Inflation sucks and for building a property you will get mucked

Discussion in 'Development' started by lakersfan23, 18th Jun, 2022.

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Does timber, steel and bricks constitute as PC items ?

  1. Yes

    1 vote(s)
    12.5%
  2. Not at all your builder is pulling a fast one on you :(

    7 vote(s)
    87.5%
  1. lakersfan23

    lakersfan23 Well-Known Member

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    Hello fellow PCers its no secret everything has gotten expensive from your morning coffee to building your dream house and everything in between. This was bound to happen especially if you keep the money printing presses on like 7/11. Now that I am done with my rant I would like to solicit your valuable input with my situation.

    Background

    I signed a Master Builder BC4 contract for $ XXX amount with my builder with the start dates TBC in early May.

    My builder was working on other projects and hence wasn't able to get me the HBCF in order to get my CC so the start date was left as TBC.

    Problem
    I got a call from my builder this week (Mid June 2022) that since the prices have gone up he would need to update the contract with the price increases as thats what was recommended by HBCF (Total BS)

    I do understand and appreciate that prices have gone up but I don't think this warrants updating the contract from May - June. He would like to add timber, steel and bricks to the PC items list which sounds preposterous to me.

    Feedback and input

    I would appreciate any feedback to my situation or my questions listed below.
    1. Does the builder have the right to do this after the contract has been signed and sent for loan approval?
    2. Does timber, steel and bricks constitute as PC items ?
    3. Can I cancel my contract if the new contract price has significantly increased potentially > 10%
    4. Would I need to pay the Clause # 9 BC 4 - Pre Contract Costs should I choose to rescind the contract ?
    As always thanks for your time and valuable input :)
     
  2. MTR

    MTR Well-Known Member

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    Read your contract and my thread on build blow outs
     
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Only if they're listed in the schedule of PC sums. They may have allowed $750/th for bricks but the selection is a $1,000/th brick, steel usually not unless it hasn't been designed and the builder made an allowance (usually X tonnes), timber nope unless it's something for parquetry/joinery which may be substituted or changed during the build.
     
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  4. NickWCBA

    NickWCBA Well-Known Member

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    My contract has provisional sums for framing, slab, earthworks and structural steel. Been stung on all of them. Structural steel had a PS of 7k, but ended up being 45k.
    Like I mentioned in an earlier post, the contract price has increased by 115k.
    Now the fun bit is finding the money.
     
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  5. southern-investor

    southern-investor Well-Known Member

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    This is why house prices will not suffer a sustained drop. The fundamental raw materials and labor cost to build them have skyrocketed. And the amount of buildings being complete is at all time lows.

    No builder will build a house for a loss. This is only 1 reason why houses will be buoyed no matter the interest rates.

    Building in today's climate you got no choice but to stump up the money.
     
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  6. sash

    sash Well-Known Member

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    This is total BS. .

    The people who are getting stung have no idea how to structure build contracts or have picked builders with very poor supply chain control.

    I expect building to be much less of an hassle from late next year. Building approvals dropped 30% this fincial year...I expect another 30% this year
     
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  7. NickWCBA

    NickWCBA Well-Known Member

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    I had mine looked at by a solicitor who specializes in construction. I would have thought it was structured well but who knows.
    The reality is, if i had not signed with PS then the time to get engineering etc would have increased the overall contract due to labor and other material increases.
    How do you structure your contract Sash? No PS or PC at all?
     
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  8. sash

    sash Well-Known Member

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    I definitely went with the bigger boys who had solid control of the supply chain....it is materials which has gone up 300-400% in some instances - think woodframes, steel, colorbond, etc. Labor has gone up but no where near 30%.

    A lot of people get too pedantic about developments... they go with smaller thinking they get better quality. Far from it...

    The other thing I do I hold them to a fixed price... but with some variation.... otherwise no business.
     
