What You Need to Know About Home Building Contracts
The objective of a home building contract is to provide certainty to both parties and for the terms of the agreement between a builder and a homeowner to be clearly and unambiguously recorded. Under the Home Building Act there are some mandatory requirements for the contents of a contract including for example, details of the cost and date for payment of progress payments and the completion date.
A home building contract also seeks to protect both parties. It is important that both parties to the contract understand what their rights and obligations are.
From the homeowners perspective a home building contract provides a record of what the builder has agreed to and those aspects of the work which may be inconvenient, or which the homeowner may not otherwise require. It also provides certainty as to what work is to be done , what materials will be used and when. It is also important to secure additional protections that are available under the legislation.
There are important benefits for builders too in using a home building contract. Using a written contract ensures that there is no misunderstanding as to what work they have contracted to do. There can be a tendency for someone to be told that other tradesmen will be able to do this or that who may actually be employed or engaged by the homeowner, for example; completion of side fencing, adding an additional window.
It is also important to record variations to the contract in writing. A builder carrying out home building work without a written contract, or without a contract containing the requisite information, cannot claim any money (whether directly from the owner or via court proceedings). The legislation limits the maximum amount that can be recovered for building work carried out with a written contract which does not contain key information.
Essential Components of a Home Building Contract Template
A home building contract template should have several key components that address the various aspects of the project. While additional clauses may be added or removed, the following are the usual elements you should expect to find:
Project Details
You will want the template to include detailed information about the building project. The address of the property, addendums, and a detailed description of the work to be performed should all be included. In many cases, the homeowner and contractor develop a plan that includes all of the pertinent project details, so the work description needs to be extremely thorough.
Payment Terms
Many companies offer general prices for square footages or provide a fixed cost for residential or commercial projects. However, the estimate for your project may need to be more customized. Even if those terms aren’t necessarily produced through a template, you should expect to see the following types of payment terms:
Timeframe
When do you expect the project to begin? When should it be completed? Many templates will include milestone dates for completion of certain parts of the job. However, depending on the final bill, the costs can be adjusted for changes to the initial agreement.
Dispute Resolution
Unfortunately, supporting documents, change orders, and payment terms can sometimes leave room for disagreement on either end. Your contract should define how disputes will be resolved, prioritize alternative dispute resolution, and outline who will pay attorney’s fees if necessary.
Even the most trustworthy and reputable builders should have strong and detailed homebuilding contract templates. If you find a contract that omits some of these crucial details, be wary of the template and ask why other contracts may be configured differently.
How to Modify a Contract Template
In most cases, once a homeowner or builder selects a contract template for their project, there will be portions of that template that need to be modified or customized to achieve the goals of that individual agreement. While a good contractor will structure their contract template so that their boilerplate clauses and requirements are presented in a way that meets both legal requirements and identifies many of the potential issues unique to their business, adjustments to the template are often necessary to meet the specific needs of the parties (and their attorneys). For example, if an existing contract template does not address what happens if an owner wishes to make a change order request to their builder, the entire contract may appear to be unusable. However, it may be possible to customize just this portion of the template to ensure a mechanism for addressing how a proposed change will affect the terms of the contract, instead of scrapping everything and starting over. Elements that builders should look for as they review their contract template include: The above list is not exhaustive and no two contracts will be the same; however, modifying a contract template typically falls within these categories. A homeowner should discuss any of the above changes with their attorney to ensure that the drafted terms are likely to be enforceable in court and beneficial to their particular agreement.
Common Legal Issues and Compliance
When embarking on any legal agreement, it is critical that the practitioner knows all of the ins and outs of the law as well as their client’s specific situation. This is especially true in the case of home building contracts. With all of the different variables in home building contracts, it is vital to ensure that the contract covers all of the unique aspects of the builder and homeowner’s arrangement. The only way to guarantee that all facets have been addressed and that these requirements are in compliance with the law is by working with an attorney who specializes in real estate law.
Typically, a homeowner, who has never been involved with a building contract before, will be at a disadvantage when it comes to understanding the terms, conditions and subtleties that can be written into a building contract. Therefore, it is critical that they have representation throughout the process to ensure that everything is covered, all stipulations are in accordance with local laws, ordinances, codes and regulations, and that their interests are protected.
A builder is typically more experienced in this type of contract, having written and entered into multiple agreements. However, to ensure that the project is covered from all angles and no unexpected issues are faced, it is recommended that they have legal counsel as well. This is particularly true when it comes to highly customized projects, unique building practices, and when the parties to the contract are working on a tight timeline. Again, it is essential to have an experienced set of eyes and familiarity with the law and building contracts to ensure that all aspects of the project are covered.
