Law Clarified
Law Clarified
Ep 2: Owners Hour - Building Contracts
Hi Queensland property owners!
In this episode: we discuss the things that you need to think about when you receive your building contract and how to navigate the language, what your obligations are and what you should consider. We discuss the laws around requesting and approving variations, the difference between prime cost and provisional sum items under a residential building contract and provide tips on how to avoid potentially costly misunderstandings and miscommunications with the builder.
Building or renovating a home is a huge financial and emotional investment. We want to make sure you have everything you need to take away some of the stress or worry with building or renovating your dream home.
Got some thoughts on today's episode? Please join our conversation on our Instagram page @hearthstonelegal.bne
Check out our website: https://www.hearthstonelegal.com.au/
Send us an email: law@hearthstonelegal.com.au
Thanks so much for listening!
**DISCLAIMER: Please note, topics discussed in this podcast are for general information and entertainment purposes only and do not constitute or seek to replace legal advice and should not be applied to your individual circumstances. If in doubt, please seek qualified legal advice***
Hi, everyone. Welcome to episode two of our owners hour, season two of law clarified today. We're gonna focus on contracts and give you some of the top tips and pitfalls that we see in our daily job and give you some information to help you think about how you might navigate those things moving forward, um, with your new build or renovation project. So let's get into it.
Speaker 2:Half stone legal presents, a real talk of the good, the bad and everything in between for all things, business and construction law, whether it's navigating a dispute, the Q BCC or guidance on a contract, we give you a rundown of some of the dues and the don'ts. These are digestible chats on topics that you might hear in our office of an afternoon. Daunting, not anymore. Here's law clarified. Okay.
Speaker 1:Hi. Hi Kelly. Hi. Hi Marty. Hi, back for episode two, back for episode two.<laugh>. So in the last episode we gave some people, I guess, some high level things to think about when they're considering building or renovating today. I wanna move forward to the you've actually got a contract. There's a contract there's you've, you're happy with your builder. You've checked them out. You wanna move forward with this exciting new relationship? Um, you've settled on some things in terms of your build or your re project, and now you've got the contract. Yeah, they, the builder sends you your contract. Yeah. It can be a bit scary. Can be very scary. The contracts long they are. And sometimes they use a lot of words in terms that are, that can be confusing. Yeah. Especially if you've never built or renovated before. Yeah. It, it, it has its own language and it's overwhelming to have to sit down and read a 30 page page contract. Yeah. Very overwhelming. Um, should clients just sign that? Oh,<laugh>, It'll be right. It'll be right. Uh, sign it without reading it. If you're willing to spend a lot of money on lawyers. Yeah. If you've got the budget for lawyers, just, yeah, just sign it. Blindly. Just go. Just jump on in. Just jump in please. Don't please. Don't we don't recommend that. Please. Please read it. Yes. And even better. Please take the time to get a precontract advice. Yes. It's a little bit of money from a lawyer. You mean from a lawyer? Yeah. Not from your mate who has read a couple of contracts before from a lawyer who is a construction lawyer because construction contracts are quite specific. Mm-hmm<affirmative>, it's not just your everyday contract. It's quite specific. There's a lot of legislation that works around it. Um, there are things that are very particular to construction contracts. We at Hearthstone legal and I'm sure a lot of other firms do this as well, but we do offer a fixed fee pre-contract advice to people so that they understand what to expect before they signed the contract. What they should look out for, what they should be aware of, what to expect during the project. And then what happens when the work is done, mm-hmm<affirmative> um, and some people, we get it, budgets are tight, you know, you don't necessarily want to, or you don't think you need to spend money on a lawyer, but I can tell you from my experience, and I'm sure you are the same Kelly. You've been doing this for a long time. Being informed at the start, arms you with the information that you need as an owner moving forward so that you have eyes wide open about what's gonna happen in this project.
Speaker 3:Yes, exactly.
Speaker 1:And where can go horribly wrong. Yeah.
Speaker 3:Where the, where the pain points potentially
Speaker 1:Might be and how to deal with those pain
Speaker 3:Points and what to happen, what to do if something happens yes. That you're not expecting. Yeah.
Speaker 1:And, um, it's not a short contract advice. It's it's in excess of 10 pages.
Speaker 3:Our, our contract advices are precontract advices are quite
Speaker 1:Yep. We
Speaker 3:Involved, I don't know which
Speaker 1:Quite ironically is
Speaker 3:Quite long.
