Grey Areas in Residential Building Contracts and Specs 7

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Wednesday, July 22nd, 2015
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If you want to see what ‘grey area’ means, you just have to look at a current standard residential building contract.

The definition of specification in contracts is laughable when you think about it. A specification “shows the full details of the building works and includes the details of the materials to be supplied” the HIA says in a 1997 document.

To fully describe the work, you must describe the materials and the labour.

It is not fully describing the work to merely state that “the work comprises a 300 square metre tiled roof, rendered brick veneer and clad home with attached brick double garage.” Labour forms about 45 per cent of nearly every project, and even a greater percentage of alterations and additions projects.

But most people involved with domestic building contracts (including the writers of current project specifications) don’t seem to think that labour content is important any more. And I’d say that’s been the situation for about 30 years now. Talk about a fiasco!

It’s no wonder standards have fallen. The industry has been well and truly dumbed down.

Last year in Victoria, a large 20-plus storey Docklands ‘Alucobest’ externally clad apartment block proved the danger of materials and/or systems that fail to meet specifications. The cladding caught fire and when it did, it didn’t smoulder, it burnt fast.

So now there will be a really expensive (and necessary) audit, likely court case(s), and huge expense, all because some or most of those involved didn’t care enough. It’s shown us all that greater care is required when imports are involved, especially when those materials are tested under different rules.

Let’s not have a scapegoat; let’s face up to the real problem. It wasn’t just the building surveyor. He/she didn’t specify the cladding, but in hindsight should perhaps have asked for more proof of fire test compliance.

Someone else specified the cladding, and I wonder if we’ll ever find out who. That was not made apparent in the articles I read. Will they keep the public in the dark?

Then there was the supplier and the manufacturer of the panels. You would expect that their specifications stated that the panels to be used were compliant with the relevant testing procedures, codes and regulations for external cladding of high-rise apartments in Victoria, but this was apparently not the case. And was there any history of other fires with this cladding? If it can burn in Victoria, it can burn anywhere else, so will there be a world-wide investigation?

This example relates to the list of materials section of a specification, the section on which considerable time is supposedly spent by the specifiers for every project, as required by the standard contract definition of specification. But despite the detailed materials, this frightening debacle still occurred.

But enough on materials. What about the other half of every project, labour, the basic ingredient that requires workmanship clauses?

Way back in the good old days, there used to be quite a number of workmanship clauses at the back of publications of Standard Project Specifications/Project Building Specifications to name but two of them. They were endorsed by the two main builder associations, a bank and an architects association. Those clauses contained specifics on what must be done to be termed ‘workmanlike.’ These clauses appeared behind the detailed material lists and were termed ‘General Specifications.’

But the use of these specs started to peter out in the mid 1980s, and had virtually stopped by the time the privatized building surveyor era commenced in the early 1990s.

Today these specifications are still available, but over time the writers have seen fit to reduce many of the workmanship clauses to fairly useless one-liners. In painting, for instance, instead of over 40 lines of specifics, we now have a list of options and a preparation clause telling workers to “Ensure all surfaces are clean, dust-free and that all filling and sanding is carried out.”

The important details that served to prevent short-changing were progressively removed from about 1985 onwards. In 2005 (no kidding), there were one-liners such as the following for exterior woodwork: “Apply two coats of stain or paint or as required by the contract documents.” But if the woodwork is not durable (as is so often the case, even with Protim coating), at least three coats are required. There is no mention or this, or of the fact that oil-based primer is also required.

In 1985, painting consisted of 55 lines; recently there were just 11, and these were mostly optional. But that’s only the half of it.

This really started dumbing down the industry to the level that virtually nobody seems to know anymore that non-durable external exposed timber has to be oil-base-primed all round including end grain or else it is a defect. Most homes have some exposed non-durable woodwork, and very few are oil-base primed.

An amazing 22 times in a row, building consultant (new house) reports I was asked to check on failed to report this defect. Is it any wonder that VCAT members seem to take so little notice of so-called ‘expert’ opinions?

And to make matters worse, the (still in use) current publication Guide to Standards and Tolerances, still basically says you cannot claim for paint defects after two years. What a load of codswallop!

If there was no oil-based primer applied to an exposed non-durable timber door frame, the peeling of the acrylic paint is very much claimable during the warranty period, as too is its removal, the preparing for and applying of the aforementioned primer, plus the re-doing of the acrylic top coats.

But worse still, not even the scant clauses in current (Victorian) specification booklets are included in the vast majority of specifications. Today there is nothing at all on workmanship in most current specifications. Take a look at one.

So why talk of changing powers of regulatory bodies and how legislation might be altered when it is the missing basics in specifications and the ridding our industry of the grey areas in contracts that really need to change?

The code AS4349.1 Inspection of Buildings – Pre-purchase Inspections – Residential buildings has four separate inadequate single sentence classifications and still fails to define defect adequately. The current Consumer Affairs definition and Contracts Guarantee Act 1995 come closer, but each of these definitions is incomplete too. All fail to address life expectancy and inferior alternative solutions.

But building contracts do not have a definition of defect at all, and together with an inadequate definition of specification, these contracts have permitted incredible short-cutting and have totally failed the residential building industry for decades.

What a ludicrous situation it is when home owners doing their final walkthroughs and building consultants reporting on the condition of new homes, are supposed to be looking for nothing but defects, and yet there is no contract definition. And it needs to be a thorough one or there will still be grey areas.

Remember the grey areas?