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  9. NickWCBA

    NickWCBA Well-Known Member

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    Which of course would mean having everything ready to go from working drawings to soil reports to engineering. Which brings me back to my point earlier.
    Over the full project I’m looking at just over 10% increase to the original quote. Easier to stomach when I look at it that way. What has been invaluable is the learning, albeit expensive lessons.
     
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  10. sash

    sash Well-Known Member

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    My builds at the moment are:

    1. Perth 4x2x2+ study, 2 living, alfresco 215sqm on 375sqm block - up spec 227k. Does not include side and back landscaping, gate, clothes line - expect this to be about 5k

    2. Perth 4x2x2, 2 living, scullery 213sqm on 503sqm block - upspec 240k, Does not include side/bacl landscaping, gate, clotheslines - expect this to be 5k

    3. Phillip Island 4x2x2, 1 living, alfresco on 478sqm block - midspec 202sqm...no high ceilings cost 224k. Does not including landscaping, and clotheslines - expect 7k for this.

    4. Geelong 4x2x2, 2 living, alfresco 430sqm block- high spec 230sqm cost 265k. Does not include landscaping, gates, and clotheslines - expect about 10k for this.
     
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  11. sash

    sash Well-Known Member

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    That is correct. That is why I think that developments are not as profitable as people think on building on existing land.

    Looks like you will wear some more increases. How are you placed to handled this?

    What is you gross margin now looking like?

    Mine are at 55%, 45%, 50%, 80%.

    Thinking starting another in Ballarat...margin down slightly ...40%:(
     
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  12. NickWCBA

    NickWCBA Well-Known Member

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    4
    Actually increased to 45% due to the latest increases. So although costs are up, profits are up also.
    At the banks beck and call in terms of how i'll handle the increases.
    Very, very frustrating.
     
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  13. NickWCBA

    NickWCBA Well-Known Member

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    I think the focus on single family homes is also interesting. Less risk and easier to finance and going by your numbers more profitable in some cases.
     
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  14. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Wow that's unusual to have PS sums for framing, slab and steel. Earthworks yes as there can be some unknowns but the other stuff it would be rare for it to be PS sums. Evidently the builder saw this as a way of being able to pass on increases outside the normal scope of price increases.
    I would seek some legal advice on this. Provisional sums can't be charged until the work has been done and then it is included in the next draw down payment.
    There are alternative ways that contract prices can be increased which can be due to factors outside of the builders control but they are notified in a different way and there are only certain circumstances allowed.
     
  15. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    It would be unusual for these to be Prime Cost items. I'm not as familiar with the MBA contract and yours might be different again for your state and be changed to suit you builder. You need to take the contract you signed to a construction contract lawyer and seek advice.

    Cancelling it often an option. Though you might not be able to find another builder to do it for less as prices have increased for those types of materials.
     
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  16. NickWCBA

    NickWCBA Well-Known Member

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    Lawyers are looking at it currently. But options are limited because I would absolutely be paying more if I was to cancel the contract and reappoint a builder.
    4 x 3bed 2 bath townhouses 590sqm of build @ a smidge over 1million.
    2.7m top and bottom. Floor to ceiling tiles and stone bench to kitchen.
    I’d struggle to get the same product at a better price.
     
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  17. NickWCBA

    NickWCBA Well-Known Member

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    The builder isn’t trying to charge ahead of the installation FYI.
     
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  18. lakersfan23

    lakersfan23 Well-Known Member

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    Nope as of now PC items are just internal doors, bathroom items and kitchen benchtops. I don't understand why he wants to add timber and steel to the list.
     
  19. lakersfan23

    lakersfan23 Well-Known Member

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    Are they allowed to charge you so excessively ? This seems like a highway robbery from the comfort of your home.
     
  20. lakersfan23

    lakersfan23 Well-Known Member

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    Prices won't suffer people will :( The supply and demand will always find it's rhythm. You can't put a price on the the personal cost unfortunately.