Speaker 1:And we're saying to people, oh, you're having difficulty understanding, or you want a better understanding your 30 page contract. Let us give you another 10 pages.
Speaker 3:I think we do a really good job though, if I can say so myself, of
Speaker 1:Course,
Speaker 3:At breaking down those really complicated building terms and clauses and explaining them in a way that actually makes sense.
Speaker 1:Yes. In normal
Speaker 3:Language, normal language in that way, we're kind of your interpreter. Yeah. Your contract interpreter.
Speaker 1:Yeah, absolutely. Absolutely. So, um, some of the things I think that can really go wrong is people don't focus on the importance of getting things in writing. Mm.
Speaker 3:Yes. Well, that was a big
Speaker 1:Grown<laugh>. Yeah. Well, it's true. Right. It's very
Speaker 3:True.
Speaker 1:It's part of
Speaker 3:The
Speaker 1:Problem. It's part of the miscommunications that we see.
Speaker 3:Yeah. It, it, it really is. And you know, I I'm, I'm hoping this doesn't sound like I'm really resigned and cynical. It it's not meant to, but go are the days where you can just have a conversation and shake someone's hand on something. Those ways of doing business and reaching agreement are gone
Speaker 1:Long, gone,
Speaker 3:Long gone. Someone can shake your hand and turn around and do something completely different. But if you haven't captured those negotiations or those, those agreements in some kind of written form, even if it's just an email, mm-hmm,<affirmative>, you're in a, your word against their word situation, that's expensive to resolve.
Speaker 1:It really
Speaker 3:Is potentially. Yeah.
Speaker 1:Because time passes, you've both had a hundred other conversations since then. And then you have to go back to this one moment in time where you had a conversation about a window or a kitchen bench or,
Speaker 3:Or a frame,
Speaker 1:Something or something that's right. And your recollection of that conversation might not be as good as you think it
Speaker 3:Is. Exactly.
Speaker 1:The builder might have promised something or, or you heard a promise about something, all of a sudden it hasn't happened. Well, it's gonna cause an issue.
Speaker 3:Yeah. Potentially. Yeah. A very expensive time consuming yes.
Speaker 1:Issue. And one of the things that we see particularly around not getting things in writing is issues with variations in building work.
Speaker 3:Mm. Variations. Yep.
Speaker 1:Yeah. Yep. Um, so we talked a little bit briefly in the first episode about fixed price contracts. Yep. And most contracts have a fixed price component. There are then things that can change the price of that contract. One of them is variations. Yes. Because you decide, I don't want that thing. I saw this other thing on Instagram and it's way more beautiful
Speaker 3:Or I'm watching the block. Yeah. And I'm really liking that wallpaper<laugh>
Speaker 1:Or I saw this amazing bath and I've gotta have it. It
Speaker 3:I've gotta have that bath. That's
Speaker 1:A variation. Yeah.
Speaker 3:Yeah.
Speaker 1:And that's more than likely gonna increase the cost of your contract price
Speaker 3:More than likely. Yeah.
Speaker 1:But it's cool if I just ask the builder, oh, can you get that lion claw bath instead of that other bath? And the builder says, yes, that's cool. Right.
Speaker 3:Please get it in writing.<laugh> yes. Get it in writing, get it in writing. And it's actually in Queensland, it's actually a legal requirement that variations are in writing. Yeah. And signed by both parties. Yeah. And agreed upon within certain timeframes.
Speaker 1:And it's so important. There's even standard forms that can be completed that go with each particular contract to make sure that everyone complies with
Speaker 3:That. Yeah. That, that's how important it is.
Speaker 1:Mm.
Speaker 3:To get variations in writing. Yeah. Get them signed, get them agreed. Yep. Before the work is done. Yes. The only exception being, of course, if something urgently needs to be done, but if it's super urgent, even in those scenarios, text messages, mm-hmm,<affirmative> emails, a written record of some kind is absolutely imperative.
Speaker 1:Yes. It's better than an oral conversation.
Speaker 3:It's better than a conversation in the heat of some urgent situation that gets resolved and then forgotten. And then you get a bill for five or 10 grand and you go, what?
Speaker 1:Yeah. Yeah. Especially as an owner, if you have a budget and you have a builder who may not be great at paperwork, you're having conversations. Yep. Let's do this instead. Let's change that. And you think, oh, oh, this just, just seems to be happening. This is great. And then you get part way through the build. You get to a progress stage and you receive an invoice that has all of these extra costs on it that were never discussed with you. And you've never signed off on guess what? You're gonna get into a
Speaker 3:Fight. Yeah. It's going to cause an issue.
