A building contract is one of the most important documents in the construction process, however it can be one of the hardest to decipher. While it may appear as ‘standard’, it is filled with complex legal terms and terminology that can make or break your new home project.
Before you sign on the dotted line, it’s essential that you read through each part of your contract, making sure you understand the inclusions and implications should something go wrong. Here’s our top tips on what to look out for.
1. Inclusions and exclusions
Many presume that a building contract will include every element of your new home, but this generally isn’t the case. To manage expectations, avoid disappointment and ensure your budget stays on track, pay particular attention to the ‘exclusions’ list – items like landscaping, gardening and fencing are often not part of the contract so you may need to organise these separately.
Make sure that all your selections are included at the right price the contract states who is responsible for supplying these – you don’t want to be surprised by an invoice for appliances halfway through the build!
Prime cost (PC) and provisional sum (PS) items also need to be thoroughly checked as these represent allowances for items that have not been selected or confirmed prior to contract preparation.
PC items are allowances made in the contract for the supply and delivery of an item like tapware, baths and light fittings, while PS items are allowances made for particular works, which include the total cost of the supply and installation. This includes joinery, landscaping, air conditioning and rock removal. It’s recommended to have as few PC and PS items in your contract as possible to avoid additional build costs.
Some builders will use an incentive to attract clients or make promises during the quoting process that would entice the client to sign with them. Incentives and promises are absolutely fine, as long as these are subsequently included in the building contract.
Make sure that any decisions you’ve made with your builder in person, on the phone or over email prior to the presentation of the contract are included in the contract and associated project specifications – as the only legally binding document, it’s what both parties will rely on to avoid any future disputes.
Mismatched understandings on timelines can cause conflict on your project, so it’s important that your contract states the agreed-upon commencement and completion dates. Any good builder will allow for potential delays in the contract as well – while they will do everything to make sure schedules are adhered to, sometimes interruptions such as bad weather, are inevitable.
Beyond the start and end date, it’s also important for you and your builder to understand when each stage will be delivered. Contracts are often based on milestone-payment terms, which will determine when you need to make a payment. This will make it easier to budget, as well as plan for any alternative accommodation arrangements.
4. Insurances and permits
Insurance is something that no client and builder ever wishes to rely upon, but it is necessary to ensure all parties are covered in case something goes wrong. Your building contract should include details of your builder’s home warranty insurance, as well as proof of indemnity insurance, public liability and contract works insurance. These should be available upon request if not specified in the contract.
The contract should also include your builder’s Victorian Building Authority registration details and the associated plans and reports for the proposed work. All permits should be detailed in the contract and should state who is responsible for finalising and paying for these.
Finally, industry standard building contracts such as Master Builders Victoria or Housing Industry Association are considered best practice, as these include all necessary safeguards and standard terms to protect both client and builder equally.
If you’re looking for a guiding hand throughout the construction process, get in touch with the team at Cobalt Constructions – we’ll happily answer any questions you have about building contracts and the overall process.