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7 Costly Mistakes: 5

Posted on July 4th, 2019

5. Not Understanding Your Contract

Chances are you’ve been working with your builder for a few months now. Your builder has probably been around to your existing home and shared a cup of coffee with you at your kitchen table. You get on well and trust him. You’re looking forward to getting started and your builder has your building contact ready to sign.

You trust the builder. Why shouldn’t you? You’ve been getting on so well and nothing can possibly go wrong… but then the unexpected happens.

Great builds and relationships between owners and builders can all of a sudden turn sour. Disputes begin for all sorts of reasons, but at the seat of them is usually some form of misunderstanding. This often involves one of the parties having to front up with cash to resolve the problem.

It would be simple to say that the majority of issues could be easily resolved by having a good building contract. And this is true, to a degree, but you also need to have parties that have read and understood the contract.

I have seen many disputes escalate because someone didn’t understand the contract. Many times owners are overcome with excitement about finally starting the build and the great relationship they have with their builder. Then they sign their building contract in a hurry and without advice from their solicitor. The simplest advice is that you are entering into a business transaction, no matter how good you feel about your relationship with your builder.

A contract to build your home will often be made up of a subset of smaller contracts or documents. These typically include your quote letter, the building contract, plans, and specifications. Each of these documents will also have an order of hierarchy in case there are any discrepancies.

An example may be that the plans show a 1200mm wide vanity in the bathroom, however, the specifications say the vanity is 900mm. You can imagine how you would feel if you are expecting a nice wide vanity to be installed only to find a much smaller one. This has the potential to turn into a nasty dispute, however, the builder contract says that specifications take precedence over the plans… dispute diverted!

Another area of major dispute is when you make changes during the building process. These are known as variations.

I once had a client who had a good friend that was building at the same time in another town. My client made a few changes as the building progressed. Each variation was priced, agreed and signed off before the change was made. At the end of the job, my client knew exactly what his contract had cost and he was happy.

Throughout the build, my client’s friend was telling him how great his builder was, how accommodating he was and that nothing was too much trouble… until he got a $40,000 bill for extra costs. Every time my client’s friend had asked the builder to do something the builder agreed to do it but made no mention of the cost. Last I heard it was two months after completion my client’s friend still hadn’t moved in and they were still arguing.

Tips & Advice

  • Building is a business transaction.
  • Seek the advice of your solicitor before signing a building contract.
  • Know the hierarchy of the building contract documents.
  • Have a good contract such as a Master Builder Contract.
  • Know your contract to avoid disputes.
  • Put any changes in writing and get a price before you approve the change.

The Homeworx Quality Standard

When you have made your decision to build with Homeworx we prepare a comprehensive written contract so there are no grey areas or potential disputes. Your Master Build Contract includes a copy of your detailed quote, payment schedule, defect tolerance schedule, plans, specifications, and 10 Year Master Build Guarantee, which covers you for loss of deposit, workmanship, structural cover and completion cover.

Our building teams work strictly on your plans and specifications. If you decide to make changes during the build we complete a variation form with a description of the change, the effect it may have on your project timing and how much the change will cost. You must approve and sign this variation before we action any of the changes on site.