Speaker 1:Yeah. And also as a homeowner, I think you want to have certainty about those things. Oh, I would
Speaker 3:Mm-hmm I would. I, I'm not a risk taker. Yes. I wanna know. I wanna know things like what's this gonna cost me? When's it gonna be done? Yes. How is this decision gonna impact
Speaker 1:The project?
Speaker 3:The project. Yeah.
Speaker 1:And for those listeners who listened to our toolbox Tuesdays series, we had 10 building commandments mm-hmm<affirmative> um, and two of them related to variations, which was get them in writing and get them signed mm-hmm<affirmative> so very important. Another thing ke we talked about in the first episode was having some expectations around when is my job gonna be finished? And the majority of contracts either have a date for practical completion, or they have a method of calculation for that date for practical completion. But sometimes stuff happens. Yeah.
Speaker 3:Things happen
Speaker 1:Sometimes there's delay with getting the tiles that you want cuz they're coming from Italy.
Speaker 3:Yeah, exactly. Um, there could be delays in time, as you mentioned, if you're building or renovating in Queensland, summer cyclones storms can come through. Yep. Whe weather delays are very common
Speaker 1:And complicated
Speaker 3:And complicated and they're not events that the builder can foresee. Mm-hmm<affirmative> when the contract is signed. So these are events that could impact the time it takes for the builder or the renovation to be completed. And the contracts will have a process that the builder needs to follow to claim an extension of time. Mm. An extension of the time to complete the project and owners need to be aware of the circumstances in which the builder can lawfully and rightfully make those requests absolutely. And how they make those requests.
Speaker 1:Yes. Uh, there's two really important elements. Isn't there there's the basis upon which that request can be made mm-hmm<affirmative> and as an owner, you should absolutely read through those, make sure you understand what they are,
Speaker 3:You spread your contract. The contract will tell you.
Speaker 1:And the second thing is how the builder makes that claim for an extension of time and what you as an owner are required to do in considering it exactly. And what the consequences
Speaker 3:Of that are and, and the timeframes to resolve that. And the consequences, if there is, or isn't an agreement about an extension?
Speaker 1:I think one of the things we're seeing is because of the lay of the land in the industry at the moment, um, it's not just a lack of, or a delay in supply of materials. It's also a delay in actually getting labor,
Speaker 3:Labor, labor,
Speaker 1:Shortages, um, and a lot of people I think just expect while my house is getting built, there should be people there doing it. But those people who are subcontractors, carpenters, tiles, plumbers, um, those people sometimes aren't available.
Speaker 3:Yes.
Speaker 1:And, and what do you do in that situation? Kel?
Speaker 3:Well, you could scream at your builder about it. Yeah. You know, and complain furiously about not having your materials or your, you know, guys on site
Speaker 1:Cause a big drama. It's
Speaker 3:Probably not going to be the best way to approach the situation, but
Speaker 1:What's the most constructive way to communicate your frustration.
Speaker 3:Not if you wanna avoid<laugh> a dispute, a formal dispute. Exactly. Perhaps I can recommend this. Yes.
Speaker 1:A more sensible approach.
Speaker 3:<laugh> well, yeah. Yes. My recommendation would be if you are receiving requests for extensions from your builder and you are worried about it, like if you are receiving an extension, for example, for wet weather and it hasn't been wet mm-hmm<affirmative> or, you know, you've received a couple of requests for an extension because of material or labor shortages. If you're worried about it, talk to a lawyer about it, talk to a lawyer about it and come up with a plan for how to navigate through that issue. Mm. Um, and we would, we, we would be more than happy to have a conversation with somebody to work out a plan for navigating that through, to avoid a miscommunication or a misunderstanding so that the project can move forward and finish. And I'd much rather that for somebody than to, you know, scream at their builder or, or just sit with that worry. Yes. Take action. Seek legal advice, have a conversation, come up with a plan, work out where you stand legally under the contract and get some advice about that. And I'm, I'm certain that with some guidance, with some advice you can navigate through that and finish the project so that you are moving in to your new home or your renovated home and it works out yes. Works out well.
