New Home Building Contracts: Here’s what to review
Have you been handed a 41-page building contract and thought, "Oh my god, this feels like overkill"? All you really care about is getting into your new home on time and within budget so your family can enjoy Christmas around that Pinterest-perfect dining table you've dreamed about for years.
I get it. Looking at your building contract might seem overwhelming—perhaps even painful. But, as someone who’s probably more enthusiastic about building contracts than anyone you’ve ever met, I can tell you they’re actually pretty exciting!
Why Understanding Your Building Contract is Crucial
When you skip the step of thoroughly reading and understanding your building contract, it often leads to nightmares down the road. You don’t want to be one of those all too common stores of families facing delays, unexpected costs, or disputes over simple things that the building contract should prevent from happening.
The sections of your Building Contract to Focus On
The standard sections of a building contract, like those found in Australian contracts, are usually solid. They provide good protections for both you and your builder. However, it’s those parts of the contract that you and your builder manually fill out where things can get tricky. This is where you need an expert eye to ensure everything is in order.
Here are the key areas you should pay particular attention to before signing:
1. Building Permits
The most common cause of delay on new home builds? Building permits. If your contract doesn’t clearly state who is responsible for obtaining permits and when they need to be in place, your build could be delayed right from the start. Make sure your contract specifies who handles permits and that all timeframes are realistic.
2. Progress Payments
The progress payment section is another critical part. This section outlines when payments are due and how much. The key is to ensure there’s no vagueness—you should know exactly how much work needs to be done before a payment is made and what the process is for making payments. I always recommend agreeing with your builder to inspect the build progress before each payment claim. (Some banks require this already!)
3. Special Conditions and Exclusions
Special conditions and excluded items are where things get specific. This section clarifies what’s included and excluded from your project. Make sure you’re comfortable with everything here, and that it doesn’t raise any new questions or issues down the track.
4. Timeline and Milestones
When does building start? When does it finish? What triggers each milestone, and what do you need to provide as the homeowner? Building a home is not a passive experience. You’ll have tasks to complete throughout the build, so understanding what’s required of you before work starts will help avoid unnecessary delays.
5. Provisional Sum and Prime Cost Items
Provisional sums are allowances set for certain items where exact costs are uncertain. Prime Cost items are the same but they are for materials and finishes selections like tapware, carpet, and joinery. You can be strategic with how these are budgeted, so make sure you’re across how they’re used, how you’ll approve them, and how they fit into your overall project cost.
6. Liquidated Damages
Finally, make sure the contract clearly outlines what happens if the builder is late. Liquidated damages specify what your builder will owe you if the build takes longer than stated, assuming the delay is their fault.
If reading this has sent you into overwhelm territory, don’t worry—that’s where I come in. I’d love to help you review your building contract, give you peace of mind, and ensure everything is set for the best build of your life.
Book a call with me, and together we’ll make sure your contract is solid, so you can focus on creating your dream home.
Annelyse.
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Written by Annelyse, Building Contract Enthusiast, Project Manager, and founder of Build Together Project Management.
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