Is my build contract really a fixed priced contract?

 

Your fixed price contract covers you for any unforeseen earthworks and engineering costs not identified by the builder due to adverse soil conditions or removal of rock.

 

Importantly your builder also allows for all items required in your build so that it is ‘turnkey’ and ready to rent on completion. This ensures that you do not get a variation for items not included in the build contract such as air conditioning, clothesline, letterbox, driveway, landscaping, flooring, fly screens etc.

 

The builder can still retain the right to charge a variation in certain circumstances such as having to connect to services that are not available to the front of the lot.

 

Post COVID-19 most builders have now included a clause that allows them to cancel a building contract if they deem the building contract to be unprofitable prior to construction commencing. In this instance the builder may ask you for a variation in price to allow them to cover reasonable costs so they can deliver the build at a small profit. This is usually around 5% of the build contract amount.

 

Why does my build contract still have variation clauses in it?

 

Your builder uses a standard build contract and cannot directly amend clauses in it. It is important to read the entire build including attachments such special conditions, specifications and building plans. The attachments often vary the terms in the build contract such as fixed priced earthworks.

 

Do I need to get my solicitor to review my build contract?

 

This depends on your personal preferences. Most solicitors will review your build contract for an additional fee. Ask the team at The Property Room for a list of solicitors used by previous clients and we can also give you an indication of fees.

 

The Property Room will provide a review of your build contract when they send it out to you for signing with all areas clearly tagged for easy review.

 

Can I make some changes to the build contract/ design, if so how do we go about it?

                                                           

Yes it is possible to make changes to the build design however before doing this you will need to consider the following:

                                                           

i) The house has been designed to get the highest and best use with a price point in mind using proven designs that work with estate covenants approval

                                                           

ii) Our builders are able to provide wholesale pricing due to minimal design changes. Retail builders will provide a full service to client at a price 10% + higher.

                                                           

If you do require small design changes you need to sign the build contract and pay the 5% build deposit as the first step so you can lock in your build price and commence your finance process.

                                                           

You can then deal directly with the builder to arrange the changes. The changes will be reflected in the build contract through a variation document.

                                                           

Some builders charge a set fee for any design changes whether they are structural or not. Other builders will only charge a fee if it is structural change.

                                                           

When do I have to pay my build deposit and how do I pay it? (out of my own funds or loan?)

                                                           

Your build contract states that you need to pay the 5% build deposit once you have unconditional finance. Your builder will issue you with an invoice to pay the build deposit at this stage. This will need to be paid out of your own funds and forms part of the equity contribution you need to make.

                                                           

You will need to provide proof of payment to your bank prior to land settlement.

                                                           

For example of you have purchased a $500,000 house and land package and you loan is for 90% then you will need to contribute $50,000 out of your own funds with your lender providing $450,000. Your $50,000 equity contribution will be required for both the build deposit and the balance at land settlement leaving your lender holding the balance loan funds to complete the construction of your dwelling.

                                                           

Why do I have to pay my build deposit so early in the process?

                                                           

Payment of the build deposit to the builder will automatically commence the building approval process that can take 8-10 weeks.

                                                           

During the approval process your builder will incur costs to generate contracts, soil tests, detailed contour surveys, contractual working drawings, engineering and council approvals out of their own pocket during the approval process.

                                               

You cannot commence construction of you house until the builder has a building approval.

                                                           

Your builder is required to commence construction within [20] days of obtaining final building approval.

                                                           

How long does the building approval process take for a house?

                                                           

The builder will immediately engage their engineer and surveyor following payment of the build deposit. This will commence the build approval process.

                                                           

The build approval process has 2 main stages

                                                           

1) Plan Preparation - 4 weeks of preparing plans and to engage private certifier

                                                           

2) Approval and Certification - 4-6 weeks for plumbing approval to come out of council. The builder’s private certifier will issue building approval immediately after plumbing approval comes out of council.

                                                           

The builder will usually commence work within 30 days following the building approval.

                                                           

Who is responsible for all building approvals?

 

Your builder. They are noted as being the responsible party in your build contract. This includes all council lodgement fees and charges.

 

Can the building approval process exceed 8-10 weeks?

                                                           

The majority of building approvals occur within the 8-10 week period however there can be delays. The delays will most often occur during the Approval and Certification period where time periods are out of the builder’s control.

