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Did you know there are two types of building contracts?
...And that signing the wrong one can leave you exposed to tens of thousands of dollars in fees even if you don’t proceed with the project!
If you don’t check the fine print of your building contract before signing, you might end up with some nasty surprises down the road. Industry associations, like the Housing Industry Association (HIA) and the Master Builders Association (MBA), create industry-approved building contracts.
These contracts are weighted fairly between the best interest of both the builder and you as the client. So when you work with a professional builder, you can be assured that the building contract you sign is an unmodified industry-approved contract.
The Housing Industry Association says that “a workable and watertight building contract is as important to the success of a building project as the plans, designs and materials used during construction.”
Which is why professional builders are using industry-approved building contracts that are produced by associations such as the HIA and the MBA.
Beware Of Additional Clauses In The Contract
Professional builders use these contracts because they balance the best interests of their clients while providing commercial protection for their businesses.
They don’t make adjustments to these contracts or add additional clauses that alter the intent of the documentation. What they will include is a copy of their standard specifications and inclusions, but no additional terms or conditions.
Average builders, on the other hand, may use an industry-approved contract but they will add their own additional clauses in order to weigh the contract in their favour. Or, they may even create their own custom contracts that have been drawn up by a lawyer and are clearly designed to favour the building company.
Contracts that do not protect your interests can cause major issues before or even during construction. So never sign a residential building contract that isn’t approved by an industry association.
Analyse Every Detail With A Fine-Tooth Comb
Here are some things you should consider before signing a contract with a builder.
If a builder provides you with a contract that isn’t industry-approved, ask them why.
Professional builders will always use industry-approved contracts, so if your builder provides you with one that isn’t, you should be wary.
It’s likely to have cost the builder a lot of money in legal fees to draft up their own contract, so find out why they’ve gone down that route. And make sure you analyse every last clause with a fine-tooth comb, before passing it onto a lawyer to check for you in more detail.
Another thing to keep in mind is that your bank might not approve your finance on an unrecognised contract. If your builder does provide an industry-approved contract, make sure they haven’t inserted their own terms and conditions.
If a builder adds their own clauses to an industry-approved contract, the original clauses created by the association may be superseded.
Avoid Seeking Legal Advice
Not so long ago, I had a client come to me after having a terrible experience with another builder.
They went through the preconstruction processes with the builder who then presented them with a building contract. The beginning of the contract was an industry-approved contract created by the HIA, but the builder had added 3 pages of their own unique terms and conditions at the end.
This client was effectively tricked into thinking that they were signing a HIA contract, not realising that the builder had added his own clauses. Before construction began, the builder they were working with was unable to get council approval to build their new home.
The builder then served them with a nasty $40,000 bill, even though he wasn’t able to build their home. The clients sought out legal advice and were told they didn’t have a leg to stand on.
The clauses the builders had added to the contract required them to pay a penalty if the project did not progress for any reason. Which meant the client ended up having to pay $40,000 to the builder for literally nothing in return!
So that’s why it’s important to ensure the building contract you sign is an unmodified industry-approved building contract.
It doesn’t matter if you are building your first home or if you have built many times before…
Designing a new home can be very overwhelming and when you hear new things for the first time, it's not easy to remember everything. So that’s why we’ve put together a quick guide for The 7 Things You Must Know Before Designing A New Home.
It’s completely free, and it will help you to keep your design on budget and avoid any nasty surprises that can sneak up on you when building a custom home.
Click on the link below to download 7 Things You Must Know BEFORE Designing A New Home.
