Articles - New Homes

Things You Need to Know Before Signing a Building Contract

11th April 2019
Things You Need to Know Before Signing a Building Contract

You've gone through the long process of designing your new home; you may think the most import part is over, wrong! The building contract is the legally binding outline that stands in the way of you and your dream home. Making sure everyone is on the same page at the start of the project is a crucial factor in its success. Many consumers have been caught out with thousands of dollars worth on unexpected additional payments or been left with less than ideal finishings because they didn't read their contract correctly.

You should always seek independent industry or legal advice before signing a building contract, but here are a few pointers to help you understand what you should be looking for.

Check for the Basics

It can be a little overwhelming at first to make sure a building contract has included every critical detail. The first step should be to make sure it consists of the basics before you decide to go any further. Don't sign a contract if it is missing any of the following information:

  • Contractors business name
  • Builders license number
  • Date of the contract
  • A detailed description of work that is going to be carried out
  • Fixed price or agreed upon fee
  • If an exact amount cannot be given or a clear understanding of the reasons why

Look for the Small Stuff

Now you've got the big stuff out of the way it's time to take a look at the fine print. A significant building contract for new homes or substantial home renovations should include a copy of your building plans and a clause that states the job will be completed according to those plans. Make sure there is a clause stating that any variation on the contract price or inclusions must be stated in writing and signed by both the contractor and the clients. Another point to look at is if the builder is responsible for obtaining a building permit for you.

Timelines are also an essential aspect of the building contract, it's unlikely that everything will always run on time, but most reasonable builders should be able to give you an accurate timetable. Especially if you are in a rush to have your house completed make sure you have agreed to a deadline before you sign the paperwork. Building contracts will also include milestone-payment terms, meaning payment is made when the builder reaches a certain point in the process. Make sure you agree to this and only pay when the point has been reached otherwise if the builder goes bust and you have overpaid you will end up paying for a replacement builder for work you've already forked out for.

Find Insurance Information

A contract for building work should clearly state that the contractor is aware of their insurance obligations and will meet them. Including builders' liability and other insurances to protect you in case an accident occurs during the building process. In Australia, laws are in place designed to protect home builders in the event their contractor disappears before completed the job.

Besides, don't assume because your builder has a license that their work will comply with building regulations. Make sure it is stated in writing that your contractor will include relevant statutory warranties and meet with the Building Code of Australia (BCA) codes, standards and specifications. There shouldn't be anything in your contract that is compliance impossible.

Be Confident with Your Builder

Like most things in life if you have a gut feeling something isn't right it's usually a bad sign. Any reputable builder will spend time with you to explain and help you understand your contract before signing. If a builder has placed something in the contract, you are unhappy with, or they are unable to explain put off signing and seek legal advice immediately. However, if you do sign a contract and get cold feet, you do have five business days as a "cooling off" period wherein you are allowed to change your mind. In the case you do change your mind, make sure you get it in writing and keep a copy for your records in case they still try to proceed with the agreement.

Always be suspicious of any builder who tries to speed up the signing of the contract or tells you they will explain the "details" later, this can lead to serious problems or expenses later down the track.


Read, Review and Sign

Once you've read through the contract and think you're ready to sign, make sure you review each point and genuinely understand it before going ahead. When it comes to signing, check that every page and every blank space has been filled in correctly. Make sure your contract is witness properly and initial every single page. Never sign a contract if you are unsure of a clause, don't sign until you know for sure what you agree to. Nobody ever wants to enforce a contract, but if it comes down to it, you will be glad you have it to protect you.

Building contracts don't have to be intimidating, make sure you thoroughly check each point to ensure you are getting what you think your getting. Once you get the building contract out of the way, you'll be one step closer to getting into your dream home.