Following on from last month’s article, this article is aimed at explaining some of the basics about how building contracts work, and a number of the choices you will need to make when entering into a building contract, and how those choices affect what will happen on your build. Please note that each State of Australia has different laws relating to various aspects of building, and particularly the construction of housing. These articles do not deal with the nuances of each State’s laws and systems.
Do you have an architect?
Years ago, nearly everyone wanting a house built engaged an architect who determined what the owner wanted and then drew up plans for the house. Now, most houses are constructed to standard plans prepared by a building company, and individually designed houses are much rarer.
If you have engaged an architect, the architect will be responsible for the overall design meeting your requirements, not the builder, and the building contract is likely to provide that the builder is engaged to build your house or renovation as drawn by the architect.
Aspects of the house such as whether the bedrooms are big enough, how many bathrooms you have, what rooms get the morning sun, making sure that the house has all the elements you require, and other design issues are dealt with by the architect.
The builder will be responsible for building what the architect designs, so you will need to ensure that your instructions to the architect include all your requirements. A good architect will help you work out what you are after and ensure that all your requirements are clearly defined and reflected in the plans and specification.
Using the Builder’s Plans
If you do not have an architect, the builder will usually draw up the plans – for a new build based on a standard house design developed by that builder, or for renovations based on your existing house plans and your instructions.
If you select a builder’s standard plan, you will be engaging the builder to build to that design, so you must ensure that the selected design meets your requirements. If the plan does not show an en-suite, one will not be built. Usually, the builder will have display homes of each of their designs that you can view, and it is a good idea to spend a good deal of time in the one you are looking at.
Pretend you are moving in, and ask yourself “where will we put …”. Measure up the rooms – is the main bedroom large enough for your bed and other furniture? Does the dining room have room for your 10 place dining table?
Ask the builder about any changes to the plans you may want or need, and the effect on the build (particularly the effect on price). Builders keep prices down by using standard size materials, and while sometimes changes can be made for a relatively minor price impact, other changes may have a large impact. For example, making a room larger might be a small issue, or it might need changes to structural elements with a considerable cost.
Scope of Works and Principal’s Requirements
The Scope of Works is a broad description of the work that the builder is agreeing to undertake. You need to make sure that this reflects what you understand the builder is to do. For example, if the Scope of Works does not include earthworks or demolition of an existing building, these can be your responsibility (and your cost).
The Principal’s or Owner’s Requirements is a name for the “brief” you provide to the architect or builder. It is important to ensure that these are comprehensive and include everything that is important to you. This is often more detailed than the scope of works (or might be used interchangeably with the “scope of works”). If you have any special needs for your building, for example, accessibility or a garage large enough to take 3 cars, these should be recorded.
This is a still more detailed description of the works to be undertaken. This can include the specific brand and model of inclusions, and details of materials – such as the specific heights of benchtops, the type and colour of materials (benchtops, tiles etc) to be used. If something is not detailed in the documentation, it will be up to the builder’s discretion. For example, a 90cm stove is noted on the plans – unless the specification sets out the brand and model, the builder may be able to select any 90cm stove.
Building Code of Australia and Australian Standards
The Building Code of Australia sets out requirements that all builders must comply with, but this does not necessarily cover absolutely everything your builder does or your new building will contain.
It will often be the case that there is a general statement in the contract or the specification that all works and materials must comply with the Building Code, but in general, it is also good to have a similar “catch-all” that all materials and works must comply with relevant Australian Standards.
The builder’s main legal obligation is to organise and supervise all building works, and to make sure they are done properly and in accordance with the contract. Most builders do not employ their own tradespersons, and they subcontract the relevant work to specific trades. The building contract will usually allow this, and you should check that the contract states that despite any subcontracting, the builder remains responsible for compliance with the contract and the standards required by it.
The trades will enter into a contract with the builder, not with you. The builder will give them part of the plans and the specification relating to their works, but they work to the builder’s instructions, not yours. It is important that the plans and specifications show all the relevant requirements for each trade.
Put it in writing
The most important take away is that if you require something, or have agreed on an item with the builder, put it down in writing in the contract. You can say “I just want to make sure that this doesn’t get missed later”. Remember, if the builder is agreeing to it, there should be no issue with putting it in writing.
Our Guest Contributor
Thank you to Andrew Throssell, Partner at Hotchkin Hanley Lawyers for sharing his insights into building contract basics. Andrew has over 20 years experience in commercial transactions and disputes and has dealt with a large number of commercial, construction and property transactions, often acting for developers, builders, building owners and shopping centre owners.
His areas of practice include commercial, industrial and retail property sales and leasing transactions, partnerships and joint ventures, construction law, business sales and purchases, franchising, information technology and intellectual property. Andrew has extensive experience advising on contentious and complex transactions.
Please note that any information in this blog is purely general in nature and provided as a guide only. Different States and Territories around Australia have different rules and laws that apply to building contracts. Professional legal advice should always be obtained if in doubt as to any contracts or agreements you are signing.