Speaker 1:Yes. And that's where lawyers can be really helpful. Not all lawyering is about going into court and yelling out object,
Speaker 3:Shaking your fist
Speaker 1:Wearing,
Speaker 3:Although we're very good at it. And we do, yeah, we like this. This is a podcast, but I'm literally shaking my fist.<laugh> um, no one can see that<laugh> and
Speaker 1:Just going off the extension of time, if you're worried about it, if you drive past your site routinely couple of times a week to just, you know, check the progress nothing's happening. No one's on site. Nothing's changed. You've made some inquiries with your builder and you're not getting any responses and you are getting concerned again, as Kelly mentioned, pick up the phone, give your lawyer a lawyer, us a
Speaker 3:Call
Speaker 1:<laugh>. And just talk through that concern. Because the thing that we find, and we, this is something that we also say a lot in our podcasts, and we'll say many times is get advice early. Don't bury your head in the sand. Don't send emails that get progressively angrier and angrier. If you have a genuine concern, even if you think that it might be a silly question, just pick up the phone and talk to someone. Yeah. Because getting that advice early, getting armed with some information about what your options are, will make things less difficult.
Speaker 3:Yeah. And oh, I said this before, but I I'll say it again. Lawyers can help you come up with a plan. It doesn't mean that lawyers, all of a sudden start writing aggressive letters. Mm. You know, I mean, that could be a strategy, but you could go to a lawyer and just talk through a plan, have some clear steps. If they need to draft something for you or communicate something for you, the pros and cons of doing that'll be discussed and worked out. But most times after a conversation or two with a lawyer, things will get worked out. If it's worked out early. Yes. Before things escalate to what I call the point of no return. Yes. Where the relationship or the communication is just broken down to a point where is no return. Yeah. And where you are going is the tribunal or the courts.
Speaker 1:Absolutely. And then we will be doing the, and
Speaker 3:Then we will be shaking our fists. Yes. And sending aggressive letters. That's right. No we won't. Or maybe sometimes<laugh>
Speaker 1:But only on a Friday afternoon. Yeah.
Speaker 3:That's the
Speaker 1:Best time to send them. So take action early. That's the message that we've taken from that portion of the discussion. I wanna loop back ke one of the things that we cover extensively in our precontract advice, um, is variations. And we've talked about that a little bit in the first episode, a little bit. In this episode, you have a fixed price contract. There are, what, what is termed prime cost or provisional, some items in that contract. Now, some contracts don't have them. Some contracts have a lot of them. Some contracts have a few depends, which contract you, your builder prefers to use and what sort of packages they offer. I know lots of builders offer, um, you know, all inclusive packages,
Speaker 3:Turnkey,
Speaker 1:Turnkey packages
Speaker 3:Might have heard the term turnkey,
Speaker 1:You know, is
Speaker 3:Literally what it means. They build your house, you turn the key. That's
Speaker 1:Right. We're checking in some platinum package or something like that. That has a fancy name. And you get the choice of ducted air conditioning, or I don't know, heated towel rails or some something there's, you know, things that get put into the package. But often even in those packages and I come back to my absolute favorite example, which is tiles tiles, the tiles, the, the fixtures and fittings, whatever they might be, they might be from a particular range. Mm-hmm<affirmative> um, you might not like anything in that particular range and that's okay. But if your tiles and your fixtures and fittings are a prime cost or a provisional sum item, and let's say there's an allowance of$10,000 for those things. And you go into the tile shop when you're making your selections and you fall in love with this beautiful etched Italian tile that some shirtless stone Mason has created. Sounds
Speaker 3:Really dreamy. I want some of those tiles
Speaker 1:And you just, you just can't live without these tiles in your bathroom. So you can have this beautiful dream while you're relaxing in the bath. You need to understand that that's probably gonna cost you some extra
Speaker 3:Yeah. Premium tiles will cost you more. Yeah. Potentially than what the builder has costed or provided
Speaker 1:For
Speaker 3:That's right in the contract. And
Speaker 1:There's a mechanism in the contract to allow for increases in those costs, which mean you homeowner, you're gonna have to pay for that.
Speaker 3:You have to pay for them.
Speaker 1:But if you decide, you know what, I don't need that fancy gold plated tap. I, I just really like this plain silver tap mm-hmm<affirmative> then you might also be entitled to a credit back. Yeah. It's not gonna cost a thousand dollars. It's only gonna cost 200 mm-hmm<affirmative> cause you got it from, you know, on sale. Great. There there's a mechanism to credit back under the contract as well. Mm
Speaker 3:Yep.
