Before you start building a new home
Before you start building a new home, work out how much you can afford to borrow and like anything related to real estate, shop around and ask questions. You can find information about home loans and mortgages on the Australian Securities and Investments Commission’s consumer website, MoneySmart. The home on display may be top of the range, but most builders allow you to change the floor plans, fittings and fixtures to some extent.
If you want an exact replica of a display house, your building contract must include exactly the same plans and specifications as those used to build the display home. If you don’t want an exact replica, get the exact cost of building the display home and the exact cost of building what you want. Changing standard plans can be expensive, so do your own detailed estimate (including all your selections of fixtures and fittings) and add 15 per cent for unplanned costs.
We recommend talking to at least three of the builders’ previous clients. A good builder will be happy to give you references.
Also consider sustainability. Under the 5-star environmental standard, new homes must have:
- a five-star energy rating for the building fabric
- water-efficient taps and fittings
- a rainwater tank for toilet flushing or a solar hot water system
Other costs to check are included in your contract price:
- the building fee, which may or may not include the cost of mandatory inspections by the building surveyor and may vary between companies
- planning permit fees (if your council requires a planning permit)
- lodgement fee paid to the local council for recording purposes
- crossing deposit or asset protection fee paid to the local council and refundable at the end of the project, if no damage has occurred to council property
- inspection fee, a non-refundable fee paid to the council for the cost of their inspection of council assets
- government levy charges when the contracted cost of work is more than $10,000. There are three levies based on the total cost of your building, which also apply to owner builders. Your building surveyor can advise you of these costs
Make sure any variations to the contract are agreed in writing with your builder. This is not required by law when the builder reasonably believes the changes will not:
- require a new permit
- cause delay
- add more than two per cent to the original contract price.
Your builder will need to obtain foundation data (from the soil report) to give you an accurate price. They use it to work out the depth of stumps, type of slab or strip footing required. You should not have to pay extra later for additional work that the builder should have foreseen from the foundation data.
During the construction of your new home, you should:
- engage an independent building consultant to check the construction work
- always consult your builder or tradesperson about occupational health and safety issues before you enter the site
- maintain good communication with your builder or tradesperson at all times
As building progresses, make sure you:
- provide the builder or tradesperson with items you agreed to supply, on time. If you fail to do this the builder may be entitled to suspend the work and charge damages for delays
- put the details and costs of any variations to your contract in writing. You and your builder or tradesperson must sign off on these variations before the work commences
- get receipts from your builder for any fixtures and fittings listed in the contract, but not costed
- don’t make payments in advance. Domestic building insurance gives you limited cover and may not pay claims on work paid for in advance. Make sure the work has passed the building surveyor’s inspection (if required), meets your contract requirements and is complete. Do not withhold a progress payment because of defects without seeking legal advice.
The building surveyor will inspect work to check it meets the minimum standards of the building regulations. Ask your builder, tradesperson or building surveyor to give you a written copy of each building inspection report.
You can also engage an independent building consultant to check the quality of work, including work not covered by building regulations (such as painting).
Visiting the site
By law, you have ‘reasonable access’ rights to visit the building site during construction.
You should always consult your builder or tradesperson about occupational health and safety issues before you enter the site.
If you or your agent interferes with the building work being undertaken on the site, you will be responsible for any costs or delays that result, providing the builder or tradesperson notifies you in writing of the cost or delay caused by your actions within five business days.
Changes to the building contract
The law only allows certain changes to the price stated in a signed domestic building contract. Legal changes to the contract price include:
- variations to the plans and specifications (changes agreed by you and your builder or tradesperson after the contract is signed, including any changes ordered by the building surveyor after building work has started)
- prime costs (your selections of fixtures and fittings that are listed items in the contract but not specifically identified and costed)
- provisional sum items for possible additional work (for which the price is not known when the contract is signed).
- Variations to the plans and specifications must be in writing and signed by you and the builder. We recommend you do the same for prime cost and provisional sum items.
You should not have to pay when variations are ordered to deal with issues that the builder or tradesperson should have identified before starting work (for example, extra costs to deal with excavation, when the builder could have predicted the problem by reviewing the foundation data).
By law, a Variation Notice must be used to change the contract, except when your builder reasonably believes the changes will not:
- require a change to any project permits
- delay the project
- increase the original contract price more than two per cent
However, we advise you to use a Variation Notice for all changes to minimise disputes.
If you are concerned that building work is defective, incomplete or different to your contract, discuss the issue with your builder or tradesperson.
You should also:
- confirm any agreed actions in writing
- engage an independent building consultant to inspect the work and ensure you have a reasonable case, if necessary
- keep a diary of all conversations you have with the builder or tradesperson and take photographs of the work in question
- keep copies of all documents
If you do not get a satisfactory response:
- state clearly in writing what you want and when you require the response
- send this to the builder or tradesperson by registered mail
- if you are still not getting a satisfactory response, you can contact Consumer Affairs Victoria for free advice about your rights
When building work is complete
When building is complete, you should:
- check everything in your contract is delivered and in working order before making the final payment
- keep records of all documents, agreements and certificates relating to your contract
- understand your rights under implied warranties
The works are complete when:
- all works defined in the plans and specifications of your contract are completed to the agreed standard and major defects have been rectified
- your building surveyor has issued a Certificate of Final Inspection or Occupancy Permit.
You can pay an independent building consultant to check for defects or unfinished work to give you peace of mind.
If there is incomplete or faulty work it is your builder’s responsibility to rectify any incomplete or faulty work.
You need to:
- make a list of anything that is incomplete or faulty
- speak with your builder or tradesperson immediately about your concerns
- send a written request for the builder or tradesperson to complete or rectify any unfinished or faulty work, together with any agreements regarding the work in writing, by registered post
Keep copies of all documents related to your building project. When the works are complete, ensure you have:
- a Certificate of Final Inspection (for extensions and renovations)
- an Occupancy Permit (for new homes)
- any other certificates required such as glazing or termite protection.
The law requires a builder to meet certain obligations when they do building work. These are called ‘warranties’ in the Domestic Building Contracts Act 1995, and ‘consumer guarantees’ in the Australian Consumer Law. You have rights under both laws.
If issues arise after you have taken possession and your builder or tradesperson has died, become insolvent or disappeared, you are protected for a period of six years for works that cost more than $16,000 (provided domestic building insurance was taken out) even if you were not the original client. Check you have a copy of the domestic building insurance policy and that it covers your property.
Contact the insurer listed on the Certificate of Currency that the builder gave you at the start of the project.