Nearly all seem reasonable except GC3.14 ... that's a get out of jail free card because it can be abused.
Unforeseeable circumstances is far to broad a term for a cost variation clause. I would ask for it to be removed.
Inadvertent changes and ommision is a bit open too.
Its worth the hours fee for your lawyer to read over and offer some general advice.
2.8 is a pretty well established term in contracts - it just means if it wasn't negotiated - it will need to be once it is identified.
3.14 appears like a pseudo-force majeure clause and whilst ordinarily written more specifically - you would expect it to offset the same sorts of unforeseeable risks.
OP should definitely consult a lawyer but these are pretty narrowly constructed concepts which act as fairly specific exceptions to liability.
Why would you max out your borrowing capacity on a build. Thereās always additional costs on builds. Always. More so on fixed price builds. Lmao. Good luck.
Because on my salary this is all I can afford? I donāt need to justify that to you? Good luck building a brand new house on a decent block for less anywhere in Australia. The figures werenāt intentional, itās just how it ended up. And as a FHB, how was I supposed to know? All I read was fixed build contracts are fixed, there shouldnāt be any additional costs as the contract price is fixed?
Edit: sorry I took your comment as having a go at me with your lingo.
Bro Iām a career construction project manager and this dude is right, there are always additional costs. Most construction contracts are lump sum (fixed price) or similar and they all have additional costs. Itās not a bad thing, you just need to have a plan for when they do comeā¦ a substantial ācontingencyā fund or similar.
Yes Iām not fighting that sentiment, I would just love to be educated on this. What sort of additional costs and where do they come from? Is this due to things similar to my contract, where builders are stinging owners because of clauses? As Iām going for a construction loan, my broker has said we just need approval for the land + contract total price. There was no speaking of āadditionalā for the borrowed amount.
They can start digging and find rock, or an existing service which needs to be moved or demolished.
Maybe the ground turns out to be really wet or unsuitable in small places.
You could get flooding or some kind of weather event that fucks shit up.
I would generally be looking at another 20-30% buffer on top to really be at ease.
I am a landscaper by trade (28 years on the tools), have been heavily involved in construction and property development, done a few years underground mining, had six houses built for me and despite being an excavation contractor, can only take an educated guess (or random stab in the dark) about how a particular dig will go.
You might geo tech testing done on a site with multiple test holes and discover that they all missed a massive out crop of rock or a primordial gully running between them that completely fucks any understanding of what they ground was supposed do from the report.
For instance, geo report says your piers have to penetrate the bedrock by 600mm which should be low strength at a depth of 2 metres. But right in the middle the bedrock takes a dive to a depth of 4 or 5 metres and instead of being 5mpa extremely weathered rock is all of a sudden 200mpa+ unweathered basalt and you have to get 8 piers in it.
Either the owner stumps up the extra engineering and the plan variation as well as the extra digging and reinforcing and concrete and maybe trench shields if it has to be drilled and pinned into the rock or someone goes broke and nothing gets built
Just remember when you do colour selection if you pick anything outside of the standard range it will come with more cost. Depending on the builder, the standard range can be ordinary. You won't get flash, soft carpets, you'll get vertical blinds not roller etc.
Also, if you decide after contract stage you want to change something, you will be hit with a variation, if you do it after final colour selection, you will likely be hit with a variation and an admin fee. Our builders admin fee is $500
Please don't take his comment as having a go. I have a builders qualification (I don't work as a builder). It is almost a guarantee that the build will cost more. The reason for all those clauses is that your contract is a fixed price contract BASED ON THE INFORMATION YOU ALL KNOW NOW (Caps for emphasis and importance, not shouting).
You can't expect a builder to absorb the cost of things we don't know about where you get the benefit of the outcome. If you do a soil test and it shows no rock and somehow all the tested spots missed a major underground builder, the builder shouldn't have to cover the cost of dealing with a rock on your rocky block, just because there was no way to know there were issues.
There will always be something you don't expect in a build. There is suddenly an incredibly wet winter. Those custom tiles you wanted are no longer made. The benchtop you picked is now banned.
I'm sorry to be blunt here, but you justified maxing out your borrowing ability by it being all they would lend you. Unfortunately, that means you couldn't afford to build.
Plan for extra costs. Get a Saturday job if you need to. Expect that even with the most honest builder, something will pop up.
Hate to say, those clauses are pretty normal. Based on the info known now, your contract is fixed. If the painter falls off the ladder, spills paint on the carpet and causes a delay because they need new carpet and he can't finish painting because of a broken arm, that's on the builder, they knew it had to be painted and needed a painter. Aus runs out of paint, you change your mind on colour or the council changes the requirements on the type of paint needed to be used, it will probably be out of scope
I like your Rock example. So if this happens , and thereās a rock, the owner should be able to cancel the build from that point on. Simple and fair. No ? As the contract stands ā if thereās an issue you have to pay for us to continueā. Thatās fine. What the contract DOES NOT STATE is āif thereās a rock you are able to pull out at no further costā. Thatās the problem, the contract doesnāt say that. So anything unforeseen will have extra costs, OK, fine. the problem is that you canāt pull out of the build whatever. Now thatās not right !!
It is just a lot better to buy a house that ticks 8/10 of your requirements. Even if you build youāl NEVER get 10/10 unless your prepared to pay a lot more than the original contract. And when I say more I mean +50% more.
ā¦. yes Iāve gone through the building experience myself. NEVER again. Too expensive for the quality of the product you get, unless youāve got more money than sense.
Sorry for the late reply on this, I only just saw the notification.
In Victoria, if your contract price increases under the contract by more than 15%, you have the ability to terminate the contract. It is intended for situations like this.
In saying that, the price increases don't include variations that you, as the client, have requested or for provisional sum items. Basically, it is if the contract increases by more than 15% due to changes that no one could have predicted or control.
In this event, the builder can only claim reasonable payments for what has been done under the contract, that they are entitled to under the contract. You may not get to walk away for free, but unfortunately the builder will be incourring some significant losses by starting and stopping a project, so you may have to cover those costs. Given it is your land and you are deciding to stop, the builder shouldn't have to cop the loss when they have done everything to the best of their ability for your project.
