Have you heard the expression, “A trap for young players?” It means that if somebody is inexperienced in an aspect of business, such as building a new house, then there are a number of things that can cause them financial pain unless they manage to avoid them. The contract is a most important document. It is a legal document and if there is a dispute between you and your builder and the matter goes before a tribunal, court or regulator, then the contract will play a significant role in any finding made by the court. And yet the contract is the perfect breeding ground for traps for young players.
Building a house is a complex operation. Depending on the size of the building, access to the site, the weather and other factors, the whole process can take many months. Things can happen in that time, changes can be made. If you wish to change any aspect of the contract — this is usually called a variation — you could take a hit to your hip pocket. Obviously prevention is better than cure so try and get the contract right before you sign it. However, if you do wish to make a change, understand it could cost you.
Another excellent piece of advice regarding the contract is ‘hasten slowly’. It is better to take a little more time and get all the details checked and checked again before you sign. One way to avoid mistakes is to engage a consultant or building broker who knows about contracts and deals with builders all the time. It will cost you to engage a building broker but if they help you draw up a contract which is exactly what you want, in the long run you may save money.
A typical trap for young players
If you request a change to a detail or details in the contract once it has been signed, there are two possibilities.
- You may wish to see something deleted from the contract or
- You may wish to have something added
If you have an item deleted, the builder only has to credit you with the cost of that item. If you add an item, the builder will charge you the cost of the item plus the margin for the builder plus the GST. Straight away you can see that a variation ideally should happen before the contract is signed.
Furthermore, if you want something added to the contract, the extra cost to you will apply immediately and effect all future payments you make to the builder. If you delete something from the contract, in most cases the saving to you will only apply at the end of the contract. Get the picture? Get the contract right in the first place.
The flow-on effect
Let’s say you request a variation and the builder has problems meeting the terms of that variation. You may want a change to materials being used in the build. If the builder has trouble sourcing those materials, the builder is entitled to have the finish date put back. The delay was not the fault of the builder and you changed the contract. This is just one example of a flow-on effect from a variation. If you had your heart set on being in the new house by Christmas, by changing the contract once it’s been signed, you could shoot yourself in the foot. Solution? Get the contract right in the first place.
Another trap involves what the builder says is fine and what the Council or Shire says is acceptable. If you take the builder’s word for it and sign the contract only to discover the authority won’t approve the size or location of say, a water tank, you’ve signed the contract. Let the buyer beware. If you’re not sure, ask. If you want expert advice, hire a consultant. Don’t be in a rush and sign only when you get answers to all your questions.