Chakir likes this.
  7. Tufan Chakir

    Tufan Chakir Well-Known Member

    Joined:
    18th Aug, 2016
    Posts:
    412
    Location:
    Victoria, Australia
    Liquidated Damages are paid by the builder to the owner - not the other way around. Consider them as a delay penalty (certainly now a way to make $ on the contract or reduce the contract sum)

    See the other comments about what constitutes LD
     
  8. Fabs

    Fabs Active Member

    Joined:
    19th Jan, 2018
    Posts:
    34
    Location:
    Sydney
    As Scott No Mates said above, LDs are paid at completion by the builder to the owner. However, when the owner causes delays, most building contracts would have a provision to allow an extension of time or even suspension of the works.

    The cost of these delays will naturally need to be paid by the owner to the builder as they will need to keep their staff and plan on site for a longer period than initially allowed.

    Some examples of delays caused by the owner (obviously depends on what is in the contract):
    -Not providing instructions to the builder on time
    -Not obtaining required approvals on time
    -Disputes with the builder or neighbours
    -Delay in payments to the builder
    -Delay in the delivery of materials to be supplied by the owner

    The list above is only the tip of the iceberg, there are many situations where your contract will provide for delay payments to the builder, and be sure that the builder is aware of them and may use them against you - depending on their experience they may have been in these situations many times and they are not in the business to lose money. There are situations where you must make a very important decision within a couple of days otherwise the builder will be entitled to claim delays.

    If you don't have experience in contract issues or don't have time to deal with the builder properly I strongly recommend that you have your contract reviewed and administered by a competent professional such as a lawyer, project manager or architect. It is a small investment that can save you a lot of money.
     
  9. Television

    Television Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    52
    Location:
    Inner-West Side, Sydney
    Some contracts include special conditions allowing liquidated damages to be held against moneys owing (i.e. unpaid progress claims).
     
    Scott No Mates likes this.