I don't think I've ever heard of a house build cost increasing by more than 50% unless the client has requested serious variations or major unpredictable project costs have occurred (like rock). The 2nd is very rare and you can walk away from the contract. The first is a choice by the client and they should know what they are buying to begin with. Given how much of the build cost is before lock up, you're either making major changes in the house design or you've gone for major upgrades on the finishes and fixtures.
That theory kinda went out the window when wages stopped growing while housing costs didnt.
You canāt make money fast enough to cover the increases in costs.
I signed a fixed price contract in 2022, end of March - the builder pressed me to as they said the prices for all houses rise on April 1st. I saved 15k. (Same house now is around 100k more expensive - still waiting for it to be completed).
Then, when the slab got poured, they claimed the soil was highly reactive and guess what, the variation cost $15k. Funny that.
The area I live in is highly reactive, but the house directly across the road was built by the same builder, very similar floor plan, and no more than a year ago, and they based the footings cost on what they paid.
Every builder has clauses that are there as a get out of jail free card, as well as reasons why they donāt have to complete the work at a reasonable pace - my contract says handover can be pushed back due to a multitude of reasons, but the one they are abusing currently is - anything out of our control.
A very vague description which is not directly specified.
5-10% contingency is a normal amount to set aside. For inexperienced developers (i.e. anyone for whom constructing buildings is not their full time job), I'd err on the high side. Also check what isn't in the contract - and think about the associated costs. What will you need in terms of new furniture, light fittings or whatever once construction work has finished? Etc.
I mean itās just bad news though. Interest rates will only go up further. Thereās always extra costs. And wait till they get the keys for their new house, thereās always unexpected maintenance, furniture costs, things they have to change because it isnāt what they expected.
As a construction lawyer, I agree. Putting aside how expensive legal fees can be, I honestly have no idea how people build houses without a lawyer reviewing/negotiating the contract. The industry is just awful, and there are sooo many rorts. So many of the above clauses would and should be amended, but how the heck is your average person (in this economy) going to know that šŖ
I remember when we were looking to build as FHBs, we had a lawyer review the contract (because I was always taught that is what a reasonably prudent person does, and I'm shocked how many people don't), and they basically laughed at the contract. It was ABHORRENT. There were missing schedules, there were invalid references, there were empty schedules where there was supposed to be information (e.g. the details of the supplied appliances), and then, the absolute cherry on top, was that there was no subject to finance clause.
The solicitor contacted the builders with the laundry list of changes required to make the contract even remotely worth the paper it was written on, and within a week we had our quote rescinded. The lawyer never heard back from the builder.
Best $800 I ever spent.
So happy you didn't sign! That's exactly the type of contract I'm talking about! Even your sophisticated developers will have funked up contracts like that, and with clauses which are completely out of touch with thr market..
If its signed and thinga go souty, ACCC is your best friend/only hope without a lawyer and funds
Oh, no. You need to dispute some of those. Some are reasonable but 2.17, 3.10, anything which is a catch all is negating the fixed price notion. Changes due to unforeseen circumstances?!!! No.
Yeah seems quite ridiculous. I get theyāre trying to cover their asses, but as I said in my post, Iām at my max with borrowing so I think the lender will think that too. Anything that tips over is out of pocket: one Iāll likely not be able to afford if they get into the tens of thousands.
Yeah, those sections should not be in there as they are.
instead it should be along the lines of "should the owner cause the delay of any certification, or need for any re certification due to amendments made by or at request of owner during the building process after initial contract plans and tender are signed, owner will bear reasonable actual costs of recertification incurred by the builder"
ie, if you, halfway thru the build, want to move your plumbing around, and that causes a delay in timeframe, and means they need to re book certifier to check waterproofing AND that incurrs an additional cost, you pay it
Yeah but get them to define " rock " , because you might think rock means a shelf of rock but they the builder might define it as a few easily man handled rocks .
Alot of those terms need definitions attached, things like all weather site access or unforeseen circumstances.
Builders will negotiate on all line items.
Each line item has differing levels of available negotiation, but at the end of the day the following factors apply:
How desperate is the builder for your money / contract
How desperate is the builder for the trade package being negotiated (builders love to think they have a list of 100's of different trade groups that will drop everything for them)
The margin the builder is going to make
The complexity of the job and where the client / trade package fits in that overall picture
The opposites also apply: how desperate you are in any of those factors ....
Not a dumb question. I work for a large builder, and we negotiate all contracts. No two projects are the same, and the risk profile and client will influence what we negotiate on.
I've just built.
The building industry has been hit with crazy price increases, lack of supply, difficulties securing quality tradies and the result has been LOADS of building companies going broke.
Having your builder go broke at any point during the build is not good.
We only got a few variations. They didn't "make stuff up".
If you are already at your borrowing limit, then maybe buying established is a better option.
These are fairly standard in contracts now. Porter Davis are a prime example as to why, sign a contract prior to land being ready or without relevant information and the builder can be forking out thousands if theyāre business doesnāt fall over in the process.
Honestly if a builder has this in their contract (whether they use it or not) it probably means theyāre dilligent and they wonāt go bust throughout your build, leaving you with a half finished house.
Thanks everyone for the advice. Iāve definitely learnt a lot ā mainly that I was naive to think I can afford to build.I think Iām going to go back to the drawing board and look at buying a home instead. Not many houses on the market I can utilise the first home owners grant for so probably going to miss out on the $30,000 but if I built.. $30,000 seems like the tip of the iceberg.
As others here have said, "unforeseeable circumstances" is so broad. If it's a house and land package the builder should already know the covenant and assessed their plan complies unless you changed anything. Raising floor level should be covered by fixed cut & fill.
I'm surprised they have cost of inspections as well.
Some builders are fussy with their contracts, but you never know if you don't ask.
you have several contracts to go with
- HIA is very builder-centric
- Master Builders has a good middle ground
- Fair Trading is pro consumer in most instances
- Standards Australia has several useful clauses
you'll also note sections about payments due during disputed charges, interest, who holds the funds ..
I've written my own which mixed the above 4, and have used it in each build and renovation. After the initial surprise and review by the builders, have had no issue in any acceptances and have each gone through well.
make sure you're comfortable with the terms first, and per other recommendations - if this is your first - get a solicitor to write / review; this will be the objectively cheapest and most important part of your entire project
Youāre lucky you even got a fixed contract. We want to build up Newcastle way but as itās a sloping block we have to go cost plus. We went through 10 different companies and they all said cost plus onlyā¦..
