Most residential construction disputes commence with an uncompleted conversation prior to slab down. That is, all agreements in relation to a contractual signed document (and remitted deposit) are ‘put to the test’ on site in the very first change to scope of work. Much leverage is shifted by that one event.
The following questions expose potential risks prior to agreements becoming irrevocable. It is hoped that by raising these questions prior to entering into fixed price terms, provisions can be included in contracts to manage risks or terms altered to minimize exposure prior to work commencing.
Pin down what the timeline actually commits the builder to
Disputes relating to the duration of the construction period of a residential project generally arise where the contract only refers to a construction period expressed in calendar days and fails to set out the mechanism for converting such days into extended time and who will bear the cost of such extension.
While it is typical for contracts to include provisions for inclement weather, material lead times, trade availability and the time required by local council or the relevant certifier for processing various forms of application, all of these can have a significant impact on completion dates. Find out how many days of inclement weather the builder’s program includes as well as how these will be recorded and proven should the need arise.
The questions that separate a program from a promise
- What date does the construction period formally commence, and what conditions must be met first?
- How many extension-of-time days are claimable without your written approval?
- What liquidated damages apply if practical completion is late, and are they capped?
- How many other active sites will the site supervisor be carrying during your build?
The answer to this question is particularly noteworthy as it serves as a great indicator of whether or not a construction program will hold together during the build.
Interrogate the inclusions schedule line by line
It is worth checking out what realistic allowances have been included for provisional sums and prime cost items as the contractor’s tender price will likely include low allowances with the intention of making later variations expensive.
Request sight of the detailed basis for all Provisional Sum allowances (such as site works allowance) on the contract. A soil test and a contour survey of the building site should have been conducted to establish a realistic allowance for site works. Verify the builder’s actual cost history on comparable sites in similar locations over the last year.
Where allowances typically fall short
| Item | Common allowance basis | What to ask for instead |
| Site works and excavation | Nominal figure pending soil classification | Priced from geotechnical report and survey |
| Driveway and external paving | Square meter rate, area unconfirmed | Measured area from the site plan |
| Tiling and floor coverings | Supply-only rate per square meter | Supply and install, with waste factor stated |
| Electrical fit-out | Standard point count | Point-by-point schedule against your plan |
| Connections and service authority fees | Excluded or nominal | Written confirmation from each authority |
Establish how variations will be priced and approved
Every build will change in some way. Will the change process be transparent or cause the contractor to have an open-ended pricing mechanism to continue building your home? It is worth comparing Stark County home builders before you commit to anything.
Request the margin that the builder applies for variations to the work and confirm that this is different from the margin of the base contract price. Also confirm the time frame within which the builder returns a price for a variation and how this impacts the overall program of work. Note also that a clause that automatically extends time for all variation requests regardless of actual impact is highly negotiable.
Can you clarify what constitutes a client requested change (CRC) and more importantly what triggers a variation versus a site instruction? Typically it is the small changes that are discussed on site verbally and are then acted upon by trades that cause the greatest amount of disagreement down the track.
Verify the builder before you verify the contract
Ask the builder to provide proof of his license to build, insurance and financial capacity to complete your project. Make sure the license he holds enables him to build the type of house you are looking for. Check that home warranty insurance has been issued in your name for the specific project and that his public liability insurance and contract works cover are up to date.
What to look at beyond the paperwork
Ask to be taken to a number of sites that are near completion and have reached lock-up stage rather than displaying completed kitchens. Examine the way that sites are organized, the manner in which waste is managed and the quality of frame that has been erected. Most homes are sold on looks but ask for the contact people for three recent completions for the builder you are talking to (within the last 6 months) and get their phone numbers as well as those for 3 homes that were completed 3 or more years ago. The homes from 3+ years ago will almost certainly have developed a number of defects by now, within a season of being built.
Agree the inspection, communication, and handover protocol in writing
Set the reporting frequency prior to commencing construction and confirm whether the builder shall provide written updates (with photographs) on a regular basis, and who the builder’s nominated contact person shall be and how long it will take for the builder to respond to any inquiries.
Will I be able to have an independent Inspector come onto the Site at the Frame Completion, Pre-plastering, Waterproofing and Practical Completion stages, and will you give me reasonable access and notification of these critical hold points.
- Confirm who issues the notice of practical completion and what evidence accompanies it.
- Agree how long you have to inspect and submit a defects list.
- Set a rectification period with a specific number of working days, not a reasonable-time clause.
- Require all certificates, warranties, and manuals before final payment, not after.
Raising these questions before you sign on the dotted line will give you an even better understanding of the contractor than their price does.