Building Contract: the traps

It is always beneficial for both homeowners and builders to have a signed written contract before any building work starts. There are obvious reasons for this:

1.    the HBA requires the a holder of a "contractor licence" (as defined in the HBA, e.g. the builder, the tradeperson) to enter into a written contract with the homeowner to carry out any residential building work or any specialist work, subject to the limited exceptions in the regulations (e.g. where the contract price does not exceed $1,000 inclusive of GST);

2.    a carefully drafted written contract will spell out your entire deal in advance, thereby minimising the possibility of any future disagreement between the owner and the builder as to what the terms of the contract are;

3.    home owners can rely on the written terms of the contract to ensure that a builder or a tradesperson complete the work properly and promptly without over-charging, this is because the scope of work, quality standards and completion time is clearly set out in a well drafted contract;

4.    from the perspective of a builder/tradesperson, it is also in their interest to have a written contract not only to avoid penalties in the HBA but also to make sure that the owner makes payment in accordance with the agreed method/schedule in a written contract;

5.    if a dispute does arise, a written contract will be one of the key documents that a court or a tribunal will examine and interpret to find out the true arrangement between the parties.

Does the above mean that a homeowner will have to spend money on legal advice before engaging a builder/tradesperson?

The good news is that there are standard written contracts available to purchase that cover various situations. For instance, the Department of Fair Trading has published different versions of standard contracts to suit different residential projects typically between home owners and builders.

The bad news is that without professional legal advice, the owner may not truly understand the terms of those standard contracts and may rely on the builder to explain to them what the terms mean, which often creates potential litigious issues.