Building a new home in Victoria is like buying a property off the plan

But worse… many owners who enter contracts with project builders don’t even get their building contract legally reviewed like they would get a sale of land contract reviewed by a conveyancer for a property purchase.

When you build a new home (stand-alone dwelling) you enter a contract, usually in HIA or MBAV form plus special conditions. Plans and specifications form part of the contract but that can vary wildly too.

There are cost plus contracts and the alternative is a fixed price contract – but that isn’t always fixed.

• There are prime cost items and provisional sums that are really like an allowance for the supply cost or just an estimated allowance. Costs can increase!
• Some volume builders I see insist you use the building surveying company they prefer…really!? Yes, this is the norm for many..
• The special conditions alone can make a massive difference. Some clauses we have seen effectively make the fixed price entirely uncertain and leave huge subjectivity to the products used and even the location of the dwelling on the land!

Some contracts we have seen have not even included the specifications!

Basically, this is about as good as the builder saying:

• You pick the floor plan and I will build you the house I want to build for you; and
• Unlike purchasing an existing home, you don’t know exactly what you will get; and

Here is the big one:

• When it comes to handover and final inspection there will be a need to hand the builder a list of defects before final payment.
• This means you need to produce a List of Defects and leave it to the builder fix the ones they accept.
• For this process you need an experienced building inspector to keep this process honest BUT many contracts do not allow for this or WORSE they actually say this is not allowed!

Risks we also see:

• Special conditions that try to actually stop your building inspector attending the site; and
• Domestic building warranty insurance certificates issued to a different builder than who is on the contract; and
• We have even seen instances of unregistered builders effectively “leasing” the registration.

Having a building inspector is critical and having an additional term to the HIA Possession clause that says something like:

“The Owner or any building inspector or other building professional authorised by the Owner or an authorised officer of the Lending Body is entitled upon giving the Builder reasonable prior notice, to enter the Land for the purpose of inspecting the Building Works at reasonable times provided that such inspection does not delay the progress of the Building Works.”

You need to get legal advice before using the above term. Reach out to Katy Gale or any of our team. Building a new home is risky but it can be managed.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• property disputes
• contract law