YOUR BUILDING CONTRACT

Entering a building contract is often one of the most high-cost transactions you will have, so it is important that you obtain independent advice before you sign –just like you would see a solicitor or conveyancer when purchasing your land. Many builders use a standard form contract, such as the template provided by Master Builders ACT, however, there can often be amendments or special conditions included in these contracts, as well as crucial timeframes and important terms such as ‘prime cost’ and ‘provisional sum’, that it is worthwhile having explained to you by a professional.

Your building contract will have specific timeframes that you should take note of. This includes when a builder is required to commence work, the amount of time that you have to respond to notices, the period of time you must notify the builder about any defects, and how long they have to respond and undertake rectification work. Your contract will also set out the timeframes for when you are required to make payment to your builder, which are usually called Progress Payments.

Most building contracts will require all variations to be in writing. It is important that if you require something in your contract to be varied, that you let your builder know as soon as possible – this could range from a change in your selections, through to amendments to the floor plan and design. Even if you have a conversation with your builder, it is recommended you confirm your requests in writing, and they should respond accordingly. Putting important changes in writing will provide clarity for both you and your builder and ensure that nothing is missed.

Building contracts include items that have a price listed as a “provisional sum”. A provisional sum is most commonly used in circumstances where an owner has not yet made a selection (for example, kitchen joinery), or when a builder is unable to determine an accurate price of the supply and fixing of the materials. With a global shortage of building products and labour, provisional sums are currently being used for items with material and/or labour components likely to experience price fluctuations. Some examples include timber, and steel frames and windows. A provisional sum means that the builder has provided an estimate only, and you will be charged (by way of a variation) the actual cost, plus builder’s margin. For example, if a contract has a provisional sum listed as $10,000, and the item(s) total cost is $15,000, this is the amount you will be required to pay. You should speak with your builder about the provisional sums in your contract before signing.

A prime cost item in a contract is an amount allocated for the supply of necessary items that have not been selected by you. For example, a builder may include tiles as a prime cost item, at a price of $40 per square metre. This means that if you select tiles that are $100 per square metre, there will be an additional cost to you. If you have already made selections or are fairly confident in your choices for items included as ‘prime cost’ items, you should let your builder know at the quoting / contract stage so they can ensure that the allowances are reasonable for your selections.

Disclaimer: The above information is general information only and should not be taken as legal advice. Master Builders ACT recommends that any person considering signing a building contract should obtain independent advice before doing so.