How to Deal with Your Building Company

How to Deal with your Building Company

So, you have signed up with a large building company, such as Metricon or Plantation - what were you thinking?

This document reflects our personal experience of building a new home, and the suggestions are based on that experience. It is not legal advice. The rules differ between states, and the examples here are from Victoria.

If you are moving to Australia as well, see So, You are Moving to Australia!

1. Who can you trust?
2. Before you sign
3. The contract is all that counts
4. The payment schedule favours the builder
5. Are the standard packages any good?
6. Watch out for "No Longer Available"
7. Extensions of time
8. What happens on site?
9. Get your own inspections
10. Record everything
11. Leave out the light fittings
12. Leave out the curtains and blinds
13. Leave out the wardrobes, cupboards and whiteware

1. Who can you trust?

   You cannot rely on what anyone tells you, not the salesman and not the selections staff. Whatever they said can get silently overridden by their bosses and you will never know.

   Going to the top did not help us either. The senior customer care and building managers did not resolve our complaints. They just delayed things until it was too late for us to act.

   Advice :

   If it matters to you, it must be in the contract. What anyone said to you does not count.

2. Before you sign

   The contract is heavily in favour of the builder. It was written for them, and you will only be able to change it before you sign.
   Advice :
   • Have a building lawyer read the contract before you sign it.
   • Know your cooling-off period. In Victoria it is five business days after you sign [1].
   • Check that the company's building insurance is in place before you pay anything. In Victoria, it covers up to $300,000, for structural defects over 6 years and other defects over 2 years [2]. It only applies if the builder dies, disappears or becomes insolvent.
   • Find out who your state regulator is before you need them.

3. The contract is all that counts

   When it comes to the crunch, it's what they got you to sign in the contract. What was there before can be removed silently, so read it again in full every time it comes back to you.
   Advice :
   • Examine the contract every time.
   • When you are unsure what the contract means, do not trust what the staff say. Annotate the contract with what you think it means.
   • Do not use DocuSign to sign the contract. Print it out, annotate it madly and sign that. For example, if you see a model number for a tile, write next to it what it is supposed to be.
   • Have the company initial every annotation and every crossing out, and keep a copy. A note that only you have signed may not bind them.
   • Any change after signing must be in writing and signed by both you and the builder [3]. Get this done before the work starts, with the cost and the new completion date.
   • Avoid provisional sums and prime cost items where you can, as this is where the price grows. Specify the make, model and colour in the contract, so that the price is final [4].
   • Check the daily amount that the company must pay you if it finishes late.

4. The payment schedule favours the builder

   You pay in stages. This is the standard schedule in Victoria for a complete house [5][6] -

   • Deposit : 5% (total paid 5%)
   • Base : 10% (total paid 15%)
   • Frame : 15% (total paid 30%)
   • Lock-up : 35% (total paid 65%)
   • Fixing : 25% (total paid 90%)
   • Completion : 10% (total paid 100%)

   Draft regulations in Victoria would change the earlier stages, but still leave only 10% for completion.

   So you pay a deposit before any work starts, and you have paid 90% by the end of the fixing stage, while the house is still not finished.

   After each payment, we looked at the work left to do. If the company had gone bust at any stage, what we still had to pay would not have been enough to finish the house. We were their line of credit.

   The final payment has to be made before handover, because the company will not hand over the keys until you pay. So you have no leverage afterwards. The final payment should really be a month after handover.

   Advice :
   • Never pay ahead of the schedule. Insurance may not cover work you have paid for before it is done [6].
   • Before each payment, check that the stage is really complete. Have your inspector confirm it if you can.
   • Ask for the contract to be amended so that the final payment is due a month after handover.
   • If they refuse, get defects listed and fixed before you make the final payment, as you have no leverage afterwards.

5. Are the standard packages any good?

   Do not accept their standard packages on Solar, Security and Air Conditioning. In our experience they are ridiculously impractical and not industry standard. Their security system would not be acceptable to insurance companies in other countries. The air conditioning installed for us was worse than what we had installed 26 years ago!
   Advice :

   Stand your ground. Get a quote from a specialist, so that you know what you should be getting and what it should cost.

   For solar, see How To Select Your Solar Power System.

6. Watch out for "No Longer Available"

   Several times, we were told that something was no longer available and were offered an inferior replacement for no extra cost. Every time we checked, the original was still available. It was not even end-of-line.
   Advice :

   Check with the manufacturer or supplier yourself before you accept any replacement.

7. Extensions of time

   The contract will allow the company to claim extensions of time. Christmas holidays should not be one of them, because they are entirely predictable. The HIA's own guidance to builders is that they generally cannot claim for delays they could have reasonably predicted before entering into the contract, and it gives the Christmas shutdown as an example, unless other delays pushed the work into that period [7].
   Advice :
   • Cross out Christmas holidays from the extension of time clauses, and have the company initial it.
   • Keep a record of the days when there is no one on site. Use it to dispute extensions of time.
   • Reply to every extension of time claim in writing and quickly, as you may have only days to dispute it.

8. What happens on site?

   We found that the site manager's job is to save money, not to finish on time and not to finish to a good standard.

   In our experience, the quality inspections seemed aimed at concealing defects rather than building a quality product.

   Advice :

   Check everything that is going on, such as the insulation, tiles and wiring.

9. Get your own inspections

   Construction goes through 11 or more stages. Once a stage is covered up by the next one, you will not see what is underneath.
   Advice :
   • Ask for the contract to be amended so that you can visit at each building stage, before the next stage starts.
   • Hire your own registered building inspector, not a real estate agent, for Practical Completion. This is your last chance to get defects listed.
   • If you can afford it, have them inspect the stages of the build as well.

10. Record everything

    Photograph everything for future reference. Record every stupidity and defect in photos and on video. For example, we had a flapping window that broke off in a storm.

    The photos also help with your house insurance. See How to Deal with Your Insurance Company.

11. Leave out the light fittings

    Light fittings supplied by the company can cost 4 times the retail price.
    Advice :
    • Ask for batten holders (plain lampholders that take a standard bulb) at every light point instead of light fittings.
    • Make sure the wiring and switches for every light point are still in the contract.
    • Buy your own fittings later, and allow for a licensed electrician to install them.
    • Before you buy LED fittings, see Are LED Lights Green ?

12. Leave out the curtains and blinds

    Curtains and blinds from the company also cost far more than they should. We had said no batteries (that is, mains wired) and wall switches. We got rechargeable batteries and remotes.
    Advice :

    Get the company to rough in the power for the blinds and curtains. Then engage a specialist for the actual installation. You will get a better, cheaper product that will actually do what you want.

13. Leave out the wardrobes, cupboards and whiteware

    The same applies to wardrobes, cupboards and whiteware.
    Advice :
    • Omit them from the contract if possible. If not, let the company install the basic ones and have them improved or replaced by someone else afterwards.
    • Get the company to provide the plumbing and wiring needed for the whiteware, strip lights and so on.
    • If you are borrowing, ask your lender first whether leaving items out affects the loan.

A Step-by-Step Process to Deal with your Building Company