Building or altering a home is an exciting time for many homeowners but can quickly become a source of great stress if the particulars of the project are not mapped out and agreed upon by all involved. It’s important for you and your builder to be on the same page throughout the construction process.
Whether the works to be done are small renovations or large-scale construction, it’s essential to establish a written roadmap with clear guidelines and agreed rules as a point of reference and legal framework for the project, and the relationship between builder and homeowner.
What kind of building contract should I use?
For residential building work under $20,000 a ‘small jobs’contract should be used. For larger-scale residential work in excess of $20,000 a full home building contract is required. Aside from this, there are two main types of building contracts that may be entered into: a cost plus contract or a fixed price contract.
- Cost plus contract
The builder is paid for the cost of the work plus a profit margin. These agreements are only entered into in certain situations, and it can be difficult to predict what the final price will be on completion of the work. - Fixed price contract
This is the most common type of building contract entered into for home building projects because, except in certain circumstances, it is a requirement under NSW building legislation.
What should be included in the contract?
Depending on whether the project is classified as a small job or a larger construction, the level of detail required in the contract will vary.
Typically, a building contract should always include the following information:
- contractor licence information
- Timeframe for the work to be completed
- Scope of the works
- Price
- How and when payment is to occur
- What happens in the event of delays
- How variations are to be managed
- Any other matters that could potentially lead to misunderstandings or disputes
All building contracts must specifically identify the works that are to be carried out by the builder, but they should also identify the works and materials that are not included – this is equally important for homeowners to understand. It is often recommended that these be listed out and attached to the contract as a point of reference.
Need help?
Before entering into a building contract, it’s important to fully understand what you’re getting into.If you need help with drafting or reviewing a building contract, contact one of our experienced solicitors or submit an online enquiry below.