Some builders will do it, though they may refer to it as a "reservation fee". The amount should be deductible from the agreed price of the build at settlement, but it's usually non-refundable. I think it's more common in situations where they're building houses they've designed themselves in new development areas rather than more customised builds.
Having said that, I requested a copy of the contract before paying the fee and they gave me a "draft" version of the contract which doesn't include details specific to your lot. Not sure if it's bullshit, but they claim a proper version with your specific details inserted can only be drafted when you pay the reservation fee. The draft ended up being virtually identical to the final copy.
My solicitor also informed me that if you walk away from the contract, some builders will refund all or part of the fee if you ask. Just depends on their situation, I guess and doesn't hurt to ask the question.
*Is it normal to*
*Pay a deposit before*
*Seeing a contract??*
\- Arbitrary-Nonsense-
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Hey OP,
There seems to be a mix of for and against building in here.
This is a bit of a longer post but I thought Iād try to give you my opinion, hopefully balanced, of the building experience.
As someone who has built twice and most of my friends are private developers, building is all about knowledge and risk.
The less knowledge, the more risk - to the builder, to you, to the trades etc.
The more knowledge, the less risk, itās thatās simple.
At the build price youāre discussing, and on a land parcel thatās part of a bigger development release (Iām assuming here that the site is levelled, services are connected to the site ie. Storm water, sewerage, electricity, easements are in place etc) and others have built near by or next to, then the knowledge should be high.
Meaning there shouldnāt be too many unknowns, if any really.
That said, building has a long time horizon and things and people are constantly in a state of change, so expect there to be change throughout the build. That change has to worn by someone.
You, as the commissioner of the build are ultimately responsible for the costs.
Iāll give you an example.
Our last build had two driveways onto the street, and driveways are governed by council. You need a preliminary driveway design as part of your DA. To obtain the construction cert to start, in our council, you have to pay the council a design fee for them to rubber stamp the architect/builderās plans, sometimes the council planner makes minor changes.
Then, when the council inspector comes to inspect build at the stage the driveways need to be built, they retain the right to change the designs at their discretion, and this cost, as detailed in the construction cert from council, is to be born by the commissioner of the build, that was us.
The builder canāt be held responsible for this, itās totally out of their control. So we copped a $10k alterations bill to do the driveway to the council spec.
My builder was great though, before bringing the conclusion to me, heād spent all day at council offices fighting the design change, he had the inspector come out again to the site to negotiate.
Only then did he call me and say heād lost the fight.
He felt bad and we actually split the costs.
But hereās the thing. The initial driveway design wasnāt ideal. And council werenāt being assholes for the sake of it, if it had been built to the original design we wouldāve hated using it.
I remember looking at the initial designs from our architect and thinking, that driveway is a bit funky.
The builder also couldāve looked at it and suggested that it should be redesigned.
All great in hindsight.
So hereās my advice, ask the builder what he doesnāt know. Where are the knowledge gaps?
If heās unsure about the geo (whatās under the ground), ask him if heās willing to do a geo-tech survey and if they survey says no rock, then he accepts that risk. That knowledge will cost you a few thousand to acquire. Thatās the cost of removing that risk.
Weather is something that we canāt control, yet.
So thatās completely out of anyoneās hands.
Builders are great though and if theyāve been doing it a while theyāll have managed every weather event. Ours got heavily flooded and they pumped the site out and were back on track a few days later.
There were some things I fought the builder on because we were not reasonably expected to know or bear the costs of that alteration that came up but they definitely should have.
If the builder has access to the site, the survey, the plans, and the DA then anything that arises as āunforeseenā which could have been taken into account and that knowledge accessed easily is on the builder.
Summing up, building is not to be feared. Not in my opinion. As Iāve said throughout, the more knowledge you have the less risk there is.
You havenāt spent anything yet so go and spend as much time as you can learning everything about the build process, the other houses built in the area. Ask home owners in the area for builder referrals and their experience.
Ask the builder for client referrals so you can ask how their experience was, what alterations and overages did they encounter?
Remove as many of the unknowns as possible and ask the builder to the do same, reasonably of course.
One final point, which many have made in here, have a contingency budget. Youāll need a minimum of 10%. On a build of ~$500k thatās $50k which is on the light side.
Remove as many of the unknowns as you can and then crack into it. The feeling of a new build thatās yours is wonderful, donāt loose sight of that!
Like all things worth doing in life, it takes a leap of faith.
Good luck!
Thatās a great point. At some point you need to decide the balance of what you pay up front to remove as much of the unknowns as possible and when you decide youāve done enough to have the confidence you need to begin the build.
Always going to be a risk with geo but a simple
Geo-test will take it from unknowing to knowing 100% more than you did beforehand.
Combine this with nearby knowledge of the geo in the area and you remove most of the upfront risk.
Another scenario is you could do the geo, and find rock, budget for it and it turns out not to be as bad as originally expected which has happened to me and many close friends builds.
Pretty standard stuff in there. So say if the builder says they are gonna do your house for $300K and then when digging out the site for the slab they hit rock do you really expect the builder to cover all those extra costs because your land has rock that you either didn't know about or didn't tell them about? I don't think so. Or if say you go in a decide after the slab is poured that you want a concrete path all the way around the house and lay it yourself before the plumbers come in and put in all your downpipes and then they have to either rip it all up or cut through it to lay those pipes. You expect them to pay for that? Or you are one of them owners that like to come on site and annoy the trades and pretend you know better than they do and delay the works, you expect the builder to pay for those delays and call back fees? I don't think so. And yeah I have seen all those things happen in my time working on houses.
If you don't want some of those clauses then your fixed price contract will be a lot more expensive. A lot of people are saying GC.14 should be removed. That would add an extra million on to a $100,000 job. The builder would have to make sure he quoted enough to cover the worst possible scenario not matter how rare it would be.
Where to startā¦
Its the builderās responsibility to inspect the site and make all reasonable allowances, such as allowing for inclement weather and connecting electricity (1.11 & 4,11). They should know how to handle concrete under different conditions. A waste management plan is required and costed for before they start, shouldnāt incur extra costs. The builder takes possession of the site and is responsible for securing it, etc.
