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Your Building Contract

My Canberra Building Inspections ACT

How To Contract

So you are building a house. The sales person of the building company seems nice. But sometimes those can be the easiest to mislead later, a year later, when all the goodwill has gone.

Understand this about a contract in Australia. It is not the paper you have signed. Your contract is where your expectation, and the expectation of the builder, agree and meet. The paper contract you sign should be a written expression of those two matching expectations. That is what it is meant to be. But is yours?

Please read more below.

But first, consider getting a building lawyer to help you.

Avoid Unnecessary Prolonged Building Periods

Your house will be done, finished in eight months? Over in a year? But will it?  You have heard of horror stories of house building being late. So what can you do?

Have you ever heard of liquidated and ascertained damages? This is a clause in your contract that protects you – the buyer – from the builder being late. He can however claim days he has lost by causes outside his control. That might include excessive bad weather. It might include embargo delays on exports from overseas to Australia. But being late due to his mismanagement is on him.

Other Houses Are Going Up Faster

Have you seen other houses by the same builder rocket up fast while yours lags behind? Well, if the builder gets penalized for building a house slowly, then that house might get built faster. By that we mean that house gets built when there are trades and materials to do the job, while others will just have to wait. This clause is standard for commercial construction, especially when there are architects involved.

Liquidated and Ascertained Damages do work.

Architect Definition

By architect we do not mean a draftsperson with an eye for design. We mean real architects. Archi means chief in Latin, and tectos is Greek, meaning to build. They are the chiefs over what is being built. Architects are not often on house construction today, though interestingly most of the ex-govie houses in Canberra were architect designed and overseen. However, today, since its inception, the word has changed meaning, as words do. But the above was the intended original meaning.

Be Fair

Australia culturally is a fair country, or it should be. So, the amount you set above as liquidated damages has to be fair. It must be agreed upon before the contract begins. And of course it must be written in your contract with the exact amount. It could be your rental amount, or your interest amount, calculated daily.

Liquidated and Ascertained Damages are also different to General Damages. General damages are what you as the house owner encounter due to the builder breaching his contract. They are determined by a court. Liquidated and Ascertained Damages are what you decide they should be, but agreed to with the builder.

Liquidated Definition

Liquidated simply means:

1 a(1) to determine by agreement or by litigation the precise amount of (indebtedness, damages, or accounts)

     (2) to determine the liabilities (see LIABILITY sense 2) and apportion assets toward discharging the indebtedness of
  b to settle (a debt) by payment or other settlement.
.

Please note that I used to take clients through their contracts and I would bring several dictionaries so that the client could understand every word. Those jobs ran very smooth. So, please understand all words and abbreviations here, as well as in your contract.

Late Damages for buildings

Protect your building from being late.

Practical Completion and the Certificate of Occupancy

The date recommended to calculate the end date of when the building is to be finished is usually the date of Practical Completion approval, or, the government giving a Certificate of Occupancy, or the keys being given to the owner.

I recommend the latter as then you have a say of when you get the building. You then cannot be rushed and pushed through when the building is not ready. This is because a practical completion inspection might reveal things that still need to be fixed.

Certificate of Occupancy

On the Certificate of Occupancy it states that the owner must attest by signing that he or she is satisfied with the house. This is a government document. Do not sign it if you believe there is more to fix in the house so you can live in it.

From Access Canberra:

“Certificates of occupancy and use are issued if the building work and any associated electrical, gasfitting and plumbing work have been certified as complete and compliant.

“A certificate of occupancy or use can be refused if the work does not comply with relevant laws and standards and the building is not considered fit to occupy.”

General Damages

So what are General Damages?

In the Legal Dictionary they are defined as: “General damages amount to financial compensation that is issued by a court to compensate for injuries suffered, for which no real dollar value can be calculated.

“Examples of general damages can include financial compensation for pain and suffering, or for a shortened life expectancy. General damages may also arise from a breach of contract claim. To explore this concept, consider the following general damages definition.”

The same Legal Dictionary defines damages as: “Damages are compensatory monies that are awarded to a plaintiff who has suffered a loss as the result of someone else’s wrongdoing.”

Breaching the Contract

A builder might consider that if you do not pay him on time that you owe him money under General Damages. But if he demands payment when it is not due or the works are not finished, then that might be considered a breach of contract. At the time of this writing, some builders do that, and their invoices could be returned with a polite note stating that demanding payment before the work is due might be considered such a breach.

