The first task is to get quotes for the work to be done. It's a good idea to get at least three written quotes. To ensure that all quotes can be properly compared, you must provide each contractor with the same information. Describe what you want in writing and attach plans if possible.
Comparing quotes will help you determine what a reasonable price for your job is. You can also get an impression of the integrity and professionalism of each builder or tradesperson. Written quotations should include all work to be done and all materials to be used. It is important that the quotes reflect your specifications or you won't be able to compare prices properly. Check that the prices given are for the materials that you want, not substitutes.
Prime cost items
Consumers often find cost overruns when it comes to prime cost items (also known as PC items). A PC item is one that the consumer hasn't specifically selected at the time of the contract but the builder or tradesperson has made an allowance for it in the total price. Builders or tradespeople may give quotes using the cost for the cheapest model or type available on the market. The real cost will be greater when you later choose better quality items. So, try to do your homework carefully and check all items before you get the quotes.
For example, let's say that you are renovating your bathroom. The contract may simply provide for the supply and fixing of taps for the bath. These can be a prime cost item and the tradesperson may quote you for the cheapest taps. However, if you decide to fit more expensive taps, the contract price could increase significantly.
When asking for a quote, you should provide details of the items you want, including model numbers, brands and style of the fittings, appliances, and tiles so that the builder or tradesperson can give you a much more accurate quote.
Note: Quoted prices can vary considerably from one builder or tradesperson to another for the same work. Apart from quote prices being too high, you should be cautious about quotes that are significantly lower than you expect. Omissions or errors in a quote could end up costing you more in the long run.
Once you decide on a quote, the written contract you sign must contain the following:
- The date it was signed by both you and the builder or tradesperson.
- Your name and the address of the premises being built or renovated.
- The name and licence number of the builder or tradesperson that appears on their contractor licence card.
- A sufficient description of the work to be carried out, and any plans and specifications.
- The contract price that must be prominently displayed on the first page.
- A warning if the contract price is subject to change.
- No arbitration clause (any such clause is void under the law).
- The statutory warranties about the work, the materials used, compliance with the law, completion time, and fitness for intended purpose.
Note: The contractor must give you a copy of the contract within 5 working days of signing the contract. If the contract value is greater than $5,000* a certificate of home warranty insurance must also be given to you before work commences.
- This value will change in different states, check with the appropriate authority to confirm the amount regarding contracts.
Breach of Statutory Warranties
Proceedings for a breach of Statutory Warranties must be commenced within 7 years from:
- The completion of the work, or
- If the work is not completed, the date for completion, or if not given, the date of the contract.
Make sure you pay no more than the maximum allowed deposit as set down by law. For building work where the contract price is $20,000 or less the maximum deposit payable is 10% of the contract price. Where the contract price for the work is more than $20,000, the maximum deposit payable is 5% of the contract price.
Building contracts should provide for payments to be made for work completed, not time on the job. The dollar value of progress payments for each stage of work should equate to the value of the work done. Your lending authority will probably have its own requirements for stages of work and progress payment. Usually, the lender's valuer will advise when each stage is completed before your lender will release the next progress payment.
Home Building Contracts
You may be able to obtain a draft contract from a builders association or fair trading office. Contracts drawn up by these bodies are written to help consumers and builders avoid disputes. Legal language can often be difficult to read and understand, the contracts provided by these bodies should be easier to understand. Contracts should clearly set out your rights and responsibilities as well as those of the builder or tradesperson in simple everyday language. The contracts help homeowners or renovators and builders or tradespeople begin their relationship on a solid foundation.
- You have the right to request changes to the contract before you sign it.
- You should not sign a contract if you're not happy with it.
- It's best to get some independent legal advice before you make a change in the contract or if the builder or tradesperson has amended a standard contract or included any special conditions.
Note: You must not sign a contract that does not meet all of the preceding requirements.
You should be wary of the following:
- A builder or tradesperson who encourages you to sign a contract quickly to avoid a price increase. This is usually just a sales pitch.
- A builder who suggests you obtain an owner-builder permit, whilst they do all the building work for you. This may be a ploy when the builder is shirking responsibility or is not appropriately licensed or cannot get home warranty insurance. If you become an owner-builder, you take on added responsibilities and place yourself at greater risk if the work is not done properly.
To protect your interests, it is a good idea to have your own representative, such as an architect or building consultant, inspect the work to ensure that all the work has in fact been done according to the contract documents and meets the appropriate standards.