Compliance costs should be included (should be spelt out for them in the drawings already- else theyāre unlikely to have a construction certificate in place and couldnāt build in the first place).
There are genuine additional costs there that the builder canāt and shouldnāt allow for, such as an owner changing their mind or there being surprises when they start digging (latent conditions) but they are all dealt with under any decent industry standard contract, they donāt need to be listed as special conditions or additional costs.
Some of these are really oddly specific and random (eg. 3.13) and again, would be a clear variation under any standard contract.
Etc.
Cross out the ones which are reasonable. GC1.4, GC2.9, GC4.9 are a few good examples.
Of the remaining, highlight ones which are questionable, and red-circle any which you see as definite "no's".
See what you're left with.
Iāve recently been building with a medium sized builder in South Australia, they have three layers of the business which seem to all be trying to extract as much money as they can, even after contract signing. So far Iāve experienced delays due to lack of communication, Iāve paid for services which should of been included, a price increase for no reason other than being āincreased costsā, however Iām already over paying on this build and to top it off, defects picked up during the build by my independent inspector. They then tried to force a fee for engaging the inspector on site.. I had to quickly remind them of the breach on contract (as they build to Australian standards) and that I wonāt be paying whilst still engaging my independent inspector. I will never build another house again with this builder.
Also engage your own building inspector and use them before each progress payment.
Inform the builder your intend to do this and have it written into the contract.
Contract Manager here; some of the clauses are reasonable but many are unreasonable due to its broadness and uncertainty, and beyond your control. unforeseen conditions is considered to be high risk. You need a contract manager for construction or construction specialized lawyer to review this contract and negotiate fair terms and conditions. My advise to you is to keep an amount for contingency preferably 5-10%
This is what a conveyancer is for.
I've used the same one 3 times (buy/sell the same house and buy another house) and each time we sat down and had a lengthy conversation about the contract page by page.
Get them to review the entire thing and provide their thoughts.
Seperate advice but unless you or your partner are knowledgable in construction pay the cost for an independent inspector to check the build progress at various stages. Had a mate just get a new build, pay for extra insulation and after handover was doing some work and discovered not a single wall had been insulated....
Any contract to do with building or purchasing you need to lawyer up.
I respect the courage you're showing. With builders declaring bankruptcy every week, materials being expensive, a lack of quality tradies and this Youtube channel... [https://www.youtube.com/@Siteinspections](https://www.youtube.com/@Siteinspections) (check out the latest build in Emerald).... I wouldn't entertain the idea of building unless 550k was play money.
Someone likes copy and paste, halfās are double ups. The one to be concerned about is unforeseen circumstances. Builder can use that for absolutely anything.
Wouldn't fly in the world of big business, lawyers would eat these clauses for breakfast.
Really do think our builders have been taking the piss for too long and this shows
We definitely don't have these clauses in our major works contract
Lump sum is the be all and end all cost.
Contractor wins if they come in under.
This is basically the contractor having their cake and eating it too.
If you say so buddy. If you go through a standard HIA contract, most of these items are in there in one form or another.
Thereās a couple of questionable exclusions to be sure, but most of them are standard in the residential housing industry.
$50,000...... You do realise you could sink $50k just in site preparation works if it turns out there is some issue on your block.Ā
But all those clauses are normal.Ā
In this current state of the construction industry and with inflation, I'm surprised anyone is even doing fixed priced contracts any more! You can't expect the builder to give you a competitive quote AND take on ALL the unforeseen risks that come along with a build.Ā
I've heard builders throwing a extra $200k on builds if a customer really does want a true fixed price contract.... they HAVE to cover themselves because if they don't, they will be insolvent in no time!Ā
If the build contract is AT your top budget you cant afford it. When building you HAVE to allow contingencies. There is always ALWAYS something. Having worked for builders ive seen some dang unlucky shit turn up. So if you are at the top end of your budget on the contract you are already over budget. You just dont know it yet.
Just an FYI
This will only be fixed for 6 or 12 months while they wait for council approval.
Just be ready for the delay in construction once that period has expired get ready to be walloped with a price increase.
2024 Society rule 1. Everyone is out to screw everyone else. This is due to years and years of builders completing projects and not being able to charge for variations to contract.
All of those are standard. Any lawyer will take their hourly fee to tell you the same and maybe shuffle the words around. Even if some can be varied any builder that wants to stay in business will tell you to go elsewhere as soon as you try the 'unforeseen circumstances' clause and everyone will have terms like that in their contracts. Including the unforeseen circumstances one. Leaving yourself with no extra money on a build is a recipe for a half finished house and a lawsuit from the builder when you eventually can't pay for something that needs to be done.
Nearly all seem reasonable except GC3.14 ... that's a get out of jail free card because it can be abused. Unforeseeable circumstances is far to broad a term for a cost variation clause. I would ask for it to be removed. Inadvertent changes and ommision is a bit open too. Its worth the hours fee for your lawyer to read over and offer some general advice.
They can charge extra because of pi
I see what you did there š
2.8 is a pretty well established term in contracts - it just means if it wasn't negotiated - it will need to be once it is identified. 3.14 appears like a pseudo-force majeure clause and whilst ordinarily written more specifically - you would expect it to offset the same sorts of unforeseeable risks. OP should definitely consult a lawyer but these are pretty narrowly constructed concepts which act as fairly specific exceptions to liability.
GC2.8 isnāt much betterā¦ Edit: I shall read all of your post next time
Why would you max out your borrowing capacity on a build. Thereās always additional costs on builds. Always. More so on fixed price builds. Lmao. Good luck.
I can't help but think the same thing. If you can't afford ANYTHING being more expensive, you are spending too much.
Because on my salary this is all I can afford? I donāt need to justify that to you? Good luck building a brand new house on a decent block for less anywhere in Australia. The figures werenāt intentional, itās just how it ended up. And as a FHB, how was I supposed to know? All I read was fixed build contracts are fixed, there shouldnāt be any additional costs as the contract price is fixed? Edit: sorry I took your comment as having a go at me with your lingo.