However, if you have it specifically stated in your contract exactly, as you should, when the payment can be demanded, and that you specifically agree to that, knowing what it means, both sides will work well and the contract administration from both sides will be easier.

Extorting Clients

This is a real story in Canberra in 2023. There was a house I recently inspected where the builder was demanding a general increase of $50,000 on the contract price as a variation, and the building was at the Fixing and Fit Off stage. This was the second such variation. There had already been an earlier variation for $25,000, and the owner had agreed to it. He had not thought there would be another.

The builder had more or less inferred that if he did not get this later variation approved, then that would slow down the work, and the owner would be paying his rent where he was, and the interest on the work up to now. And that he would just have to work on a go-slow if the variation was not approved. That client was already bleeding bad.

Definition of Extortion

This may fit the definition of extortion. And, what is worse is that this owner was not the only one, and other builders had been doing it as well. I do not know how that went, but I know it could have been avoided with a good contract.

I also heard of home units with two qualities of finish in 2022. Those who voluntarily paid a general variation increase of $10,000, got a higher quality of finish – such as better paintwork – than those who did not pay.

Criminal Code of Extortion

An easy to find definition of this criminal term is below from Queensland, but ask your local police in ACT if you believe you have been subject to extortion. They will help you more.

Criminal Code 1899 – SECT 415

415 Extortion

(1) A person (the “demander” ) who, without reasonable cause, makes a demand—

(a) with intent to—

(i) gain a benefit for any person (whether or not the demander); or

(ii) cause a detriment to any person other than the demander; and

(b) with a threat to cause a detriment to any person other than the demander;

commits a crime.

Penalty

Maximum penalty—

(a) if carrying out the threat causes, or would be likely to cause, serious personal injury to a person other than the offender—life imprisonment; or

(b) if carrying out the threat causes, or would be likely to cause, substantial economic loss in an industrial or commercial activity conducted by a person or entity other than the offender (whether the activity is conducted by a public authority or as a private enterprise)—life imprisonment; or

(c) otherwise—14 years imprisonment.

Variations

Variations are a pain to everyone. But some people have trouble making up their mind. So I am going to tell you, the client, on how to stay on the right side of the builder. A builder could do the following – as I always did.

  1. Make absolutely sure that everything you have detailed in your house is what you want. Do not be in a hurry to sign the contract until you have everything. Everything.
  2. I used to charge minimally, on today’s rates, a thousand dollars to the client just to change their mind.

Example of a Variation Gone Wrong

I briefed the clients on this: You say that you want a red tap instead of blue? Okay. That will be a thousand dollars plus any price difference. Why? Because that change can inevitably cost the builder money. Why?

The Administration is This

The builder has to administer the changes, give the change to the contracts manager, who gives it to the project manager, and the supervisor. The supervisor has to make sure the plumber has it. He decides to tell him on the other job they are doing together. But he forgot his site instruction booklet. Finally, the plumber gets the changes in writing.

The plumber then has to make sure his wife has it, as she gets the taps from the shop. Then he has to make sure it goes inside the van. Next, the apprentice unloads the red tap set at the wrong house and they are lost. Then they are found and get to the house right. And finally, they find it was the earlier version tap that the client wanted. Oh Nooo…

Document it Better

Did we know the number and the make? And if any of that chain of command goes wrong, as it will, and the client gets red taps with white handles, instead of gold handles. But the builder has to pay for them being taken out and replaced, and then try it all again.

  1. So yes, your variations can cost a lot of money. Also, they delay works. So make sure you have it right at the time of the contract, or be prepared to pay to change your mind and suffer delays if you want to vary. And if a job is suffering delays, trades people may not want to work there much.

Teamwork

  1. Please understand this. You and your builder and all his trades people are working like a machine. It is a team of parts. You, as client, can be a good cog in that machine – working together with all the machine parts. If you think the rest of your machine are your enemy, wrong. They are not. Most people are good people. Some are not as clever as you. They make errors. Allow for that. They expect other members of their team to watch their backs. Don’t just protect yourself. Do more. Then others will reciprocate. That is life.

Your Documentation

Did you get enough documentation? Do not skimp on it. Don’t try to save money on your drawings.

