What you need to know about building contracts

Apr 27, 2017

building contracts canberra

Your building contract is the single most important document you will sign when building your new home.

Not only does it lay out the specifications of the home the builder has agreed to build for you, and the inclusions that form the basis of the price you will pay, but it also outlines the rules that both parties will adhere to, and what can be done in the event of a disagreement or dispute.

Building contracts are made up of 3 parts:

  1. The Contract: The terms and conditions of the build, including the time it will take, handling of payments, accessing the site, dealing with variations, dispute resolution and more;
  2. The Specification: Specifications (or schedules) that set out exactly what is included (or the allowance for an inclusion), and at what stages of the build you will pay certain amounts; and
  3. The Drawings or Plans: An Appendix of professional drawings that show the plans for your new home, as drawn up by your architect and approved by a building certifier.

After you have agreed on the design and inclusions for your new home, your builder will compile your building contract and discuss it with you.

At Rosin Bros, we do this through a Build Process Explanation Session. This session helps our clients understand each clause, and how it relates to them. There’s no point having a mismatch of knowledge where the builder knows and understands the contract and you don’t. Knowledge needs to be shared so everyone appreciates what is being agreed to – and that’s what our explanation session aims to achieve.

Other builders may have a different process, but in essence you want the contract signing to be an enjoyable experience where you feel confident and excited moving forward. If you’re worried, ask the builder well in advance for a blank copy of their standard contract so you can spend time going through it first.

Most builders follow the standard contract supplied by the association they belong to (i.e.: an approved HIA or MBA building contract). The contract is then adjusted to the requirements of your specific build.

More information about the standard HIA contract can be found here.

Generally clients don’t need a lawyer to overlook their building contract – as everything is (and should be) pretty straight forward, and in plain English. However, if your builder is not using an approved building contract from HIA or MBA, and their wording seems a little ambiguous, it’s good to have a lawyer look it over.

When you go through your contract, the main questions you will want to ask are:

  • Is it a lump sum or cost plus contract? Meaning, is the quoted figure your final figure, after all inclusions are accounted for? Or, is the figure a base price plus a collection of allowances for different parts of the build (such as kitchen, tiles, bathroom fittings and so on)?
  • What is the schedule of payments? Check the allocation of payments across the build and make sure they are reasonably even. If your builder is asking for a significant payment in earlier stages (such as more that 60% before lock up stage) your bank may not approve it. So have the bank agree before signing if the payment structure seems “top heavy”.
  • How much time will it take? There will be a clause in your contract that states how many days a builder has to complete your home. This varies between homes, as obviously some are larger than others and custom designs take longer. Ensure you agree to the days specified (and keep in mind, they are working days).
  • What do you need to provide before the builder can start? One clause within your contract outlines the documents you need to provide before your builder will start building (such as proof of ownership of land, proof of funding, etc). If you do not provide these documents, the builder is not obligated to start. So make this a priority, because once complete, the builder must start within 15 days.
  • Is there a warranty period? Generally the warranty period on a new home is 3 months. At Rosin Bros, ours is 12 months. We like to see the home go through an entire year of seasons (particularly in Canberra). Be sure to make note of any maintenance schedules or things you must do to keep your warranty valid.

Typically, building contracts do not have a cooling off period.

The fairness of your contract is generally determined by the specifics your builder places within the clauses of the standard building contract. So if the build time seems exceptionally long, or the inclusions are vague, you might want to take the time to negotiate more.

And just keep in mind, the more specific your contract, the less chance there is of a dispute. If you have not picked out certain inclusions before you start, and the allowance is not sufficient, you will likely need to pay for the excess costs out of your own pocket at that stage of the build. So keep occurrences like these to a minimum to avoid any nasty surprises.

When you are happy, sign away and make sure you and your builder have initialled every page. There should be two versions, so do stay vigilant and ensure both contracts are the same.

And then you can then get to the most exciting part of the entire process…building your new home!

For more information about building contracts, or the Rosin Bros Build Process Explanation Session, please contact us on 6247 4799 or email info@rosinbros.com.au.

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