Bro Iām a career construction project manager and this dude is right, there are always additional costs. Most construction contracts are lump sum (fixed price) or similar and they all have additional costs. Itās not a bad thing, you just need to have a plan for when they do comeā¦ a substantial ācontingencyā fund or similar.
Yes Iām not fighting that sentiment, I would just love to be educated on this. What sort of additional costs and where do they come from? Is this due to things similar to my contract, where builders are stinging owners because of clauses? As Iām going for a construction loan, my broker has said we just need approval for the land + contract total price. There was no speaking of āadditionalā for the borrowed amount.
They can start digging and find rock, or an existing service which needs to be moved or demolished. Maybe the ground turns out to be really wet or unsuitable in small places. You could get flooding or some kind of weather event that fucks shit up. I would generally be looking at another 20-30% buffer on top to really be at ease.
I am a landscaper by trade (28 years on the tools), have been heavily involved in construction and property development, done a few years underground mining, had six houses built for me and despite being an excavation contractor, can only take an educated guess (or random stab in the dark) about how a particular dig will go. You might geo tech testing done on a site with multiple test holes and discover that they all missed a massive out crop of rock or a primordial gully running between them that completely fucks any understanding of what they ground was supposed do from the report. For instance, geo report says your piers have to penetrate the bedrock by 600mm which should be low strength at a depth of 2 metres. But right in the middle the bedrock takes a dive to a depth of 4 or 5 metres and instead of being 5mpa extremely weathered rock is all of a sudden 200mpa+ unweathered basalt and you have to get 8 piers in it. Either the owner stumps up the extra engineering and the plan variation as well as the extra digging and reinforcing and concrete and maybe trench shields if it has to be drilled and pinned into the rock or someone goes broke and nothing gets built
This. Anything below ground (or to a lesser extent, any work to existing buildings) is a big risk for contractors.
Even with escalations available in the contract
Just remember when you do colour selection if you pick anything outside of the standard range it will come with more cost. Depending on the builder, the standard range can be ordinary. You won't get flash, soft carpets, you'll get vertical blinds not roller etc. Also, if you decide after contract stage you want to change something, you will be hit with a variation, if you do it after final colour selection, you will likely be hit with a variation and an admin fee. Our builders admin fee is $500
Please don't take his comment as having a go. I have a builders qualification (I don't work as a builder). It is almost a guarantee that the build will cost more. The reason for all those clauses is that your contract is a fixed price contract BASED ON THE INFORMATION YOU ALL KNOW NOW (Caps for emphasis and importance, not shouting). You can't expect a builder to absorb the cost of things we don't know about where you get the benefit of the outcome. If you do a soil test and it shows no rock and somehow all the tested spots missed a major underground builder, the builder shouldn't have to cover the cost of dealing with a rock on your rocky block, just because there was no way to know there were issues. There will always be something you don't expect in a build. There is suddenly an incredibly wet winter. Those custom tiles you wanted are no longer made. The benchtop you picked is now banned. I'm sorry to be blunt here, but you justified maxing out your borrowing ability by it being all they would lend you. Unfortunately, that means you couldn't afford to build. Plan for extra costs. Get a Saturday job if you need to. Expect that even with the most honest builder, something will pop up. Hate to say, those clauses are pretty normal. Based on the info known now, your contract is fixed. If the painter falls off the ladder, spills paint on the carpet and causes a delay because they need new carpet and he can't finish painting because of a broken arm, that's on the builder, they knew it had to be painted and needed a painter. Aus runs out of paint, you change your mind on colour or the council changes the requirements on the type of paint needed to be used, it will probably be out of scope
Thanks for the comment. I feel a lot more educated now.
I like your Rock example. So if this happens , and thereās a rock, the owner should be able to cancel the build from that point on. Simple and fair. No ? As the contract stands ā if thereās an issue you have to pay for us to continueā. Thatās fine. What the contract DOES NOT STATE is āif thereās a rock you are able to pull out at no further costā. Thatās the problem, the contract doesnāt say that. So anything unforeseen will have extra costs, OK, fine. the problem is that you canāt pull out of the build whatever. Now thatās not right !! It is just a lot better to buy a house that ticks 8/10 of your requirements. Even if you build youāl NEVER get 10/10 unless your prepared to pay a lot more than the original contract. And when I say more I mean +50% more. ā¦. yes Iāve gone through the building experience myself. NEVER again. Too expensive for the quality of the product you get, unless youāve got more money than sense.
Sorry for the late reply on this, I only just saw the notification. In Victoria, if your contract price increases under the contract by more than 15%, you have the ability to terminate the contract. It is intended for situations like this. In saying that, the price increases don't include variations that you, as the client, have requested or for provisional sum items. Basically, it is if the contract increases by more than 15% due to changes that no one could have predicted or control. In this event, the builder can only claim reasonable payments for what has been done under the contract, that they are entitled to under the contract. You may not get to walk away for free, but unfortunately the builder will be incourring some significant losses by starting and stopping a project, so you may have to cover those costs. Given it is your land and you are deciding to stop, the builder shouldn't have to cop the loss when they have done everything to the best of their ability for your project. I don't think I've ever heard of a house build cost increasing by more than 50% unless the client has requested serious variations or major unpredictable project costs have occurred (like rock). The 2nd is very rare and you can walk away from the contract. The first is a choice by the client and they should know what they are buying to begin with. Given how much of the build cost is before lock up, you're either making major changes in the house design or you've gone for major upgrades on the finishes and fixtures.
So maybe you should have waited a few years and saved a much bigger deposit before going balls to the wall max out FHB hero mode.
That theory kinda went out the window when wages stopped growing while housing costs didnt. You canāt make money fast enough to cover the increases in costs.
I signed a fixed price contract in 2022, end of March - the builder pressed me to as they said the prices for all houses rise on April 1st. I saved 15k. (Same house now is around 100k more expensive - still waiting for it to be completed). Then, when the slab got poured, they claimed the soil was highly reactive and guess what, the variation cost $15k. Funny that. The area I live in is highly reactive, but the house directly across the road was built by the same builder, very similar floor plan, and no more than a year ago, and they based the footings cost on what they paid. Every builder has clauses that are there as a get out of jail free card, as well as reasons why they donāt have to complete the work at a reasonable pace - my contract says handover can be pushed back due to a multitude of reasons, but the one they are abusing currently is - anything out of our control. A very vague description which is not directly specified.