How many times have I come across the client saying that they had an agreement with the sales person, about…. But it did not happen on site. Or that the client says, “I sent a text a year ago about that.” To me, as a builder, that is being delinquent as a client. You need to be sure the building is drawn as YOU want it. If it is not then understand that the builder will build it as he wants it, or his tradesmen will build it as they want it.

A Recent Example

Here is a recent simple example. There was a mirror in a bathroom. It was centred on the wall between the shower screen and the end wall. That is great. But the vanity unit was centred in between the toilet and the shower screen. So the mirror was off centre over the vanity unit by about 200 mm.

As an inspector I cannot state which is right as both the builder and client are right and wrong at the same time. The decision on where to put the mirror was never documented. Fortunately this was a magnanimous builder who just got his tradesman to change it at no charge.

Today we do not have building specifications like we used to, as we have better building codes, but there are things not in the codes you might want.

Tips To Ask Yourself

Do you want the doors painted on top and bottom? A full coat or half a coat? You better specify it.

How many downpipes are needed? One on each corner? You better have it shown on the drawing. What size downpipe?

Do you want floor wastes in the wet areas?  And do you want the floor draining to them? You better specify it, as it is no longer necessary in the codes. Do you want landscape draining points in the lawn? Then you better have it drawn as to how many.

What do you want exactly under the stair? Exposed?

What about under the laundry trough on the rear wall? Painted? Some still leave that wall unpainted.

More Suggestions

Where do you want the electrical points, and light switches, and how many, how high on the wall? You better show it and specify it. The past week I did an inspection and the light switch was behind the walk-in-robe door. Yes, you had to go into the robe while it was dark. Then you closed the door behind you to find the switch and turn it on.

The electrician put the switch where he thought best, and the carpenter put the door where he thought best. There were no drawings showing which was right, and so the supervisor was having a breakdown.

And More Suggestions

With the roof, if it is low pitched and metal it is usually good to show it on its own plan. Show the downpipes, the box gutters.

The builder will only give you a price for what is documented. So document what you want in your building. From this page here, take notes of what to do.

Do you want inspections, and how easy will it be? You better specify that in your contract too. Note that it is still the builder’s building site and any inspector needs to have permission to attend.

And you should also specify what you want done with minor defects and when they are to be rectified.

Drawings and Internal Elevations

The reason for the internal elevations is to give you a choice of where you want the toilet roll holder. Do you want to leave it to where the tradesman thinks is best, or do you want to know before you contract the house? I have seen them obviously in the wrong place. On one job there was no space for the toilet roll holder and it was placed out of reach on a far wall.

And those mirrors, how high should they be? Low enough in the large bathroom so your kids can comb their hair? You better show it. Are they centred over the vanity?

You are helping the builder and all the tradespeople by getting this all answered.

So draw up your elevations internally. That can include your bathrooms, your laundry, your kitchen and your pantry. It can also include the robes in the bedroom(s).

These drawings will also help the builder run his trades. He cannot watch them every minute, but they can have the drawings to work from.

Why This helps

Many tradesmen do not have a firm grasp of English. They are quite literate in their own original home language. But English is not their mother tongue. That is how it has been in Australia for over half a century. So, show in the drawings what you need to show.

We have all heard that a picture is worth a thousand words.

Also note, that if you change your mind and want a variation, then the drawings must be changed as well.

Drawings Sections and Details

Sections are drawings done that are a two way slice through your building. It is usually drawn in the easiest way so as to be cheapest for the draftsperson. In days gone past there would also be details showing exactly how the hard to build parts should go together. These were done at a scale of 1:10.

The purpose here is to make sure the builder has the plans well thought out. How do you get into the roof? Is the manhole blocked off by the later heating unit there? Do you need more manholes? I recommend three per house. The garage, the laundry, and the ensuite.

Make sure you understand that what you want is what you need to document. The builder gets your plans and documents and gives it to the trades to competitively price them. To win the job, the trades will assume the least is what is wanted. So if you want more, specify it, or you might just have to be satisfied with what you get.

Suggested Tips

Box gutters are good to detail. But the design will dictate what more are needed.

