The importance of taking legal advice before entering into a building agreement…

A couple engaged a builder to renovate their family home. They signed a building agreement and a paid a substantial deposit upfront.

The couple became concerned when the builder unilaterally increased the contract price.

The couple sought to terminate their relationship with the builder and took legal advice on their rights under the agreement.

Unfortunately, the agreement was drafted in favour of the builder. The couple ended up in a protracted negotiation to get out of the agreement and ultimately forfeited their deposit.

What should a Building Agreement Contain?

A building agreement for work over $30,000 must contain the following:

• The names and full contact details of the parties;
• The address where the building work will be carried out;
• The date or dates when the contract was signed by both parties;
• A description of the building work;
• The materials and products to be used;
• The person or persons who will be carrying out the building work;
• The person or persons who will be supervising the building work;
• Which party will be responsible for obtaining the building consents and any other approvals required to carry out the building work;
• The expected start date and completion date of the building work; and
• The contract price or the method by which the contract price will be calculated;
• The number of payments under the contract. If there is more than 1 payment under the contract, the interval between payments; and the amount of each payment; and the date on which each payment is due;
• Terms prescribing how payments will be invoiced, made, and receipted;
• Terms prescribing how notices are to be given under the contract;
• Mechanisms for negotiating and agreeing on variations to the building work;
• Terms prescribing how possible delays will be dealt with (for example, delays as a result of unforeseeable circumstances that prevent someone from fulfilling a contract (known as force majeure events);
• Terms prescribing how any defects in the building work will be remedied, including a reference to the existence and application of the implied warranties in sections 362I to 362K of the Building Act 2004;
• Dispute resolution procedures;
• An acknowledgement that the building contractor has supplied, and the client has received, the prescribed disclosure information and checklist.

It is vital to ensure the variations clause is robust, as often what is agreed at the beginning of the project needs to be varied due to availability of materials or discovery of further issues as the builder carries out work.

A house renovation or agreement to build a new house is often a significant investment, and we strongly recommend that you take legal advice before signing a building agreement and paying a deposit.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.