• In early June the Federal Government announced a $680 million HomeBuilder scheme to stimulate the construction sector as Australia begins the economic recovery following COVID-19. This scheme will allow eligible owner-occupiers to access a tax-free grant of $25,000 to build a new home, or substantially renovate their existing home from now until 31 December 2020.

    To check whether you are eligible, click here to view the HomeBuilder Frequently Asked Questions PDF.

    Things to Consider

    If you are interested in taking advantage of the HomeBuilder grant, there are a few things you should consider before you jump in.

    Consider Your Timeline

    One of the requirements of the grant is that construction begins within three months of signing the contract. Due to this tight time frame, it is important that you are organised and prepared, so you should consider whether you will have the sufficient time to have plans drawn up, obtain council approval and commence building within three months when signing the contract. From our experience, three months is a ‘tight timeframe’ to achieve the latter, so preparation is key!

    Consider Your Finances

    In addition to the HomeBuilder grant, you should consider whether you may be eligible for other grants, which may include the first home owner grant and the regional home building boost grant. You won’t be able to use the grant in your initial deposit as it is expected that it will take some time for it to be awarded. As such, you will need to ensure you have sufficient financing for any initial costs that you may have.

    Choose Your Builder Carefully

    It is very important that your builder is registered or licensed, otherwise you will not be eligible for the grant. You also cannot do the building work yourself as an owner-builder, or engage family or close friends. When selecting a builder, you should also review their proposed prices to ensure they’re reasonable and that you aren’t being ‘ripped off’ by builders capitalising on the HomeBuilder grant. Be on the lookout for builders who only commenced operating following the HomeBuilder announcement, as they are more likely to be taking advantage of the scheme than longstanding builders. Lastly, always make sure that you perform a QBCC license search on your builder, as this search will show you:

    • the date your builder became licensed;
    • the value of projects your builder completed since inception, and each financial year; and
    • whether the QBCC has had to take any disciplinary action against the builder, such as notices to rectify, issuing of defect notices etc.

    Review Your Construction Contract Carefully

    It is very important that you do not simply ‘sign up’ to the contract your builder presents. The financial commitment you are making is likely one of the biggest in your life, and it should be treated with the same caution and respect as any other financial arrangement of that size. There are a number of key clauses that you need to pay very careful attention to, and a number of standard amendments you ought to request.

    Make sure you check out our knowledge page in the coming weeks for our ‘Top 10 Domestic Construction Contract Clauses to Consider’ article.

     

    In the meantime, if you would like to take advantage of the HomeBuilder grant and it feels like there is too much to consider, the team at Enterprise Legal can help.

    ☎️ (07) 4646 2621

    ✉️ Submit an Online Request

  • If you’re looking to enter into a domestic building contract for the construction of a new home or renovations to your existing home, there are many things you’ll need to think about, from the flooring to your paint choices. In addition to all of your aesthetic choices, there are plenty of things you specifically need to consider when it comes to your contract itself, as this will be the backbone of the entire construction project.

     

    1. Initial Period

    After you enter into a building contract, you will generally have a period of time where you are required to provide the builder with materials including proof of ownership, proof of loan approval and relevant building approvals.

    If you need to obtain finance approval prior to being able to commit to the project, make sure the contract documents accurately reflect this to avoid a scenario where you are contractually bound to proceed with the contract, regardless of finance approval. Also make sure you clarify up-front who is responsible to obtain building approval, as often builders advise they will ‘assist’ but the ultimate responsible may lay with the home owner, which is not ideal.

     

    2. Progress Payments

    Progress payments are payments made to the builder at certain stages of the construction process, which should be clearly set out and identified in your contract. It is important to ensure you are aware of what is payable and at what time and that your contract does not impose any restrictions on progress payments. It is arguably more important that you make sure the work you are paying for has been carried out, in the manner required by the contract.

     

    3. Pricing

    Your building contract may be a ‘fixed-price’ or ‘cost-plus’ building contract. A fixed price contract is one where the total price is fixed, barring any variations, delays, or extenuating circumstances. The other form of building contract is ‘cost-plus’ where you may be given an estimated final price but the contractor will obtain the materials and services through the building process and pass the costs onto you, as well as charge their own time by the hour. This can become costly quite quickly, so it is always our recommendation that a fixed price contract be entered into, to minimise the risks of ‘blow outs’ to home owners.

     

    4. Variations

    When negotiating the construction contract, it is very important that the contract contains a clause that variations only be allowed where it is agreed to in writing by both parties, prior to the work the subject of the variation being carried out.

    What can often happen is a simple site conversation where the home owner innocently changes a product or selection, thinking it will be the same cost, can end up resulting in a very costly exercise for the home owner. Where builders know that variations have to be subject to writing, they will make decisions more carefully and explain them to home owners’ in more depth, as ultimately the risks in those circumstances lies with the  builders.  

     

    5. Defects Liability Period

    The defects liability period is the period of time where the builder is required to return to repair any defects. This will usually start at the date of practical completion. It is important to check your contract to determine the length of any defect liability period before you enter into your contract to ensure that it is likely to be sufficient, builders will often try for a six month liability period where as twelve months is industry standard.

     

    6. Prime Cost and Provisional Sum Items 

    Prime cost items are fixtures and fittings that may be listed in the contract but not specifically identified and costed – usually because the exact type was not decided on at the time of signing – so the price is only an estimate. Ideally, you should avoid prime cost items as much as possible by deciding on as much as possible as early as you can. Provisional sum items are those that are listed in the contract for possible additional work where a builder is only able to make an estimate of the cost at the time. Items such as these should be avoided where possible as it can increase your overall costs.

    Sometimes, however both prime cost and provisional sum items are unavoidable, and in these instances we recommend home owners negotiate a certain ‘capped amount’ with the builder, to ensure builder accountability in product estimation and selection.

     

    7. Site Investigations

    Before construction begins, it is important that your builder undertakes appropriate site investigations to determine the soil type, rocks that may need to be removed, and other things that could lead to unexpected price variations later on. Your contract should include warranties relating to any necessary site investigations, and it is very important that all these latent condition issues are covered off before hand, so as to avoid contract price blow out.

     

    8. Date for Practical Completion

    The date for practical completion is the date that the construction is scheduled to be completed, barring any unexpected delays. This date should not be left blank on your contract and it should be a realistic estimation of when the project is required to be completed.

     

    9. Liquidated Damages

    Something to consider when entering a contract is whether you want to include a liquidated damages clause. Liquidated damages are a set amount per day that the builder will pay you for every day past the date for practical completion that the work is not finished.

    We always recommend that a liquidated damages amount be specified in the contract, because it will motivate the builder to complete the project on time. If there are no liquidated damages amount in the contract, the main remedies available to home owners for late delivery is a breach of contract claim, and most builders know this is a lengthy and expensive process so home owners are unlikely to go down this route.

     

    10. The Builder Themselves

    While it might seem obvious, it is important to ensure that your builder has the appropriate licences for the work they are contracted to do. You should also check whether their work is of a quality you are expecting and whether they have received formal orders from QBCC to rectify defective work. If there are a large number of these orders, you may want to steer clear of the relevant builder and engage a different builder instead. Always ask for references as well, and make sure you contact the references or do standard google review searches, to ensure previous good experiences with that specific builder.

     

    To ensure you fully understand your contract and that there aren’t any hidden surprises, the team at Enterprise Legal can help. 

    Make sure you contact us before you enter into the relevant construction contract, and we will gladly assist in the review and negotiation of same:

    ☎️ (07) 4646 2621

    ✉️ Submit an Online Request