I would also suggest it be detailed how the side of all exposed concrete footings and slabs are dealt with. Do you render them with waterproof render? Most builders do not. But I am thinking that is a big long-term mistake. I am finding more and more slab edges semi porous. They do not give the full 20 mm concrete cover to the reinforcing steel. The slab edges are pitted with holes and gaps, and sometimes the steelwork is even exposed. This is why you need an inspection before the concrete pour, and another after the pour. You, the client, can inspect after the power. It does not need to be a formal building inspector inspection.

More suggestions

Detail all retaining walls inside the house and outside. This is important.

Detail how the alfresco roof is going to be held down, bolted to the slab. The same for any front balcony. How are the roofs held down, exactly? Show it in a 1:10 drawing detail so no one can miss it. This inspector lived in a region where this construction was not done properly by another, the holding down of the roof. The roof lifted off the house and left. Someone died. Do not be cheap on showing how to hold down your roof.

There should be notes on the section drawings, and in your specification pages, regards landscaping and the depth of soil the site is designed for. How much concrete footing is shown above the ground? What exactly is the bottom of the outside wall detail? If you do not show it you will not get it.

Certifier

The certifier is vital. Make sure you know who it is and you have their details. “The building certifier is appointed by the land owner and not the builder.” Access Canberra.

Your engineer is also vital and you need his details as well. They must be on the drawings or in your documents.

Contacting Your Builder

When you contact the builder, should you use voicemail, email, text, phone or telepathy?

I suggest email, even if you have used the phone. Back up every agreement, text or verbal, with an email. Your supervisor should appreciate this. Your Construction Manager will as well. Make sure the other end of the email acknowledge you. That email may have gone to spam. So ensure you get an acknowledgement to your email. This is both fair to you and the builder. Emails can then go in a folder, your folder.

Fairness

Australian culture is based on fairness. The client has to be fair to the builder and tradespeople, and they have to be fair to the client.

For clients and builders and tradespeople who are new to Australia, each signed a government document that they read. It is about Australia being a culture of fairness. Let’s follow that on your building project. It works.

Extra Reading

There is more here on this Access Canberra page on how to resolve disputes.

“As soon as you identify an issue or have a concern, raise this with your builder in writing. Your builder should take steps to address your concerns. If the issues are not resolved and are about building or planning of a technical compliance nature, and construction is still underway talk to your building certifier and consider making a complaint to Access Canberra. The building certifier is appointed by the land owner and not the builder. They work in the interest of achieving compliance with the relevant building and planning laws.”

“If your concerns relate to your contract, such as issues with payments, quality of inclusions, or communication, you can contact:

How Many Stages Are Needed?

The media have been reporting that 10% of builders are going bankrupt. So how does a client ensure they do not get caught up in that? Many are. The client has to do research. More payment stages are a lower risk than less payment stages. But more stages take more of your own time to administrate. As an example, there could be Fixing and Fit Off as two stages instead of one, and separate payments for each.

One can also have a clause, so as not to hold up the builder, that the client can make a mutual agreement to deduct from the payment what is not done. In days gone by an architect could sort all this out. But most clients choose to administer it now.

Document Your Stages

Be very sure that you document clearly each stage. State what goes in each stage. The links below show more.

The builder may also have fear that his clients not pay him. So more stages can benefit the builder, as he is also at less risk.

So the stages could be: Slab and footing stage, Wall Frame stage, Roof Frame Stage, Façade Stage, Roofing Stage, Lock Up Stage, Pre Lining Stage, Fixing Stage, Fit Out Stage, Practical Completion Stage, and Final Full Completion and Handover.

Full List of Building Stages

Also see more about the full list of building stages and contracts below. We would recommend five of those be inspected. The bigger the house the more inspections we recommend you have.

Your Building Contract

     Slab Inspection

…..Frame Inspection

…..Facade Inspection

…..Roof Inspection

…..Lock Up Inspection

…..Pre Lining Inspection

…..Fixing and Fit Off Inspection

…..Practical Completion Inspection

…..Ninety Day Defect Liability Inspection

Worksafe ACT

To report unsafe work practices, such as faulty scaffold, please contact Worksafe ACT.

It is hoped this page helps.

Our Inspector

Written by: Nick Broadhurst, building inspector, registered Class A Builder, Bach. Arch. UWA. For more information on Nick: See here

Nick Broadhurst building inspector on top of a roof.

Call us today for your next Building Inspection.

We will answer your questions. Our Building Inspector is registered here at Access Canberra. No. 111.

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