KEY TAKE OUTS:
- Building a new home or renovating an existing home can be an exciting but daunting time for many.
- Coutts’ Building and Construction expert, Melissa Care shares her tips on the 5 essential steps before commencing a build so that you can build with more confidence.
- Some conflicts and issues are unavoidable during building matters, however, if your legal documents and insurances are in order these will be a key tool in assisting with any resolution of a conflict and hopefully minimise the risk to you at one of the most crucial times.
Making a decision to build a new home or renovate an existing home can be an exciting but daunting time for many. It is essential that prior to entering into a Building Contract a Homeowner takes steps to ensure that all matters are in check before signing any formal agreement. Coutts’ Building and Construction Specialist, Melissa Care shares her tips on the 5 Essential Steps before commencing a build.
Check the Credentials of the Builder You are Looking to Hire
It is important to ensure that the Builder that you are trusting to build your dream home or renovate your existing home has the skills, experience and qualifications necessary to complete the job. Accordingly, doing some background searches on the Builder’s licence, conditions of licence, history and set up is essential to ensuring that you are getting what you pay for. The Department of Fair Trading on its website offers an easy to use search system in which you can check a builder/contractor’s licence.
The search provides important information including whose name the building licence is in, whether the licence is valid, suspended or expired, what works the builder is allowed to undertake (for example works over $20,000 requiring insurance) and whether that builder has had any previous complaints made against them. This information will assist you in making a decision as to whether the builder is the right one for the job. In addition, if a builder runs its business under a Pty Ltd company, it is also beneficial to conduct a search on that company to ensure that it is still a registered company with ASIC and who the directors and shareholders of that company are.
Make sure that there is a Written Building Contract in Place
By law, you must provide a written contract for residential building work:
- If the contract price is over $5,000 (including GST), or
- If the contract price is not known, is for the provision of labour and materials by the contractor the reasonable market cost of which is more than $5,000 (including GST).
A written building contract (particularly for works over $20,000) should contain the following essential terms and requirements:
- The date and signatures of both the contractor and homeowner
- The homeowner’s name and the exact name on the contractor’s licence and licence number
- A sufficient description of the work to be carried out
- Attached plans and specifications
- Relevant warranties required by the Home Building Act 1989
- The contract price
- The cost of cover under Home Building Compensation Scheme if insurance is required
- A clause about variations and that they form part of the contract
- A progress payment schedule
- A termination clause
- A checklist of 17 items that are prescribed in the Home Building Regulation 2014
- A caution about signing the contract if the homeowner cannot answer yes to all items in the checklist
- A note about the homeowner’s entitlement to a copy of the signed contract within five days of signing
- A note about the contractor’s obligation to give an insurance certificate under the Home Building Compensation Scheme (formerly known as home warranty insurance) if the contract value is over $20,000
- A clear statement setting out the cooling-off period of five clear business days within which the homeowner may cancel the contract, applicable to contracts valued at over $20,000
- A homeowner statement of acknowledgement
- A ‘quality of construction’ clause
- A clause regarding limits on liability of the contractor if the failure relates solely to a design or specification prepared by somebody else or if the contractor has advised against it.
It is recommended that prior to entering into a building contract a Homeowner seeks legal advice regarding the terms and conditions of the written contract issued to them to ensure that all legal requirements are included and that their position is protected. Coutts is able to review and advise on building contracts.
Make sure that Home Building Compensation Fund Insurance is Obtained and a Certificate is Provided
Whilst this is a legal requirement of any build over $20,000, it is not uncommon for Homeowners to find out later that their builder did not obtain the appropriate Home Building Compensation Fund Insurance. Home Building Compensation Fund Insurance is crucial as it is the Homeowner’s protection in the event of an insurance event occurring being that a builder dies, disappears, becomes insolvent or has their licence suspended as a result of a claim made by that Homeowner. In the event that an insurance event does take place and the Homeowner has made a claim within the relevant time periods, then the insurer can compensate the Homeowner for loss and damage suffered as a result of defective and/or incomplete works. If there is not valid Home Building Compensation Fund Insurance in place, then a Homeowner loses any such recourse.
Reference Check and Verify
The best way to determine whether the quality of the work and the workmanship of the builder you are looking to hire is up to your standard is by checking their prior works and verifying with previous customers their experience and outcome of the final product. There is no harm in asking your potential builder for some examples of the work he has done and then approaching those previous customers for feedback. As the old saying goes, word of mouth is the most effective form of marketing and a good way to be confident in the builder you are about to invest in.
Have Your Documents in Order to Minimise the Risk of Hidden or Increased Costs
When it comes to building a home or renovating an existing home, it is often best to obtain quotes from a builder once you have your plans, specifications, Complying Development Consent or Development Application in place. This allows the builder to provide an accurate quote based on a true version of what is going to be built. If a builder provides a quote prior to all the relevant documents being obtained, it is likely that the contract price will be dependent on those documents being finalised and could possibly lead to increased costs and variations later into the build once you have already committed and entered into a valid contract. It is important to work with skilled and experienced Geo-technicians, engineers and architects when it comes to preparing and finalising the plans and specifications for your dream home.
Coutts is here to Help You
By following these 5 essential steps prior to commencing a build, you can be more confident in the builder you chose to engage, the quality of the works you will receive and the building contract you enter. Unfortunately, some conflicts and issues are unavoidable, however, if your legal documents and insurances are in order these will be a key tool in assisting with any resolution of a conflict and hopefully minimise the risk to you at one of the most crucial times.
Coutts’ Building and Construction experts can help you every step of the way from initial contract review prior to entering into a building contract, hiccups that may arise during the build, through to finalisation and practical completion of the build. If you are looking to build or renovate your home, Coutts would be happy to assist you throughout the process.
ABOUT MELISSA CARE:
Melissa is a Senior Associate at Coutts Lawyers & Conveyancers working from our Campbelltown Office and has extensive experience in the areas of Civil Disputes & Litigation, Building and Construction Disputes, Commercial Litigation & Employment Law for both corporate clients and individuals.
Melissa holds a Bachelor of Laws, Bachelor of Commerce (Majoring in Marketing), Graduate Law Diploma from the College of Law; and has been admitted to the Supreme Court of NSW and the High Court of Australia.
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.