HELP!! Builder trying to run away with my deposit!

Hello all, it seems I have gotten myself into a bit of a pickle with a project home builder.

I had a vacant residential block of land that I was looking to build on. I engaged a well known project home builder to build. I paid my initial $750 non-refundable deposit and the went away and completed a survey and soil test to allow them to accurately present me with a tender price.

Once they completed the above, they contacted me to inform me that as per my section 10.7, my property was in flood and bushfire prone land. They requested me to get a flood report and AHD survey which I did and provided it to them pre-tender. The builder agreed to organise the bushfire report.

Along comes the in office tender presentation. Everything looks good. Flood report showed no additional work required due to siting, but a round $20k extra to upgrade the slab and footings. Something I was expecting. No mention of bushfire. They told me that they were expecting it to be BAL-29 and that CDC was their preferred option. Happy days.

After we signed the contract, we needed to attend 2 whole days of appointments with their supplies to choose colours and for them to upsell. Super waste of time for us as it was an investment but nonetheless, we were required to go and so did.

Roughly 2 months after signing the contract, I received a call from the builder notifying me that I was in BAL-FZ and that I needed to get my rating down to BAL-40 or less as their internal policy is they don't build in FZ. They quickly offered to refund me the $1,300 I agreed with in the initial contract for them to obtain the Bushfire report. After a few months of back and forwards with various bushfire assessors and the RFS and no-go, still in BAL-FZ.

After notifying the builder that BAL-FZ was here to stay, they happily offered to allow me to cancel my contract, however, they would not be returning my 5% deposit of ~$15k as it was already spent on the project. I requested a breakdown of costs and 95% of the costs were services prematurely engaged by them. They paid insurance, $5k for a sales contact and $7,500 of administration overhead. BS expenses if you ask me.

They refuse to build, they refuse to cancel the contract and they refuse to refund or credit the 5% deposit. I will be engaging legal advice further but just wanted to know if I am going crazy or they really are just bullying me for my money. I feel like I have a pretty good chance of getting my money back but don't want to lose it all on legal fees. I have been to NCAT a handful of times for non-paying customers and always won so might end up going that approach.

Thoughts?

PS. I have build over 10 dwelling in my development career and am in the construction industry so do kinda know what I'm on about.

 

What does the contract you signed say?

 

It's just a standard HIA contract so not much. The only clause I can see that would apply is clause 27.1(b) where the builder is in breach of contract.

They do have a clause stating that the builder may terminate the contract if the dwelling is in BAL-FZ. It does not mention anything monetary.

 

Sounds like the builder is allowing you to cancel the contract, just that the deposit is spent? Isnt the key what the contract allows the builder to do with the deposit? Ie whether what they say they’ve spent it on is within the contract?

 

Can you issue a notice to complete or similar? They'll then either have to comply, cancel the contract or challenge it.

Note: I have extremely limited legal experience.

 

I would say they have legitimately spent some of that money. Once a HIA contract is executed then they are required to get the insurance, they spent time doing your prestart and they presumably spent time working with CDC/Council, potentially engineering consultants, initial bushfire assessment consultation to see if it could be improved.

I am confused when you state they offered to allow you to cancel your contract then later state they refuse to cancel the contract.

 

In addition to what westminster said... whilst the clause says building may terminate in BAL FZ, you need to explore where the contract refers to termination, and the consequences of that. Two separate matters - 1) termination, 2) financials upon termination

 

Breach ? Or incapacity to complete !! You have land that they cant build on. You engaged them and admit there is a contract. They spent time and money on a matter thay cant recover their costs. I think you are looking at this from your perspective and their perspective is you didnt seek approvals for construction PRIOR to purchasing the land !! Your failure to do that meant you contracted for something that could never be fulfilled. They had to check the fire zones etc and it failed. Yes that takes time and time means money.

You may now have problems with getting others to build on this land as many project builders wont build on fire zoned land. Or will quote major variations to design and materials and site position.

 

The contract doesn't directly stipulate what the builder will do with the initial deposit. They do stipulate the progress payments, but not the deposit.

Within the HIA contract, either party can issue a breach notice if the other party does not live up to the contract. Clause 27.1(b) says the owner can issue a breach if the builder suspends the carrying out of the building works. I believe they have done this by putting my project on hold until the BAL rating is reduced, which is impossible as the BAL rating is calculated to Australian standards.

I agree, they have legitimately spent some of that money. I have calculated it to be around $2000. That includes, soil testing, sewer drawings from Hunter Water and a site survey. All which I paid for pre-tender. I told them I was happy to pay for these costs, however, they would not settle with anything less than the 5%.

I also agree that they need to take out insurance when issuing a HIA contract. My argument is, why did they issue a contract when the section 10.7 certificate noted that the land was bushfire prone land? They required me to get a flood report and AHD surver before signing, yet informed me they were happy to organise the bushfire report themselves after tender. They should not have issued a contract without certainty that it was a zone that they were willing to build in.

They have spent money on works that they and I cannot use. It is essentially wasted money. Now they are asking me to pick up the bill as they did not complete the bushfire report before engaging works.

