As regular readers will know, I consider that the standard domestic / residential building contracts are very unfair to owners / developers. Many examples of this are set out in past newsletters. You can access a recent newsletter with 5 examples by clicking here.
However, working with a client recently, I came across a new one that is a ripper!
The Problem
The client had signed a standard MBA (Victoria) domestic building contract. The client had been unhappy with the builder’s workmanship for some time. Complaints about defects to the building surveyor had achieved nothing as the surveyor did a lot of work with the builder – and presumably didn’t want to get the builder off side.
The builder belatedly announced that construction was complete. This was despite the client’s independent building inspector identifying a range of building defects which would cost an estimated $50,000 to rectify.
The builder also announced that as construction was complete liquidated damages (at the inadequate rate of $250 per week) would no longer apply!
Was this right?
The Definition of Complete
The MBA Contract provides:
Completion is in turn defined to mean:
Naturally, the builder argued that the Works have been completed in accordance with the Plans and Specifications AND and an Occupancy Permit had been issued.
Hence the builder argued that liquidated damages no longer applied – despite the fact that the client couldn’t move into their new home and substantial works were still required to rectify the manifest defects.
This certainly didn’t match the client’s idea of what ‘Completion’ should mean.
Clearly, this isn’t an argument you want to have with a builder. The definition of ‘Completion’ needs to be amended to ensure compliance with all relevant building standards and regulations is required. It also needs to be amended to ensure that Completion only occurs once the defects raised at the final inspection are remedied.
Advice
For this reason and many more – when presented with a domestic building contract I believe you need independent legal advice.
Builders are very good at pressuring owners to sign contracts quickly and presenting the standard HIA / MBA domestic building contracts as somehow being unable to be amended.
The truth is that these contracts are prepared by the Builders’ Associations to serve the interests of the builders. If something goes wrong, many owners will find themselves between a rock and a hard place.
Lewis O’Brien & Associates offers fixed price building contract reviews for the standard domestic building contracts. There include:
- A formal written review of your building contract;
- Our recommended special conditions to restore a sense of fairness; and
- A 30 minute zoom consultation with me to answer any questions you have about our review, the special conditions of the contract generally.
If you are looking for a more cost effective option:
- You can purchase our recommended special conditions from our website here; or
- You can book time to speak to Lewis about your contract here.
If you aren’t thinking of signing a building contract but know someone that is please share this article with them.
Lewis O’Brien
Your Preferred Property Lawyer