01 Feb What’s in a Home Building Contract?
BEFORE YOU SIGN THE CONTRACT:- The home Building Contract Act specifies that the person doing the work for you, must give you special notice before the contract is signed. This standard notice is called “NOTICE FOR THE HOME OWNER” and explains the main parts of the Act so that you fully understand your rights and obligations before you sign It is important to read this notice.
YOU MUST HAVE A WRITTEN CONTRACT:- There must be a written contract between you and the person doing the work for you, you should have signed a copy of this before the works is commenced.
If you don’t receive a copy you should write to the person doing the work for you and request it, it is important to keep a dated copy of your request.
If the contract is not in writing, stating all the terms and conditions, dated and signed by yourself and the person doing the work for you, you can then terminate the contract by notifying the person doing the work for you in writing and it is important to keep a copy of the date when this occurred.
THE PRICE MUST BE FIXED:- If the price of labour or materials goes up after the contract is signed the person doing the work for you, is not allowed to pass these on to you. Clauses in contracts which allow this to happen are called “Rise and Fall” and are now illegal under the Act. There are only three instances where a trades person or Builder can legally charge you for the cost increase and that is:
When the increase is the result of a change in government laws.
When the increase is due to increasing Government charges or taxes.
When the increase is due to a delay in staring work of more than 45 days from the date of signing the contract and the delay was caused by you not fulfilling one of your contractual obligations. ie you may be requested in the contract to prove that you are able to pay the contract price.
If the person doing the work for you does want to increase the price, then they must notify you in writing stating the amount of the price increase and when the increase is to be paid.
The request for extra money can only be for genuine costs incurred by the time that particular payment is due.
If the price rise is more than 5% of the total contract value you have the right to terminate to contract by notifying the person doing the work for you or Builder in writing (we will discuss termination of Contract later on). Alternatively you can apply to the Buildings dispute committee to assess wether the price is justified.
So in summary for the person to pass the increases on to you the costs must be genuine as defined previously and all notification and response must be done in writing.
PROGRESS PAYMENTS:- If the person doing the work wants to be paid at various stages of the works then it must be stated in the contract. You cannot be charged any more than the cost of works actually completed or charged for the materials actually supplied and used at the time of the progress claim or payment. If this does happen you have the right to terminate the contract by notifying the person doing the person doing the work. (explained more later).
Although this is not required by the ACT, you may include a clause in your contract allowing a fund for retention. This allows you to pay the majority of each progress payment when it’s required, but hold back a pre determined percentage of each payment until final completion.
The idea is of course for the person doing the work to complete the works a soon as possible with as little fuss as possible including rectifying complaints.
CHANGING OR (VARYING) YOUR CONTRACT:- If you and the person doing the work agree to making changes after the contract was signed, then these changes (variations) must be notified in writing setting out the date, terms and costing of the variation. The person doing the work must give you a copy of such variations as soon as possible and before the work relating to the changes begins.
When the variation is accepted and ordered the various authorities that originally passed the plans ie. SECWA, HEALTH or the BUILDING SURVEYOR may require changes, in any case they need to be notified. Then within 14 days of the person doing the work having received your order to proceed with the variation he should then provide you with a written explanation and costing of the variation. You will be responsible for the increase in costs.
If the variation is due to unforseen circumstances , then the person doing the work must first demonstrate to you that the variation could not have been foreseen using reasonable skill and experience.
If this then is the case, the person doing the work has 14 days to provide you with a written statement explaining the reason for the change and costing. You will be responsible for any cost increase. An in crease in cost of the materials or labour cannot be passed on to you as a unforseen circumstance. When you and the person doing the work disagree on a cost variation due to unforseen circumstances, you have 14 days after receiving the notice to refer the matter to the Buildings Dispute Committee for a decision.
We want you the reader to write to us on , any Building matters, questions or if you seek advise, we will gladly answer any topic that you wish us to discuss, so please send us your comments.