What to Do If You Receive a Variation Notice from your Builder
Receiving a notice from your builder asking for an increase in building costs can feel overwhelming. But take a breath — it’s all about staying calm, reviewing your contract, and ensuring the process is followed correctly. Here's a step-by-step guide to help you navigate the situation smoothly.
3 Steps to Take After Receiving a Variation Notice
1. Review Your Building Contract
Start by diving into your contract. This document is your safety net — it’s there to protect you and guide you when things like this happen.
Check whether the request aligns with the specific clauses of the contract. If it doesn’t, raise it with your builder and insist they follow the correct process. Remember, everything during your build should be handled as outlined in the contract.
2. Examine the Notice Closely
When you receive the variation notice, there are a few things you need to pay attention to:
Contract Mechanism: Ensure the request for an increase is made under a valid contract clause that allows changes. Whether it’s a Variation, Extension of Time, or another adjustment, it needs to be backed by the contract terms.
Cost Escalation: For contracts under $500,000, cost increases due to inflation or rising wages should already be factored in by the builder. A cost escalation clause can’t be included without explicit approval from Consumer Affairs Victoria.
Evidence of Efforts: Ask your builder to provide proof that they’ve taken steps to minimise costs or delays. They’re required to show that they’ve done everything possible to prevent the situation from escalating.
3. Understand Your Own Obligations
It's important to stay on top of your responsibilities as the building owner, like responding within a set period of time or meeting Loan Approval requirements. Missing these can give the builder the chance to seek compensation, so make sure you’re clear on what’s expected from your end.
What to Do Next
If you’ve received a notice asking for an increase in construction costs, here are some steps you can take:
Talk to a construction professional: We offer 1:1 Building Contract Consulting calls where we work through any problem on your new build and figure out a path forward that aligns with your building contract.
Approve or reject the claim: Once you've reviewed everything carefully, you can decide whether to approve or reject the claim.
Request a revised notice: If the original notice doesn’t comply with the contract terms, ask your builder to issue a new one.
Explore dispute resolution: If things aren’t adding up, use the dispute resolution procedures outlined in your contract.
Consider your options: If the proposed cost increase or time extension feels unreasonable, you might want to explore the possibility of terminating the contract — though this should be a last resort.
How to Prevent Variations in the First Place
To avoid preventable variations before your build even starts, here are some things you can do:
Have your contract reviewed before you sign — a professional can catch potential issues before they become a problem.
Talk worst-case scenarios with your builder. It’s better to know upfront how they plan to handle challenges.
Verify insurance certificates to ensure you’re protected in case the builder runs into trouble or walks away from the project.
Remember, your construction contract is there to safeguard your project. Stick to it, and you’ll have a solid foundation to manage whatever comes your way.
Thanks for reading, and catch you in the next post 😊
Annelyse
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Written by Annelyse, Building Contract Enthusiast, Project Manager, and founder of Build Together Project Management.
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