As a self-employed electrician myself, it's a clearly a fail of internal processes. If I was doing a supply upgrade for a building, would I order the switchboard materials, build it and hire a generator before getting approval from the energy supplier? Sorry Mr. Building Manager, AusGrid have knocked back the upgrade application, but you still need to pay for the switchboard that we can't return..... It doesn't work that way.

If I cancel, I lose my 5% deposit, if they cancel, they need to refund. They are happy for me to cancel as it gives them a "get out of jail free card". They won't cancel as they will need to give me a refund. They're just leaving the project in limbo.

The issue I see is, they are not exercising the clause that stipulates their right to cancel in BAL-FZ. They are simply saying, we aren't going to build in BAL-FZ, you can cancel if you want and lose your money or....blank.

I do not have land that they can't build on. I have land that they have CHOSEN not to build on.

Australian Standards specify requirements to build to the specific BAL levels, including BAL-FZ. They don't want to build to that. Their choice, not mine.

I engaged them on the premise that they wanted to build my dwelling. When I signed the contract they did, now they don't. It fell into their too hard basket.

So, just to make it clear, I engaged them for the complete approval process as well as construction. They notified me that there was no issue with building and that they were going to seek approval through CDC. CDC approval can only be granted in BAL-29 and under. They clearly did not check the basics before issuing me a contract. You cannot get construction approval before you purchase land so I don't know why you suggest that avenue?

The building is only BAL-FZ as it is within 8m from the southern and eastern boundary. If the dwelling is >8m from those boundaries I'd be within BAL-40 and the builder would be happy to build. I have requested them to "shave" 1m of the 2 sides of the dwelling to comply with BAL-40 requirements. They refused and said I'd need to cancel the contract, lose my 5% deposit and start their sales process again.

All they want to do is charge me for work that never should of been done. I paid them $1,300 to do a bushfire report that they failed to do. They were happy to take my money for that report. Where they ever actually going to get it done? Who knows.

 

Any chance you could ask for a copy of the bushfire report, and see if it was dated before or after the contract/tender?

Seems like they should have never issued the contract imo, especially if you had paid the money for the bushfire report like they asked, you could've got the report done yourself and presented it to them before a contract was issued and they would've seen the BAL-FZ, so why wasn't it done by them pre-contract...

 

It's in the Flame zone, what is the additional cost to build meeting the requiements of FZ? Another $40-60k or is FZ prohibited construction?

The survey, bushfire consultant, soil testing/report etc runs well over $2k. (noted that the fire consult was paid separately).

As you note, the house would me in BAL-40 if they move or reduce the building by 1m, this should be treated as a vary it's not a deal-breaker.

The contract needs to be prepared to cater for the 5% deposit, insurance needs to be effected with the contract.

The deposit becomes the builder's working capital, the builder isn't your financier so they don't just sit on it but apply it to the works.

 

I can call my insurance company within approx 6 weeks of initiating a policy and cancel with a full refund (providing no claims).

As the builder hasn't turned a sod or placed a peg (any site works at all) I don't see why the insurance component shouldn't be refunded ........

$7,500 for "administration" is a joke ($2k maybe)

I wouldn't cancel the contract !

 

Get their response ("we are not going to build in FZ") in writing, take it to a construction lawyer. If the way I'm reading the situation is correct, they won't be able to do anything and must either build, or terminate contract and refund/compensate. Get a legal opinion

 

This is exactly what I am thinking. Why did they provide me a contract without confirming that the BAL rating was a zone that they would build in. Really is a waste of everyone's time. They just wanted to lock you in so they get you as a customer.

They never got the bushfire report done. They managed to spend money oneverything else, but never the bushfire report. The BAL rating came from an independent bushfire assessor I engaged.

From my DD the additional costs are around 10-15% which I am happy to pay. They won't provide me a price as it's a flat out, "we don't build in BAL-FZ".

As mentioned previously, happy to pay the costs of the survey and soil testing.

Also happy to trim the house down by 1m as a vary. They said no. I need to cancel, lose my deposit and restart the sales process. Apparently they do not allow structural variations after contract signing.

Exactly, easy to cancel the insurace. AFAIK, as soon as I cancel the contract, they'll be asking for a refund from their insurer for a little extra lining of their pockets.

They won't provide me with a breakdown of administration costs unfortunately.

I have it in writing in numerous emails already.

I provided a solicitor friend with a copy of the contract. They believe I am entitled to the whole 5% refund. They also advised not to use a solicitor as it will cost more in legal fees...LOL.

Seems like NCAT is the way to go. I have been there over a dozen times and won every time. Ironically, for customers disputing my invoices for completed works.

 

I can assure you in Qld you can get refunds on the insurances paid if the job doesn't progress to construction, you can also get refunds for parts of the building application fees so they should allow for that in their calculations.

We charge clients an initial $2500 fee for soil test, preim slab design, contour survey, initial drawings, site inspections and drawing up the Contract.

Once the Contract is signed we move forward to Building Application which is where the bigger costs come in such as insurances, application fees, energy reports, structural designs by the engineer, colour consultation etc etc and we charge $7500 for that.

That $10,000 generally covers costs outlayed up to starting construction.