Thinking about building a new house or renovating? Having concern on the building contract? There are few things to consider before entering to a contract:
Domestic building contract requirements
In Queensland, QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION (QBCC) sets out contract requirements of the erection or construction of a detached dwelling or the renovation of a home. QBCC is a statutory body regulates the building industry under the Queensland Building and Construction Commission Act 1991.
QBCC classifies building contracts into different degrees according to the constructions, there are:
- New Home construction contract – this is for a new building/residential dwelling.
- Renovation, Extension and Repair contract.
New Home construction contract:
When entering a New Home construction contract, in addition to signed names of owners and contractors, the contract must include:
Cooling-Off Period. Cooling-Off Period is permission for the owner or the contractor to withdraw the contract within 5 business days after the day of receiving copies of both the signed contract and Queensland Consumer Building Guide. (But there will be extra cost for owners in withdrawing, generally $100 plus any out-of-pocket expenses incurred by the contractor up to the time of withdrawal.)
QBCC License. Before committing with the contractor, please make sure the contractor is licensed by QBCC, otherwise the building work would not be covered under the Queensland Home Warranty Scheme. The contractor’s license can be checked via QBCC website or contact QBCC.
Queensland Home Warranty Scheme. QLD Home Warranty Scheme is the protection of the owner against non-completion, defective work and subsidence for up to 6 years from completion, provided a licensed contractor performs the work. (a Notice of Cover and links to important information would be given from QBCC within 2 weeks since signing the contract.)
Commencement Notice. When the actual construction starts.
Contract Price. The fixed contract price must be shown on the first page of the contract schedule, if the price is not fixed, the method for calculating any allowances must be stated in the contract schedule.
Deposit Limits. The maximum deposit before work starts on site is 10%.
Progress Payments. After payment of deposit, owners and contractors could choose the number and timing of progress payment for the project freely.
Building Approvals and inspections. Building inspections and approvals are the responsibility of a building certifier which is mandatorily required at certain stages of construction. (The contractor must give the owner copies of any certificates of inspection after they receive the certificates from the certifier.)
Variations. Variation is any change to the materials used or work to be performed under the contract. All variations have to be agreed in writing by the owner before the variation work commences and any increased price due to the variation cannot be required to pay until the variation work is started.
Extensions of Time. EOT will occur when a variation to the contract which involves extra work, or the work is interrupted by emergency. When EOT occurs, the contractor must give the owner a written EOT claim to consider whether to approve the claim or not. If the owner approves the claim, Practical Completion will be extended by the claimed period; if the owner does not approve the claim, the extension is deemed as ‘disputed’.
Liquidated damages. LD is a contractual payment for extra cost to the owner from the contractor if the contractor fails to complete the work within the allowed time in the contract.
Practical Completion and Handover. The owner does not need to pay the final contract payment until all the contracted work has been completed. If the owner thinks there are minor defects or minor omissions, the contractor must give the owner a ‘defects document’ during the handover inspection.
Implied Warranties. Implied warranty is the protection for the owner for the suitability of materials, compliance with legal requirements and standard of work and exercise of care and skill, even the warranty is not stated in the contract. For structural defects, the warranty period is 6 years; and for others, the warranty period is 1 year.
Renovation, Extension and Repair contract:
QBCC classify this in 3 levels:
1) Not regulated by domestic building legislation
If the contracts are priced at less than $3,300, it will not be necessary to have a domestic building contract, but it still recommends the owner to record necessary information in a brief document to minimize the risk of disputes.
2) Level 1 contracts
If the contracts priced from $3,301 to $19,999, there will be key content requirements for the contract:
Must be in writing, dated and signed by both parties;
Must contain names of the contracting parties;
Must contain a description of the contract work;
Must contain the contract price;
Must contain the start date of building;
Must contain the date for practical completion;
Must contain a copy of any plans and specifications;
Must contain a conspicuous notice advising the owner of their cooling-off period rights;
The contractor must give the owner a fully signed copy of the entire contract within 5 business days after the contractor enters the contracts.
3) Level 2 contracts
If the contracts priced at more than $20,000, there are more requirements base on requirements of Level 1 contracts:
The QBCC Consumer Building Guide must be given to the owner;
If there are the contract price and a price change warning, they must be stated on the first page of the contract schedule;
The contractor must give the owner a Commencement Notice within 10 business days of work commencing on site.
Checking terms of New Home construction contract and Renovation, Extension and Repair contract is the first step to engage a builder, understanding a full-detailed contract could be a daunting process, it is always recommended to seek professional legal assistance before entering any contract.
If you are considering building a new home or renovating a property, and having concern about the contract, contact us now and let us guide you through with each step of the process of building.
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