The dumbing down by lack of vital information in specifications and the lack of a definition of defect in contracts are major reasons why there are so many arguments in VCAT, and why much of the time neither side wins.

Very few building consultants seem to know the basics or the specifics. Add to that the commonplace substantial list of disclaimers and is it any wonder that most defects are never discovered? This lack of discovery has meant that builders who don’t take sufficient time to thoroughly supervise their tradesmen are actually shielded by the lack of detail in their specifications.

Short-cutting occurs in most trades when prices are screwed down and supervision is slack. There are dozens of commonplace short-cuts going on undetected under everyone’s nose on nearly every house. Builders, their supervisors, building inspectors and building consultants have seemingly ignored those defects, or don’t even know about them.

It surely wouldn’t hurt the builders to have an experienced eye look at their projects once every year or so, find these short-cuts and ensure their removal within each trade. Perhaps builders could pay some of the screwed-down tradies more to do a proper job without the short-cuts. I’m certain it’ll be a win-win situation.

So it may well be that virtually no legislation changes are actually necessary.

Instead, what we really need are:

  • detailed workmanship clauses in specifications for every trade
  • a few up-graded definitions in contracts
  • revised agreements between builders and ‘tradies’
  • upgraded supervision

That would solve a huge problem and lead to far fewer VCAT disputes! That’s what we all want.

There has been insufficient care for so long that few people seem to know what ‘workmanlike’ really means any more. That is why so many defects occur (and are not discovered) and why ensuing costly arguments occur.

Ask the Auditor General if he thinks workmanship is generally poor.

Add fairer building warranty insurance to the mix, and anyone caught repeatedly ignoring the basics could simply be removed from the industry by the existing authorities, provided they really want fairness.

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Discussions
7
  1. Gaven Gilmour

    Interesting article. I would suggest the decline in the thoroughness of specification writing is related to the who the author is. The rise of D&C, which is the entire project home industry, has the builder writing the specs and determining level of quality. In the private sector it is becoming more common, and in fact the norm, for architects (if one is involved at all) NOT to be commissioned to prepare a full specification, particularly if the builder had influence with the client – "that will only drive the price up!" These words have an impact on a client grappling with feasibility and the procurement process – "how do I select a builder and what will the price be."
    It is becoming more common for an architect's scope of services to be "just give us CC or BA docs."
    I think builders need to have a hard look at themselves and draw a line somewhere on how cheap they go to achieve a client's budget.

  2. Anne Paten

    Mark you have hit the nail on the head! The contracts favor the builders. The specifications are so vague as to be meaningless. As for materials – seconds and non-compliant common, and appalling workmanship. The Guide too is just that – not enforceable, poor, worthless to owners. The building industry is full of 'definitions' that defy the real meaning of words, these explicitly used in stark contradiction to their dictionary meaning. For example, 'warranty', which in building means no warranty; 'contract', which means tool to con-consumers; 'warranty insurance', which means no guarantee of insurance; 'independent', which means, buddy of practitioner and not independent or impartial; 'expert', which means 'hired-gun', friend of builders; 'consultant', which generally means not qualified, not registered and masquerading as an 'Inspector' – this illegal in Victoria! Then the VCAT members ignore the 'Rules of Evidence', far too cosy with the lawyers/consultants, overtly biased, there solely to 'hammer' owners until they are broke and broken. The members have never been made accountable for their deliberate distortion of 'justice' – unfair, partisan, lacking any honesty or integrity.

  3. Bob McPherson

    If you seek advice at Bunnings, they will sell you a water-based primer without asking what surface you are painting. Mark Whitby seems to know his stuff, so I will be more cautious in future and ask for specs in black and white, not fifty shades of grey.

  4. Mel

    Thanks Mark, great article. How many people would build, renovate, or buy with the view to do either of those things if the truth that specifications are meaningless was made known to them? Those trades who strive to do the right thing (yes there are some out there, few as they may be) become disillusioned and get priced out of the industry. Then what are we left with.

    • Mark Whitby

      Yes Mel,

      There are very good tradies out there and also very good builders too; just not the ones who advertise that they are the greatest (apart from Muhammad Ali). But how are the public to know what good workmanship is, when job after job is short-cut in numerous ways by several trades on almost every job… and passed by the building supervisors on behalf of the poor old home owners who know no better if it looks smart. Too bad if the render or the final roof tile pointing coat are way under the minimum requirements of the manufacturers. But yes they do exist still… and what are left of the old fashioned (now) traditional smaller builders are trying to hold onto theirs in a tougher and tougher market where price and not quality is the main thing. When tradies see the next door's house with the short-cuts and they are screwed down too much… it happens.

  5. Branko

    Great article Mark but it does not stop there, actual standard building contracts are defective. Firstly there is no provision for "adjusted contract sum" to exclude provisional sums from progress claims as they should be. Adjusted contract sum= contract sum – provisional sums. It then means that provisional sums are claimed in progress claim stages as percentage of contract sum even though no PS work may have been carried out. So builders get paid for nothing (contrary to DBCA-1995 method for claiming PS) and use owner's money as free overdraft. This becomes significant risk where there are substantial PS. One of my clients paid out over 100K for no work done before contract with the builder was terminated. Guess who was out of pocket?

    Secondly, owners must pay when stage of work is completed even though work may be substantially defective. Where else in the wold would you have to pay for defective work just hoping builder will fix it? There has to be a change in definition to state that building stage is only complete when it is free of substantial defects.