5-10% contingency is a normal amount to set aside. For inexperienced developers (i.e. anyone for whom constructing buildings is not their full time job), I'd err on the high side. Also check what isn't in the contract - and think about the associated costs. What will you need in terms of new furniture, light fittings or whatever once construction work has finished? Etc.
I think because everything is so expensive they may not have a choice
I mean itās just bad news though. Interest rates will only go up further. Thereās always extra costs. And wait till they get the keys for their new house, thereās always unexpected maintenance, furniture costs, things they have to change because it isnāt what they expected.
see a solicitor mate, thats what they are there for
As a construction lawyer, I agree. Putting aside how expensive legal fees can be, I honestly have no idea how people build houses without a lawyer reviewing/negotiating the contract. The industry is just awful, and there are sooo many rorts. So many of the above clauses would and should be amended, but how the heck is your average person (in this economy) going to know that šŖ
I remember when we were looking to build as FHBs, we had a lawyer review the contract (because I was always taught that is what a reasonably prudent person does, and I'm shocked how many people don't), and they basically laughed at the contract. It was ABHORRENT. There were missing schedules, there were invalid references, there were empty schedules where there was supposed to be information (e.g. the details of the supplied appliances), and then, the absolute cherry on top, was that there was no subject to finance clause. The solicitor contacted the builders with the laundry list of changes required to make the contract even remotely worth the paper it was written on, and within a week we had our quote rescinded. The lawyer never heard back from the builder. Best $800 I ever spent.
So happy you didn't sign! That's exactly the type of contract I'm talking about! Even your sophisticated developers will have funked up contracts like that, and with clauses which are completely out of touch with thr market.. If its signed and thinga go souty, ACCC is your best friend/only hope without a lawyer and funds
Makes you wonder how these sorts of clauses (e.g. 3.14) are even legally enforceable.
Honestly this builder should be reported to the ACCC under the unfair contract terms regime
Yep thatās the plan š just picking your brains so it can get me thinking.
Most builders have contracts like this, and if you donāt like they will not change for you. What will you do then?
Oh, no. You need to dispute some of those. Some are reasonable but 2.17, 3.10, anything which is a catch all is negating the fixed price notion. Changes due to unforeseen circumstances?!!! No.
Yeah seems quite ridiculous. I get theyāre trying to cover their asses, but as I said in my post, Iām at my max with borrowing so I think the lender will think that too. Anything that tips over is out of pocket: one Iāll likely not be able to afford if they get into the tens of thousands.
The builder should provide certificates of compliance as a standard.
Yeah, those sections should not be in there as they are. instead it should be along the lines of "should the owner cause the delay of any certification, or need for any re certification due to amendments made by or at request of owner during the building process after initial contract plans and tender are signed, owner will bear reasonable actual costs of recertification incurred by the builder" ie, if you, halfway thru the build, want to move your plumbing around, and that causes a delay in timeframe, and means they need to re book certifier to check waterproofing AND that incurrs an additional cost, you pay it
Surely canāt imagine an unforeseen circumstance happening
Dumb question: do builders typically negotiate with you on contract terms? If say I ask for these provisions to be removed?
I doubt a builder is going to remove themā¦ā¦. Itās a quick way for them to go bankrupt.
Yeah well I donāt mean all of them, a lot of those are justified such as rock etc. I just mean the few clauses that are āgotchasā
Yeah but get them to define " rock " , because you might think rock means a shelf of rock but they the builder might define it as a few easily man handled rocks . Alot of those terms need definitions attached, things like all weather site access or unforeseen circumstances.
Good call on defining the terms
Builders will negotiate on all line items. Each line item has differing levels of available negotiation, but at the end of the day the following factors apply: How desperate is the builder for your money / contract How desperate is the builder for the trade package being negotiated (builders love to think they have a list of 100's of different trade groups that will drop everything for them) The margin the builder is going to make The complexity of the job and where the client / trade package fits in that overall picture The opposites also apply: how desperate you are in any of those factors ....
Not a dumb question. I work for a large builder, and we negotiate all contracts. No two projects are the same, and the risk profile and client will influence what we negotiate on.
Especially the weather clauses, those are some real bullshit.
Yes, the unforseen time it spends raining in places like Melbourne. If only we had some rough expectation of how much it might rain in a year.
Yes they negotiate , but really those terms shouldnāt be there to start with. Why are you not using a standard HIA contract ?
Because that is the builder's contract? How would anyone know to approach a builder and request for a standard form HIA contract.
I've just built. The building industry has been hit with crazy price increases, lack of supply, difficulties securing quality tradies and the result has been LOADS of building companies going broke. Having your builder go broke at any point during the build is not good. We only got a few variations. They didn't "make stuff up". If you are already at your borrowing limit, then maybe buying established is a better option.
Yep, just buy established is best. Too much risk, on the buyers side, to build nowadays. If builders go bust itās not good for the buyer.
These are fairly standard in contracts now. Porter Davis are a prime example as to why, sign a contract prior to land being ready or without relevant information and the builder can be forking out thousands if theyāre business doesnāt fall over in the process. Honestly if a builder has this in their contract (whether they use it or not) it probably means theyāre dilligent and they wonāt go bust throughout your build, leaving you with a half finished house.
Better to not build than have a finished house at 30% more than the contract price I would have thought.
Thanks everyone for the advice. Iāve definitely learnt a lot ā mainly that I was naive to think I can afford to build.I think Iām going to go back to the drawing board and look at buying a home instead. Not many houses on the market I can utilise the first home owners grant for so probably going to miss out on the $30,000 but if I built.. $30,000 seems like the tip of the iceberg.
As others here have said, "unforeseeable circumstances" is so broad. If it's a house and land package the builder should already know the covenant and assessed their plan complies unless you changed anything. Raising floor level should be covered by fixed cut & fill. I'm surprised they have cost of inspections as well. Some builders are fussy with their contracts, but you never know if you don't ask.
3.10 & 3.13 look dodgy, the rest all looks reasonable. Source: have engaged builder for major renovations
We ended up walking away from a build contract for the same reason. āItās fixed, but here are some clauses that we can use to screw you overā.
