The purchase of a home is a big commitment. Likewise, renovation or building works to such properties also involve large lots of energy, time and expense. Building and construction works by their very nature are complex, with many moving pieces. There are ways however, to minimise potential issues.
Firstly, for domestic building works that are worth more than $10,000, parties must enter into a written contract. There are penalties for a builder who does not enter into a written contract for works valued more than $10,000. It is best practice for model or standard contracts to be used as critical terms would be included in them. It is advised that even for works below $10,000, parties should enter into a written contract to avoid potential disputes further down the track.
On a related note, be sure to note whether the builder requires you to obtain some of the preconstruction works separately, in which case, you would be provided have to enter into separate contracts with the soil surveyor or architect as the case may be.
Any preconstruction works such as soil reports, architects’ drawings, and approvals from Council etc. can be included as part of the building contract, and indeed may be considered under the law to be part of the building contract.
Secondly, be sure to obtain the full name of the builder prior to the signing the contract. This may be an individual or a company. Perform a search on the Victorian Building Authority website to ensure that the builder is registered. The building contract should contain the full name of the registered builder as well as their licence number.
Likewise, for builders, it is important that the contracting party is a registered builder with a building licence, and to ensure that the appropriate insurance is in place for the building works. For building contracts of more than $16,000, insurance is mandatory. There are penalties imposed against builders by the Domestic Building Contracts Act for not meeting such requirements.
Thirdly, it is also best to discuss in detail all the requirements for the works prior to signing the contract. This can be done via drawings, emails, or spreadsheet. Such lists should include prime costs and allowances which are generally made by the builder for plumbing, electrical works among other things. These can potentially lead to cost blowouts further down the track, so it is good to negotiate this and understand such figures properly at the outset.
Similarly, it is important to understand exactly when staged payments are to be made. Some builders may include a smaller portion of the works which are not commensurate with the actual completion of the works. Be sure to discuss this with the builder, to avoid being in a position of having paid more then 70% of the contract price with only 40% of the works being done.
Vik Pillay
Senior Associate (Admitted in Australia, Singapore and England & Wales)