Common Pitfalls and How to Avoid Them
Many costs, delays, and legal disputes have dismally surprising origins: these are usually unexpected traps in home building contracts. Finding the wrong clause in your template may mean that you miss an important term or don’t understand your obligations. Here are some common mistakes made when using home building contract templates: A major violation involves works done without written approval, where no formal building contract is issued before a work commences. Such a contract may be "padded," i.e. it may be created after work started to justify extra charges. Clearly, such a system is open to abuse, and you risk significant extra charges, time delays, and frustration. Be careful with clause standardization. Some clauses thinly veiled attempts at altering legal obligations and financial risks. They are added only to appear in line with the template. Read every clause carefully to make absolutely sure that it does not prejudice your rights as a consumer. Read the whole document! We cannot stress this point enough . Some terms negate rights by limiting the builder’s obligations. Others create strange obligations that offload legal liability to unsuspecting consumers. As we’ve noted above, some liabilities created are already provided for by law.
Many of Australia’s state and territory building laws impose pre-contract guidelines. The one that requires signed contracts (with or without a record of the quote) does so for good reason. Without a clear, unambiguous written contract between a builder and a consumer, it becomes difficult to interpret agreed terms. When this happens, there is no room for consumer discretion and no protection from unscrupulous operators. It’s worth emphasizing that your right to spend holiday time at home is, subject to conditions in various state and territory laws, limited to one, continuous period. No more than six continuous weeks’ holiday time is permitted in most jurisdictions. Take care not to jumble your holiday days and inadvertently cause problems later. This sounds obvious, but is still a common mistake people make when drawing up contracts.
Advantages of Using a Contract Template
For those in the construction industry, a building contract is an essential document. It does details about your agreement and can be useful if it comes to dispute. A contract template helps you create a complete legal document, something that is lacking when writing it out manually.
It saves time
Using a contract template will save you a lot of time in the long run. Of course, it takes time to create a contract template in the beginning as you will need to think about everything that needs to go into a contract. Then, you have to decide how you want it to look. Once all this has been done, you can save the contract template and then fill in the spaces whenever you need to. If you were creating a contract from scratch every time, you would likely forget certain clauses or forget to include information which would only lead to more work for you in the future.
It saves money
Inevitably, having a contract template used to cost you money. There is a charge to purchase a construction contract template and you can even add certain sections and make edits to a customised template. If, for example, you decide to hire an attorney for your contract, then this additional cost would be well worth it. Having a template will also help you avoid fine down the line. You should also consider the cost of taking time to answer questions about a contract because you have missed something out or have been unclear in your contract.
It creates consistency
With a contract template, there is consistency over several contracts. When you are creating them manually on your own each time, you are likely being inconsistent with some details. There’s always a chance that you could forget to include some clauses or you will add in different wording each time which will get confusing. This can be a serious problem for those in the construction industry when there are so many different projects and contracts. When you use a contract template, having the same wording and similarly formatted contract each time gives everyone more confidence. Your clients will know what they are getting when they work with you and you and your employees will be familiar with the contract and what it covers, no matter how different the project is.
It protects you legally
A construction contract is a legal document, and not one that you should ever take lightly. However, when it is created poorly it doesn’t have the same impact. Heading into a contract that is different to the last one you worked on or is confusing, can make you more vulnerable. It means that there is room for interpretation, which no one wants when signing a legally binding document.
A contract template helps to prevent you from making mistakes and not having all the necessary details from the beginning. Not only does a contract template help you cover your bases in legal terms but it brings a stronger sense of professionalism to your business. It looks like you know exactly what you are doing, which is certainly something that you should aim for when signing a contract.
Where to Locate Quality Home Building Contract Templates
While there are many ways to obtain a home building contract template, not all are created equal. Some may be outdated, while others can contain ambiguous language that may lead to legal issues further down the line. Fortunately, there are some reliable online resources where you can find trustworthy and comprehensive home building contract templates.
One of the most reputable platforms for contract templates is Rocket Lawyer. This website offers a customizable, lawyer-approved home building contract template that covers all the essential bases you’ll need. Not only is the template easy to understand, but it also provides additional resources that can help you navigate through the construction process.
Another excellent resource for contract templates is LawDepot . This website allows you to create a personalized home building contract that specifically addresses your unique requirements. It also provides important information on various aspects of home building that you should be aware of before you enter into a contract.
The Canva library also provides templates that are good starting points for your contract. However, these templates require more customization than the templates from Rocket Lawyer and LawDepot. Be especially careful to ensure you retain strong indemnities and warranties in the contract. A strong contract is your first line of defence should anything go wrong during the course of construction.
Scrutinize any template you choose and make sure it complies with your local laws and regulations. Consulting with an experienced lawyer to customize a template is highly advised, regardless of where you decide to get your template.