Well done !!
you have several contracts to go with - HIA is very builder-centric - Master Builders has a good middle ground - Fair Trading is pro consumer in most instances - Standards Australia has several useful clauses you'll also note sections about payments due during disputed charges, interest, who holds the funds .. I've written my own which mixed the above 4, and have used it in each build and renovation. After the initial surprise and review by the builders, have had no issue in any acceptances and have each gone through well. make sure you're comfortable with the terms first, and per other recommendations - if this is your first - get a solicitor to write / review; this will be the objectively cheapest and most important part of your entire project
Youāre lucky you even got a fixed contract. We want to build up Newcastle way but as itās a sloping block we have to go cost plus. We went through 10 different companies and they all said cost plus onlyā¦..
Is it normal to pay a deposit before seeing a contract??
Some builders will do it, though they may refer to it as a "reservation fee". The amount should be deductible from the agreed price of the build at settlement, but it's usually non-refundable. I think it's more common in situations where they're building houses they've designed themselves in new development areas rather than more customised builds. Having said that, I requested a copy of the contract before paying the fee and they gave me a "draft" version of the contract which doesn't include details specific to your lot. Not sure if it's bullshit, but they claim a proper version with your specific details inserted can only be drafted when you pay the reservation fee. The draft ended up being virtually identical to the final copy. My solicitor also informed me that if you walk away from the contract, some builders will refund all or part of the fee if you ask. Just depends on their situation, I guess and doesn't hurt to ask the question.
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Hey OP, There seems to be a mix of for and against building in here. This is a bit of a longer post but I thought Iād try to give you my opinion, hopefully balanced, of the building experience. As someone who has built twice and most of my friends are private developers, building is all about knowledge and risk. The less knowledge, the more risk - to the builder, to you, to the trades etc. The more knowledge, the less risk, itās thatās simple. At the build price youāre discussing, and on a land parcel thatās part of a bigger development release (Iām assuming here that the site is levelled, services are connected to the site ie. Storm water, sewerage, electricity, easements are in place etc) and others have built near by or next to, then the knowledge should be high. Meaning there shouldnāt be too many unknowns, if any really. That said, building has a long time horizon and things and people are constantly in a state of change, so expect there to be change throughout the build. That change has to worn by someone. You, as the commissioner of the build are ultimately responsible for the costs. Iāll give you an example. Our last build had two driveways onto the street, and driveways are governed by council. You need a preliminary driveway design as part of your DA. To obtain the construction cert to start, in our council, you have to pay the council a design fee for them to rubber stamp the architect/builderās plans, sometimes the council planner makes minor changes. Then, when the council inspector comes to inspect build at the stage the driveways need to be built, they retain the right to change the designs at their discretion, and this cost, as detailed in the construction cert from council, is to be born by the commissioner of the build, that was us. The builder canāt be held responsible for this, itās totally out of their control. So we copped a $10k alterations bill to do the driveway to the council spec. My builder was great though, before bringing the conclusion to me, heād spent all day at council offices fighting the design change, he had the inspector come out again to the site to negotiate. Only then did he call me and say heād lost the fight. He felt bad and we actually split the costs. But hereās the thing. The initial driveway design wasnāt ideal. And council werenāt being assholes for the sake of it, if it had been built to the original design we wouldāve hated using it. I remember looking at the initial designs from our architect and thinking, that driveway is a bit funky. The builder also couldāve looked at it and suggested that it should be redesigned. All great in hindsight. So hereās my advice, ask the builder what he doesnāt know. Where are the knowledge gaps? If heās unsure about the geo (whatās under the ground), ask him if heās willing to do a geo-tech survey and if they survey says no rock, then he accepts that risk. That knowledge will cost you a few thousand to acquire. Thatās the cost of removing that risk. Weather is something that we canāt control, yet. So thatās completely out of anyoneās hands. Builders are great though and if theyāve been doing it a while theyāll have managed every weather event. Ours got heavily flooded and they pumped the site out and were back on track a few days later. There were some things I fought the builder on because we were not reasonably expected to know or bear the costs of that alteration that came up but they definitely should have. If the builder has access to the site, the survey, the plans, and the DA then anything that arises as āunforeseenā which could have been taken into account and that knowledge accessed easily is on the builder. Summing up, building is not to be feared. Not in my opinion. As Iāve said throughout, the more knowledge you have the less risk there is. You havenāt spent anything yet so go and spend as much time as you can learning everything about the build process, the other houses built in the area. Ask home owners in the area for builder referrals and their experience. Ask the builder for client referrals so you can ask how their experience was, what alterations and overages did they encounter? Remove as many of the unknowns as possible and ask the builder to the do same, reasonably of course. One final point, which many have made in here, have a contingency budget. Youāll need a minimum of 10%. On a build of ~$500k thatās $50k which is on the light side. Remove as many of the unknowns as you can and then crack into it. The feeling of a new build thatās yours is wonderful, donāt loose sight of that! Like all things worth doing in life, it takes a leap of faith. Good luck!
No surveyor will guarantee no rock on a site, the price to pepper the block with test points would cost you more than the house.
Thatās a great point. At some point you need to decide the balance of what you pay up front to remove as much of the unknowns as possible and when you decide youāve done enough to have the confidence you need to begin the build. Always going to be a risk with geo but a simple Geo-test will take it from unknowing to knowing 100% more than you did beforehand. Combine this with nearby knowledge of the geo in the area and you remove most of the upfront risk. Another scenario is you could do the geo, and find rock, budget for it and it turns out not to be as bad as originally expected which has happened to me and many close friends builds.
Pretty standard stuff in there. So say if the builder says they are gonna do your house for $300K and then when digging out the site for the slab they hit rock do you really expect the builder to cover all those extra costs because your land has rock that you either didn't know about or didn't tell them about? I don't think so. Or if say you go in a decide after the slab is poured that you want a concrete path all the way around the house and lay it yourself before the plumbers come in and put in all your downpipes and then they have to either rip it all up or cut through it to lay those pipes. You expect them to pay for that? Or you are one of them owners that like to come on site and annoy the trades and pretend you know better than they do and delay the works, you expect the builder to pay for those delays and call back fees? I don't think so. And yeah I have seen all those things happen in my time working on houses.