Speaker 1:Those things. And, and I talked about this, you might recall in our toolbox Tuesdays series from a builder's perspective, but from an owner's perspective, it's really important to remember, or to be aware of the fact that a change and I'm using the word change very purposely a change in the cost of a prime cost of provisional, some item tiles, you know, carpets and carpets,
Speaker 3:Anything, another example, whether
Speaker 1:It's up or down, that is just an adjustment to the contract that happens if it goes over because you pick something more expensive, you don't get to get into an RG bargy about that. It is what it is. You
Speaker 3:Choose it, you pay for it.
Speaker 1:Absolutely completely different to a variation mm-hmm<affirmative> and it's a really important distinction. Mm-hmm<affirmative> I know some builders often present to their clients, excuse me, a, a, a change in a prime cost or provisional sum item or allowance as a variation. That's really confusing. It is. And as a homeowner, we really encourage you to understand what the difference is and be really clear about what is an actual variation to your contract and are you liable to pay for it and an adjustment really, and adjustment because you've made a choice. That's either given you some money back or is gonna cost you a little bit extra, can be really, it's a bit unclear. Sometimes I think
Speaker 3:It is. And I, I might be oversimplifying this concept of variations versus prime cost and provisional, some items a bit too simply, but sometimes the way I think of it in my head is there's a difference, a, a variation in my mind is a change to the scope of the project. Mm. So it's extra work or work being taken out of the scope of the project. Yep. That's a variation. Yep. Um, and an example, uh, might be, um, maybe your original contract didn't provide for the construction of gardens mm-hmm<affirmative>, um, or driveways, um, on your new home. And some, some builders, some owners like to do that, work themselves through other trades at the end. Um, but during the course of the build, maybe as a homeowner, you decide, you know, yeah. I actually do want some gardens and builder. Can you do that? Uh, and the builder will say, yes, I can. That's a variation because it's extra work beyond what I originally scoped in my contract versus a prime cost or provisional sum item where tiles and carpet are very common examples of that your contract to build or renovate your home may always say that the builder's gonna tile your bathroom. Yep. And your kitchen. Yep. Um, but what he can't cost at the start of the project is based on what you choose, that's a selection that comes at that particular point in the build.
Speaker 1:Exactly.
Speaker 3:Um, and that is, um, the prime cost or the provision that's made. There's a provision made for a thousand square meters of tiling. The actual cost of that though, is worked out when you choose the actual tile that you want used. So that's how I kind of try and work out the difference yeah.
Speaker 1:In my mind. And, and can I say, oh, that's a really excellent way to think about it. I don't think it's over oversimplifying it. Oh, good few. Because I think<laugh> as lawyers really it's our job to make things straightforward and understandable. We could spend pages and pages writing about the complexities of, of these sorts of things. And we could Chuck in some Latin and use big words<laugh> but who's gonna understand intera. Oh my gosh. It's so unnecessary. When we talk to people, we wanna explain things in a way that is practical and understandable. And that example is fantastic. That that's a really just straightforward, sensible way to look at it. You can understand it. It makes sense. Okay, cool. I, I now get it. I get it. And that's really important. That's what we try to do in our contract advices is really just bring it back to normal concepts that are understandable and, and clear
Speaker 3:Mm-hmm<affirmative>. Yeah, yeah,
Speaker 1:Yeah. So, no, I, I really like that example. Oh,
Speaker 3:Thank you. Yeah. Thank you very much.
Speaker 1:So I think really, um, we've covered a lot. We've covered a
Speaker 3:Lot. In this episode,
Speaker 1:We have lots
Speaker 3:Of tips
Speaker 1:And the pitfalls, the pressure points where things can go wrong, how you can plan to not necessarily avoid those things. Cuz sometimes they're unavoidable, but to know how to deal with them, if they come up and as always get advice early, no question is a stupid question. If you have a concern, trust your instincts, have a chat with someone, pick up the phone to us, see what your options are. You might not need us. You might either way, at least we know that you're armed with the information that you need. Mm-hmm
Speaker 3:<affirmative> getting legal advice earlier, I think is probably the best piece of advice that we could give. Yes, yes. In this environment.
Speaker 1:Absolutely. Yep. Okay. Well that's all that's episode two done. Episode two. Done. How exciting. Very exciting. All right. Well, I will look forward to seeing everyone on episode three where we dive into
Speaker 3:The, the
Speaker 1:Q
Speaker 3:BCC, the Queensland building and construction commission. Let's talk about the regulator. Yeah.
Speaker 1:That's a really good idea. Awesome. All right, we'll see you next time. Hey, bye. Bye.