What to consider in a contract with a builder?

Hi,

I'm engaging with a builder for an extension to PPOR. Got a quote from him which we were happy with and he is now writing up a contract. Works will be >100k. Never done anything more than hiring someone to change floors and paint a house. Just wondering what I should look our for in the contract (particularly to avoid disputes later on) and whether I should check this over with a solicitor before signing? Thanks.

 

Is the builder doing the working drawings too? How about engineering etc?

Check his registration, and get a couple of references from recent jobs.

Most builders will use industry association contracts (HIA or MBA) which cover standard stuff.

It is worth getting someone independent to check each stage of the build. Homeone Forum has lots of useful info.on this.

Renovate Forums, has a few active builders as members - and the community there is very helpful with advice about what to look out for.

It is very important to check that every thing you have agreed on is included in the drawings/documentation as once the contract is signed, any changes to that agreement will be variations - and an extra charge.

 

• Margin on variations
• method of adjustment of provisional sums
• schedule of rates for excavation in rock/definition of rock
• timeframe for notification/approval of variations & costings
• liquidated & ascertained damages
• incorporation of construction programme into contract including critical path
• allowance for weather (lost time)
• incorporation of milestones (for progress payments)
• use a quantity surveyor to assess/monitor claims/review variations/administer contract

 

Try and negotiate a fixed-price contract as well as a fixed-duration with penalties for running late.

It is also worthwhile checking out the productreview.com.au website to see if there is any positive or negative customer feedback.

Some building inspectors will review plans and specifications for you before signing. They may also say they review contracts but best to get a solicitor if there is anything significantly different from the standard HIA contract.

In some ways, renovations can be more risky than cookie-cutter new home builds. Particularly if any issues are found during the build. This is where having an independent building inspector can help to reduce your risk.

 

AFAIK only a solicitor can give legal advice however an experienced contracts administrator should be able to review the contract. Any departure from the standard RAIA/MBA or HIA contract should be reviewed by a solicitor experienced in construction building disputes not your local lawyer.

 

Agree. I investigated getting a solicitor to review my PPOR build contract a few years ago. Quotes I received were over the top. I'm surprised more solicitors don't offer it as a basic service - particularly for straightforward residential builds.

As my contract was based on the standard HIA contract, the builder had not made alterations to the terms, it was a fixed term and had no provisional sums I was happy. I did agree an extra liquidated damages condition with them. It was a smallish builder that was accomodating. The larger builders would not be.

I had also worked with the builder prior to contract to review and/or price up all the selections (electrical, kitchen, tiles, fixtures/fittings). This meant I was hit with no variations and associated administrative charges post-contract.

 

Thanks. Lots of good info here.

I used a draftsman for drawings. I've also engaged with a structural engineer to assist with these drawings. Some minor changes have been made since and the builder will use his structural engineer to make any amendments and price this into the contract.

I've read the fair trading contracts have better protection so I might try to push for this one over HIA or MBA. Would you agree? I'll download each of these and compare whether there are any differences.

It's a fixed price contract. I did not see penalties as standard in the fair trading contract. The builder gave a time frame of 3 months (which typically means more). What would we an appropriate timeframe and penalty given the builder will no doubt whinge about weather, suppliers etc holding up the job?

 

All good advice above.
Just to add, whilst it's good to get testimonials, IMHO it's more worthwhile to speak to their subbies or workers. Get an understanding of how well/quick they pay their subbies, project management skills. You'd be surprised to hear what's on the ground level.

 

I'm wondering why isn't or can't be done by a private certifier. My quote for PCA services includes inspections at certain points in the build.

 

Well, the weather thing is fair. There will be something in the contract about that.

 

I'm about to sign:

* Using standard MBA contract. No alteration to terms on his part.
* 20% margin on variations
* No PC items listed (I provide all bathroom PC items). No provisional cost items listed - builder says he has accounted for everything to do the job.
* License is valid. Checked both company license and his own license check from FT website. No historical issues in 10 years. Providing home warranty insurance.
* Builder was a recommendation from a friend who did an extension. Overall impression was pretty good on quality and deliverables.
* 10 progress payments listed on contract with achievement of stated milestones.

The only thing is that the builder provided a single "price" for the whole job and would not itemize this quote into the various parts (concrete slab, roof construction, demolition, decking etc) when asked. Is this normal?

 

Builder quotes/refers to drawings/plans ie ..... ''As per plan"', if the draftee/architect left something out, beware that you will likely be wearing the costs, not the builder.

MTR