When housing approvals are up, building companies and tradesmen have work coming out their ears. How does this affect the build for the client and what risks are they taking?
Building companies are taking on too many projects at the same time. Many builders are struggling to find tradespeople, let alone good ones. When builders can’t stay on top of trades, poor quality work slips through the cracks to the detriment of their clients.
So what are the four risks to mitigate before and during your building process?
Risk 1: Builder liquidation
Builder insolvency could result in significant financial losses and emotional distress. There are many factors that could lead to builder liquidation, such as inexperience, cash flow problems, and poor project management, just to name a few. Therefore, why not do some background checks on builders you are considering before you sign the contract?
Risk 2: Contract amendments
Before signing your building contract, why not have someone review your contract and inclusion lists to ensure you fully understand the contract content and includes any of your included clauses? Crucially, your contract also needs to include clauses stipulating how you will be protected if things may go wrong. Things that could be included are:
- ensuring your upgrades or changes are included before exchanging contracts
- ensuring the progress payments are within recommended standards
- ensuring you are compensated when construction completion is delayed
It is advisable to take a breath and not be overwhelmed with the process. It’s important that you take your time to ensure you have all building components included in your build now. Contract amendments can become extremely expensive as some builders will charge an administrative fee of up to 30 per cent, plus the additional cost of the inclusion. Little things like extra power points could cost you an extra $100 each and, of course, something like a retaining wall could set you back up to $10,000. Stopping and thinking about this now could save you significant money throughout the build. Variations are the builder’s cream, so get it right the first time.
Risk 3: Defective works
During and after construction, it's important to have the correct measures in place if the builder became liquidated. Therefore, it is important that you:
- find out what to expect in each stage of construction before releasing progress payments
- quality check your documents such as Home Warranty Insurance, builder insurances, government/council documents and have them well filed
- have independent inspections done by your private inspector (not by the builder's certifier) at the pre-slab stage, frame and brickwork stage (pre-sheeting) and the final handover stage (practical completion)
Risk 4: Delays in construction
Construction delays occur more often than not, and you could lose money through issues such as lost rental payments. Delays could be a result of weather conditions, poor project management, supplier/tradesperson unavailabilitie and the like. It is important to understand what are your rights and be compensated when the construction is delayed.
Disputes between the builder and the client are unfortunately a common occurrence. Therefore, ensure your contract is locked down and contains the details outlined above. And avoid variations at all costs.
Get the help of a professional early as engaging legal services later can be a costly exercise. Endeavour to reduce your risk before you start and you are on your way to a happy building experience.