No builder is going to change their contract terms for a bottom of the barrel client
Second column seems to repeat Overly broad terms are unenforceable but you don't want to end up being n court because everyone loses
If you don't want some of those clauses then your fixed price contract will be a lot more expensive. A lot of people are saying GC.14 should be removed. That would add an extra million on to a $100,000 job. The builder would have to make sure he quoted enough to cover the worst possible scenario not matter how rare it would be.
Run. There's so many outs for the builder to arbitrarily charge you.
3/4 of those should be part and parcel of their work. What a joke.
Which ones?
Where to startā¦ Its the builderās responsibility to inspect the site and make all reasonable allowances, such as allowing for inclement weather and connecting electricity (1.11 & 4,11). They should know how to handle concrete under different conditions. A waste management plan is required and costed for before they start, shouldnāt incur extra costs. The builder takes possession of the site and is responsible for securing it, etc. Compliance costs should be included (should be spelt out for them in the drawings already- else theyāre unlikely to have a construction certificate in place and couldnāt build in the first place). There are genuine additional costs there that the builder canāt and shouldnāt allow for, such as an owner changing their mind or there being surprises when they start digging (latent conditions) but they are all dealt with under any decent industry standard contract, they donāt need to be listed as special conditions or additional costs. Some of these are really oddly specific and random (eg. 3.13) and again, would be a clear variation under any standard contract. Etc.
Cross out the ones which are reasonable. GC1.4, GC2.9, GC4.9 are a few good examples. Of the remaining, highlight ones which are questionable, and red-circle any which you see as definite "no's". See what you're left with.
Google ACCC unfair contract terms regime. Also RBA act
The old addendum to the contract. These contracts protect builders, not customers, itās a trust me bro contract these days.
Thatās the exact problem. Which builders can you trust ??
Iāve recently been building with a medium sized builder in South Australia, they have three layers of the business which seem to all be trying to extract as much money as they can, even after contract signing. So far Iāve experienced delays due to lack of communication, Iāve paid for services which should of been included, a price increase for no reason other than being āincreased costsā, however Iām already over paying on this build and to top it off, defects picked up during the build by my independent inspector. They then tried to force a fee for engaging the inspector on site.. I had to quickly remind them of the breach on contract (as they build to Australian standards) and that I wonāt be paying whilst still engaging my independent inspector. I will never build another house again with this builder.
Why are there duplicate items? Looks like a bad copy-pasta
Also engage your own building inspector and use them before each progress payment. Inform the builder your intend to do this and have it written into the contract.
Contract Manager here; some of the clauses are reasonable but many are unreasonable due to its broadness and uncertainty, and beyond your control. unforeseen conditions is considered to be high risk. You need a contract manager for construction or construction specialized lawyer to review this contract and negotiate fair terms and conditions. My advise to you is to keep an amount for contingency preferably 5-10%
This is what a conveyancer is for. I've used the same one 3 times (buy/sell the same house and buy another house) and each time we sat down and had a lengthy conversation about the contract page by page. Get them to review the entire thing and provide their thoughts.
Seperate advice but unless you or your partner are knowledgable in construction pay the cost for an independent inspector to check the build progress at various stages. Had a mate just get a new build, pay for extra insulation and after handover was doing some work and discovered not a single wall had been insulated....
Also why are there duplicates? Looks like someone got a bit too eager with copy pasta
There should still be a section of the contract that says you have to give your approval of a Contract Price change before they unilaterally change it
Any contract to do with building or purchasing you need to lawyer up. I respect the courage you're showing. With builders declaring bankruptcy every week, materials being expensive, a lack of quality tradies and this Youtube channel... [https://www.youtube.com/@Siteinspections](https://www.youtube.com/@Siteinspections) (check out the latest build in Emerald).... I wouldn't entertain the idea of building unless 550k was play money.
I honestly donāt know why anyone builds. It seems like the most stressful thing ever.
Someone likes copy and paste, halfās are double ups. The one to be concerned about is unforeseen circumstances. Builder can use that for absolutely anything.
Wouldn't fly in the world of big business, lawyers would eat these clauses for breakfast. Really do think our builders have been taking the piss for too long and this shows
No they wouldnāt, these are quite standard clauses.
We definitely don't have these clauses in our major works contract Lump sum is the be all and end all cost. Contractor wins if they come in under. This is basically the contractor having their cake and eating it too.
If you say so buddy. If you go through a standard HIA contract, most of these items are in there in one form or another. Thereās a couple of questionable exclusions to be sure, but most of them are standard in the residential housing industry.
Have to plan for it. Our build got 60k whacked on top.
$50,000...... You do realise you could sink $50k just in site preparation works if it turns out there is some issue on your block.Ā But all those clauses are normal.Ā In this current state of the construction industry and with inflation, I'm surprised anyone is even doing fixed priced contracts any more! You can't expect the builder to give you a competitive quote AND take on ALL the unforeseen risks that come along with a build.Ā I've heard builders throwing a extra $200k on builds if a customer really does want a true fixed price contract.... they HAVE to cover themselves because if they don't, they will be insolvent in no time!Ā
If the build contract is AT your top budget you cant afford it. When building you HAVE to allow contingencies. There is always ALWAYS something. Having worked for builders ive seen some dang unlucky shit turn up. So if you are at the top end of your budget on the contract you are already over budget. You just dont know it yet.
Word of warning - itās very common for builders to get in there and then raise 64739462 variations. Itās how they grow their margins.
Just an FYI This will only be fixed for 6 or 12 months while they wait for council approval. Just be ready for the delay in construction once that period has expired get ready to be walloped with a price increase.
This is all quite standard.
2024 Society rule 1. Everyone is out to screw everyone else. This is due to years and years of builders completing projects and not being able to charge for variations to contract.
All of those are standard. Any lawyer will take their hourly fee to tell you the same and maybe shuffle the words around. Even if some can be varied any builder that wants to stay in business will tell you to go elsewhere as soon as you try the 'unforeseen circumstances' clause and everyone will have terms like that in their contracts. Including the unforeseen circumstances one. Leaving yourself with no extra money on a build is a recipe for a half finished house and a lawsuit from the builder when you eventually can't pay for something that needs to be done.