Earlier this week we talked with Samantha Powers. Samantha entered into a building agreement naively assuming the contract was fair and that she would be protected. She was wrong. In today’s show she gives are more tips on selecting a good builder.
Kevin: Getting back to our conversation with Samantha Powers and the e-book that we’re talking about – and you can get more information on the website, NewHomeContracts.com.au – we are helping you to make sure you choose the right builder if you’re going to go into a building contract. Learn from the experiences of Samantha.
Samantha, earlier in the show, you were giving us some tips on selecting a good builder. You’ve given us one. What’s the second one?
Samantha: Thanks, Kevin. Like I said, there are many tips that you can do, but I’ll touch on another one at this point. The second is to make sure that the liquidated damages are sufficient for your contract.
At this point in time, the standard default rate is about $250 a week, and liquidated damages is just the cost if the builder goes over the contracted time and everything. Now, $250 a week is not much if you are building, say, three townhouses or something like that. If you’ve already drawn 80% of your construction loan, $250 a week is definitely not going to be anywhere near your actual costs.
Making sure that your liquidated damages are not zero and quite potentially quite possibly above $250 is another thing, because that deters them from dragging their heels and going over the contracted timeframe.
Kevin: Do contracts and standards vary much between the states?
Samantha: The contracts themselves don’t. In each state, they rely on different kind of legislation, but the contracts themselves are just an agreement between two parties, so they can be changed depending on what the parties want.
When it comes to the differences between states, there’s different terminology. Victoria has a building survey that issues and occupancy permit whereas New South Wales, they call it something else and they get an occupancy certificate. It’s more terminology differences, but in general contracts, it all comes down to the cost of the project. Over $500,000, you might require a different contract. Under $500,000, the same story.
Each state has small differences, but ultimately you can protect yourself through implementing fairer terms in your contract.
Kevin: Is it as simple as making sure that there’s some kind of performance within that contract, that it has to be done within a certain timeframe, and also, whether or not it should be done at a fixed price?
Samantha: A fixed price contract is never actually fixed because there’s always the possibility that inclement weather could occur or that your bricks might not be available. Fixed contracts are desired but they’re never really fixed. Yes, you can try that, but otherwise, you have to get a good builder who’s going to give you a big overview of what could go wrong, and then it’s not just about having that locked-in price; there are so many more things that you can also do.
Kevin: I know you cover that in some great detail inside the e-book, and it’s called “The Essential Guide to Australian Domestic Building Contracts: Save Yourself Thousands.” It’s available through Samantha’s website, which I mentioned earlier, and I’ll do it again now: NewHomeContracts.com.au.
Just in closing, Samantha, what’s the best thing to do if a project does actually come off the rails?
Samantha: If a project comes off the rails, you need to seek advice from various sources. Each individual state has a place to go or people that you can consult with. For those in Victoria, it’s the Building Commission – they’ve renamed it now. You can go there. But they all have disclaimers that their advice is advice only and they’re not bound by it legally.
Don’t go to your friends and family and ask them. If they have no clue about building and contracts, then you’re going to get some great opinions, but…
If you decide that maybe the building work has not actually reached the stage and you refuse to give a payment, if you are actually in the wrong, then you are liable for costs in the end. You need to do your research, you need to really understand the terms and what your obligations are.
Kevin: It’s all covered, as I said, in that book that’s called “The Essential Guide to Australian Domestic Building Contracts.” It’s been written by Samantha Powers. It’s available on the website NewHomeContracts.com.au. Samantha, we are out of time but thank you so much for sharing this experience with us. I know that it will have helped a lot of people.
Finally, can I ask you, was there a happy outcome?
Samantha: Yes. I finished the house myself, I learned a great deal throughout, and I will do it again.
Kevin: Okay. That’s great to hear. Samantha Powers. That website, again, is NewHomeContracts.com.au.
Samantha, thanks for sharing your experience with us.
Samantha: Thank you for having me, Kevin.