signing a building contract

October 21, 2019

When it comes to a building contract, a client can and often will have lots of questions.

At Milara Building & Development, we create all of our contracts based on a Master Builders’ contract template, as do many other builders across Australia. Sometimes clients think this template is something we have created from scratch however this is not the case and for good reason.

When it comes to financing your project, most banks will want to see either a Master Builders or HIA building contract, as this industry standard is what they are familiar with. Engaging a builder who does not use one of these contracts can slow down the process and potentially hinder the release of project finance, which is always important to keep in mind.

What does a Master Builders contract include?

The first 30 pages of the building contract is written by Master Builders and is designed protect both the client and builder. This section is arguably heavily weighted towards the builder for a number of reasons including:

Industry Protection

Master Builders’ main priority is to protect the construction industry, their members and their members’ clients. This is also a big thing for the bank, who want to see these parties protected in cases of jobs being held up, which increases the potential for the builder to be exposed to cash-flow dangers and risks the project not being completed. This inadvertently hinders the bank, as they’re left with a half-finished project because the contract wasn’t strong enough to ensure that works continued.

Project Timelines

Clients need to be aware of their timeframes to make decisions. By penalising clients for not selecting things like variations or prime cost items in a timely fashion, the client is given incentive to make the decision quickly so as to not hinder the build’s critical timeline. Not having such penalties in place puts the builder and the bank at risk, should somebody drag their feet and be complacent with decisions that could impact the project timeline.

Workplace Health and Safety

Constructions sites are some of the most hazardous workplaces yet, on so many occasions, you hear of lay people visiting site, unescorted by a builder. This is a strongly worded no-no in the Master Builders contract, which many clients deem unnecessary. In the interest of safety however, it’s essential that a client speak with a builder before any site visit so they can be escorted carefully thorough the site.

Protect the Build

Most clients are of good character and would never undermine a builder and their processes however, the contract is written to cover all possibilities; it is not unheard of for a client to speak to the tradesmen engaged by their builder and try to direct different aspects of the build onsite.

This can cause grief to both the builder and inadvertently to the bank. At the end of the day, the project is warranted by the builder’s own guarantee; not having such strong wording in the contract to prevent the client from engaging the builder’s tradesmen could undermine this guarantee, jeopardising the build process, the quality of the build, the timeline and relationship between builder and client.

Why do we have these contracts?

Building contract templates written by bodies such as Master Builders Association and the HIA, are constantly evolving and improving. They exist to ensure a project can be started, maintained and completed in a fair and reasonable fashion by all involved, whilst ensuring a quality build. When a serious breach, incident or issue occurs, these contracts are impacted and where a clause is not covered, it may be introduced in the future to ensure there’s a clear and concise ruling for future issues of the same nature.

At Milara Building & Development, we have rarely had to rely on these clauses; they exist to cover everybody not just one organisation. To use the analogy of the law around shoplifting – most people would say ‘I know that rule will never apply to me. I would never steal anything however the rule does exist in our society even though it will never need to be applied to most of us.’ In the same way, many clauses in the templated building contract may never need to be applied, however they do have to be written into the contract for those 1-2% of cases.

If you’re looking to team up with a custom home or townhouse builder in the Eastern Suburbs of Melbourne, contact Milara Building & Development today!