If you are considering building works, whether it is a renovation, extension or new home, it is vital that the intentions of both the builder and client are clearly articulated – by law there must be a contract for building work that exceeds $5,000 in value.
Only a registered builder can enter into a domestic building contract for works that exceed $16,000 in value. Once this value is reached there is also a requirement to take out domestic building insurance.
There are instances where you do not need a domestic building contract, usually where the works are for only a single element of a building project – eg plastering. These circumstances are covered in the Victorian Building Authority’s Practice Note 2014-32. In instances such as this it is still important that an agreement as to what is to be done is properly documented in case either party needs to enforce their rights. Email chains are useful in documenting such agreements.
The actual contract can come in many forms, however at Supa Group we use a pro-forma contract prepared by the Housing Industry Association that is specific to renovations, extensions or new homes. The contract when prepared contains the plans along with the specifications of the type of materials to be used and these form part of the contract.
The contract sets out important matters to be considered including:
- The agreed timeframe for the works
- The agreed cost of the works
- Detail of any Prime Cost and/or Provisional sum items included
- The construction stages and amount payable by the client at each stage
- A deed of guarantee and indemnity
The HIA contract also sets out and describes practical considerations in terms of the actual construction (e.g. rights to access, when progress claims can be made) and dispute resolution procedures.
Once the contract is signed, if there are to be any changes to the plans and specifications they must be amended by way of a Variation Order. This “VO” sets out what the adjustment to the contract is and the amount payable or refundable that results from the VO.
Signing a building contract is a major financial commitment, so it is important that you are fully informed as to what you are signing, and if necessary you should seek legal advice.
There is a five clear working day cooling off period that allows the client to cancel the contract after it is signed.
Once the paperwork is done the best place for it to be located is in the bottom draw – hopefully it will not need to be referred to again. Building law differs from state to state, so if you’re outside of Victoria the rules might be slightly different.
So if you’re thinking of building whether it’s in Glen Waverley or Glenormiston, Bentleigh or Barnawartha make sure you have the protection that a properly drafted contract offers.