Your building contract is an important document that you shouldn’t sign blindly. Doing so could lead to messy legal wrangles and costly project delays.

But what should you look out for in a building contract?

Here are three common questions that come up with regards to building contracts. Make sure you cover these points in your contract to avoid any disputes with your building contractor later on.

  1. Is the contract price fixed or will I face additional costs?

Unless your contract states the price is fixed, you may be open to paying for extra costs such as material price increases, delivery costs, installation costs, subcontractor fees, additional labour and equipment hire.

Most professional builders will account for these in their costing. However, some builders opt for a cost-plus contract, which includes rough estimates. Any difference in price or additional costs will be passed on to you as the project progresses.

These costs are usually listed under ‘provisional sums’ in your building contract. If you don’t want any unpleasant surprises later on, check that the builder’s estimates are realistic and confirm that it is a fixed-price contract before you sign.

  1. Can I make changes to the building plan after the contract is signed?

Yes, but it may incur some extra cost. On a new build, it’s not uncommon for people to change their minds on decisions they made at the time of signing a contract. You may realise the bathroom is too small or the tiles you initially chose aren’t matching your vision.

These changes are called ‘variations’ and your building contract should make allowances for them. It should list all products and materials agreed upon; and, should you change your mind, the builder will charge the difference in price. They may also charge for:

  • Extra materials, if the previous materials were already bought
  • Additional labour costs, if any construction needs to be broken down and rebuilt
  • Engineering or drafting fees, if new plans need to be drawn for structural changes
  • Legal fees, if the contract needs to be amended
  1. What recourse do I have for any damages that occur?

If the builder does not complete the project on time, it means they are in breach of contract. If the delay means you’ve suffered a loss, you might be able to claim for damages.

For example, if you are building a commercial property and the builder doesn’t complete the project on time, it means you can’t open your business on the date you planned. So you might be able to claim for the loss of expected income.

To cover breach of contract, you can include a clause in your building contract for liquidated damages. It should state the amount the builder will pay you per day for every day past the date for practical completion. This will motivate the builder to complete the project on time.

Note that liquidated damages do not include extensions due to inclement weather, labour strikes or other unforeseen circumstances.

Freya Southwell is a Property Lawyer at Sutton Laurence King Lawyers.

Having an airtight contract is important before you start building. Sutton Lawrence King offers legal services for both residential and commercial property development. Email us at info@slklawyers.com.au or call 03 9070 9810.