Building & Planning
Legal & Contracts
with Phil Breeze, Manager – Housing Services
with Tracey Wood, Manager of Contracts
Is the insurance premium paid under the Queensland Home Warranty Scheme based solely on contract price?
What are liquidated damages?
If you carry out insurable residential building work to a value of more than $3,300 you’re required to pay an insurance premium to the Queensland Building and Construction Commission (QBCC). However, the premium doesn’t apply to work carried out for a person holding an Owner Builder Permit. The insurance premium is based on the contract price, as well as the value of any materials supplied by your client. The contract price is the amount the client will pay you for completing the work. If your client supplies any materials, such as floor tiles or kitchen cabinets they have sourced for you to install, you need to find out the value of those materials. You must either pay the premium before beginning the work or 10 business days after the contract date – whichever occurs first. If the value of the work increases by $5,000 or more due to a contract variation, an additional premium must be paid before you begin work on the variation.
What is a scope of works and how much detail should it contain? A scope of works forms part of a building contract and it refers to the work due to be carried out by a contractor for an owner, or a subcontractor for a builder. It should include sufficient detail to enable a builder or subcontractor to cost things like labour and materials required for the work. The subcontractor’s scope of work would usually reflect the portion of work contained in the owner and builder contract. However, if it’s unclear as to what the builder’s liability is to the owner under that contract, it’s more than likely the ambiguity will flow down the contract chain to subcontractors. This is how disputes arise with arguments over scope creep and the need for variations (costs increase), which in turn can create costly time delays and put additional strain on relationships. Therefore, a more detailed scope of work ensures there is less risk of not meeting an owner’s expectations.
If you need help, contact Master Builders’ Housing team on (07) 3225 6419.
Liquidated damages are a pre-agreed amount that may be deducted from the ‘contract sum’ for every day that the project is late in achieving ‘practical completion.’ However, liquidated damages must be a reasonable pre-estimate of the loss that may be suffered by the other party if the project is delivered late, and it applies regardless of whether a loss actually occurs. The estimate should be determined at the time the contract is entered into, not when it’s completed. If liquidated damages aren’t a reasonable pre-estimate then they would be considered a penalty and, in the case of contracts, penalties aren’t enforceable.
When can I suspend work under a contract? It will depend on what your particular contract says. If your contract provides a right to suspend works, then you must strictly follow the process detailed in your contract prior to suspending works. Section 67O of the Queensland Building and Construction Commission Act 1991 and section 33 of the Building and Construction Industry Payments Act 2004 (Qld) also provide a right to suspend works in certain circumstances. In this case, you need to strictly comply with the process detailed in the relevant act. We recommend contacting Master Builders before suspending work to check you won’t be breaching your contract.
What can I do if I’m not getting paid? While there are multiple options for recovering money owed, the options available to you will depend on the type of work you do, who your contract is with and how much money is owing. Here are some options you may have: ○ Your contract may contain certain rights for non-payment ○ QBCC Monies Owed process – the QBCC will investigate and has the
power to take action against a licensee if they are unable to pay their debts as and when they fall due, as this would be a breach of the Minimum Financial Requirements applicable to the licence class
○ QBCC adjudication under the Building and Construction Industry
Payments Act 2004 (Qld)
○ Subcontractors Charges Act 1974 (Qld) – a charge may be lodged
against money owed to a contractor up the contractual chain
○ Court action – the complexity and costs associated with this option
will depend on the amount owed as each court has a different threshold for debt recovery.
Contact us early on to minimise your risk of non-recovery.
If you need help, contact Master Builders’ Legal & Contracts team on (07) 3225 6426. january 17 / march 17 [ 39 ]
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