Building & Construction Law FAQ - I am sceptical about signing a building contract - can you help?
Date: March 03, 2011
Q. I am considering buying a house and I have been asked to sign a building contract but am somewhat sceptical about it and wonder whether you can help me?
A. Yes. In general terms there are three types of building contracts in circulation for domestic building projects in NSW. There is the OFT, the MBA and the HIA building contracts all of which have their pitfalls. Whenever a building contract is negotiated the homeowner should ensure that they fully understand what they are buying and what they paying for. In other words you should be aware of whether you are paying fixed price, cost plus, cost plus a fixed percentage, or whether it is on a do and charge basis etc. You also need to be aware of the traps and pitfalls associated with variations and at what stages payments are demanded and whether or not prepayments are required. Obviously builders are there to make a profit but many of them underquote the job to obtain the contract and once they have landed the homeowner the real fun starts which includes a raft of changes and ongoing flow of variations so that in some circumstances the actual contract price can increase anywhere from 25% to 100% during the construction period.
