How To Ensure Your Building Contract Is Iron Clad, So You Can Enjoy Your Building Process With No Risk Of Extra Expenses Or Surprises

In the excitement of designing and building your dream home in the Mornington Peninsula – creating the exact floor plan you’ve always wanted, choosing colours, and selecting all your fittings and finishes — it’s easy to overlook the importance of your building contract.

While you should trust your builder to deliver on their promises, it’s still critical to have everything in writing so there are no misunderstandings or unexpected surprises or disputes. As the saying goes, “Trust but verify.” 

In this article, we’ll discuss how to ensure your building contract is ironclad, so you can enjoy your building process with no risk of extra expenses or surprises.

 

Prime Cost and Provisional Sums

Your building contract may contain terms like Prime Cost (PC) and Provisional Sums (PS). PC allowances provide a specific budget for items like appliances, taps, and lights. This is the set amount you have for each specified item. If your selections exceed this budget, you will need to cover this additional cost. On the other hand, if you spend less than the allocated amount, you will receive a credit. 

PS allowances are estimated amounts for things that may not be fully defined when you sign your contract. This can include things like excavation for site preparation, structural elements that are still being finalised, and the connection of services like power and water. 

While PS allowances may offer flexibility (especially for items that suffer price volatility like framing timber/steel), they can also present risks, because the final costs may be more than the initial estimates, leading to budget overruns and disputes.

Where possible, it’s good to limit the number of PS items in your contract. And when your contract does include PS items, be sure to understand the potential scope of extra costs.

 

Everything Itemised

No matter what your builder has promised, if it’s not in your contract, you should not expect to get it. 

Everything needs to be in writing. EVERYTHING. From preliminary items like soil testing, contour survey, and council searches. Through to demolition or building permits. And every single item in your house (including tiles, taps, and toilets). 

I repeat: If it’s not in your contract, you should not expect to get it. 

  

Exact Specifications

De-specking is a growing practice among builders. This is where categories of inclusions are listed in a contract without the exact specifications, allowing builders to substitute lower-quality items or finishes, thereby reducing the cost at estimation stage and presenting a seemingly lower price. And because it’s not fully specified in the contract, there’s nothing the homeowner can do about it. 

For example, your contract may list: Caroma Duel Flush Toilet. But when you look at a Caroma catalogue, you’ll see there are dozens of Duel Flush toilets. And the difference between the cheapest and most expensive is more than $1,000. If your contract doesn’t list the exact model you have chosen, your Mornington Peninsula builder may install a different (and cheaper) model than you wanted. 

The devil is in the detail. For example, the inclusion of a ‘fence’ in your contract is not nearly detailed enough. The contract must include a full description including the design (how it will be built and what it will look like), position (where it will go), dimensions (height and length), and the exact building materials (timber, steel, or other). 

This applies to every single aspect of your home. A contract that merely lists the colour of your paint is insufficient. It must detail the brand and how many coats of paint. And when it comes to appliances, your contract must list the exact models so they can’t be swapped.

 

Payment Schedules

Take note of the payment schedule outlined in your contract, especially if it strays from standard industry practices. Confirm this payment schedule with your bank to ensure compliance and avoid any potential issues with financing. Banks generally prefer standard payment schedules and may raise concerns if your builder asks for anything out of the ordinary. 

 

Lawyer’s Opinion

If your Peninsula builder has their own custom contract (rather than a standard Industry Contract), it’s a good idea to have it checked by a lawyer. A contract doesn’t mean much until something goes wrong. Then it means everything. So it’s worth having an expert double-check your contract before a misunderstanding or dispute arises. 

 

A Free Guide for Building Your Dream Home in the Mornington Peninsula

As you can see, an ironclad contract is essential for a smooth and stress-free building process. 

Yet there’s much more to know. That’s why I’d like to invite you to download our practical guide to building your custom dream home in the Mornington Peninsula. 

It’s based on our twenty  years of experience specifying contracts (for the homes we’ve built) and will help you avoid mistakes that can cost you thousands. 

0/5 (0 Reviews)
Posted in
Richie Ferri

Richie Ferri

Richie has 20 years experience in the construction industry. As well as being a licensed builder, Richard is also a qualified carpenter with a dedicated eye for detail. Along with Richard’s extensive experience in the industry, he has also developed processes to ensure the construction runs on schedule, the final product is at a high standard and your home is built to last.
Scroll to Top
Call Now ButtonDOWNLOAD FREE GUIDE