                                                           

Can the builder get my building approval if the land is not registered yet?

                                                           

The builder can commence the Plan Preparation stage of approval once the developer gives the builder access to the site to conduct soil and survey tests. This occurs towards the end of the civils program when the lot levels have been finalised and survey pegs are in to identify the lot boundaries.

                                                           

The builder cannot commence the Approval and Certification stage of approvals until the land is registered.

                                                           

What is Practical Completion and when does it occur?

                                                           

Your builder will notify you (2-4 weeks usually) from when they estimate practical completion to occur. The builder will then send you a notice to let you know Practical Completion has been reached.

                                                           

Practical Completion has occurred when the house has been completed as per the building contract except for minor defects and omissions that would not prevent the house from being occupied by a tenant. The builder will identify defects at this stage through a third party building inspector and these will then need to be completed prior to Handover.

                                               

You have 7 days to notify the builder that you do not agree Practical Completion has been reached.

                                                           

How are liquidated damages calculated?

                                                           

Liquidated damages are paid by the builder to you if the actual build time exceeds the build period in the contract allowing for extensions of time such as wet weather and public holidays.

                                                           

The build period commences with the slab preparation (digging of footings) and finishes with practical completion.

                                                           

If you believe that your builder is required to pay you liquidated damages you should request that they calculate the build period including allowances for extensions of time to confirm that this is the case.

 

Any liquidated damages payment should be deducted from the final claim payment to the builder.

                                                           

Do I need to get a Handover inspection?

                                                           

Your builder will instruct a third party building inspector 1-2 week before PC stage. The building inspector will provides a defect list to the builder. The builder will then fix these defects prior to handover.

 

If you would like to obtain your own third party defects inspector you should do so 1-2 weeks prior to PC stage so that the builder can rectify ALL defects at the same time prior to handover.

                                                           

How do I know that the defects identified during the Building Inspection report have been rectified prior to Handover?

                                                           

If you would like to check that your builder has fixed all defects you can engage a third party defects inspector. Please contact your team at The Property Room if you would like the names of inspectors previously used by our clients.

                                                           

Your rental manager will conduct an entry inspection report prior to your tenant moving in which may pick up additional defects.

                                                           

If a defect is not rectified immediately after this inspection you are still covered for a [12 month] period from Practical Completion stage on minor defects in QLD or [24 months] in NSW and 6 years and 6 months on structural defects in QLD and 6 years in NSW.

                                                           

The Property Room will ensure that you get your defects fixed due to its long-standing relationship with its wholesale builders.

                                                           

What is the difference between the Bank Inspection and Builders Inspection?

                                                           

A bank inspection is typically undertaken by a valuer or a bank representative who will inspect your property to check that the house has been completed in accordance with the building contract and on the specified property lot. Your lender may send someone out to your property to inspect each stage and on completion to verify that the works have been completed before they will approve each progress payment.

                                                           

A building inspection is undertaken by a registered third party building inspector who is qualified to look for defects. The building inspector will inspect the property at practical completion stage only.

                                                           

When do I need to organise my insurance?

                                                           

The builder will notify you (2-4 weeks usually) prior to practical completion stage.

                                                           

It is recommended that insurance is organised at this time. Once practical completion stage has been reached the builder’s insurances are no longer valid except in relation to defect warranties.

                                                           

When do the keys get handed over?

                                                           

You will get the keys once the final payment is made to the builder. It is ideal if the builder keeps the key until they have fixed defects prior to handover, which can take 1-2 weeks after practical completion stage.

                                                           

Does my builder need to notify me of wet weather days?

                                                           

Each builder allows for wet weather days in the build contract. If the site supervisor has wet weather on site and considers it unsafe to work or they are unable to work then they need to notify the builder’s head office where a record is kept.

                                                           

If the builder exceeds the allowable days in the build contract the builder will need to request an extension of time from you.

                                                           

What happened to my build period during the Xmas / New Year

                                                           

All build contract allows for a mandatory shutdown period of 2-4 weeks which can be claimed by the builder if the build period runs over this time.

                                                           

Can the builder claim for any other extension of time?

                                                           

Yes your builder can claim for anything that causes a delay that was not foreseeable when the building contract was signed. Examples of delays are not getting access to services and getting final plumbing approval from council.