Building a new home is an exciting experience. Choosing the land. Picking the design. Selecting the colours, fixings and fixtures. Watching the build commence – your dreams are coming true!
But what happens when your build slows down, or stops altogether?
Considering the money, time and effort you put into building your new home, when things are delayed it often results in being very financially and emotionally stressful for landowners.
Our building lawyers outline some key terms that may be relevant for your building delays and what they mean. Understanding your contract rights and obligations in relations to delays means that you are less likely to end up in a building dispute and will rectify issues earlier. In this article we refer to Victorian Building Contracts and legislation, however there are similarities in other states.
Timeline
In Victoria, your building contract should dictate the timeline for your build. However, this is not necessarily easy to determine, as most standard domestic building contracts do not include an exact "completion date". Instead, it is usually a calculation.
The most common calculation in building contracts is a "time for completion" that is given in a number of days (for example 365 days). A common misconception is that this time for completion begins "ticking down" on the date the contract is signed. However, it (most commonly) begins ticking on the date that the building works actually commence on site.
If you are unsure of how to calculate the time for completion, or if you require assistance with interpreting your building contract, you should obtain legal advice.
Completion date
Once you have interpreted the time for completion in your building contract and have ascertained when the works commenced (if applicable), you can then calculate the time that the building works should be completed by the builder – the "completion date". It is important that you mark this date in your calendar and keep an eye on the progress of your build as that date draws closer.
Extensions of time
In some circumstances, your builder may request an extension of time to complete your build. Your builder should issue any "extension of time request" in accordance with the terms of the building contract. If you receive an extension of time request, depending on the terms of your building contract, you may be entitled to object to it if you think it is unreasonable. However, you usually have a very short timeframe (often only 7 days) to provide your objection to the builder and, if you fail to do so or do so incorrectly, the extension of time may automatically be granted to the builder.
If you have received an "extension of time request" and are unsure if you can/should object and/or the process you should follow to ensure it is done correctly, or if you require assistance, you should obtain legal advice as soon as possible to avoid adverse ramifications.
Delays and Liquidated Damages
While it is fantastic to know when your build should be complete, it can be alarming when that date draws closer and your build seems far from finished. There could be many reasons why your build may not be as far along as planned, including some very reasonable explanations and some more sinister excuses. For example, specialty items for your build that needed to be ordered could be delayed, the builder's workers could have fallen unexpectedly ill, or your builder may be experiencing financial problems meaning your build cannot progress. While some of these problems can be difficult to overcome, it is important to know that you have rights when your build runs overtime.
Most building contracts will contain a "liquidated damages" (also referred to as "agreed damages") clause to cover your potential losses if your builder fails to complete your build by the "completion date". Liquidated damages are generally payable by the builder at the completion of your build or upon the termination of the building contract, where it is adjusted in the final payment.
The amount of liquidated damages that the builder is liable to pay is generally stated in the building contract as a weekly accruing figure. It ought to take into account losses such as rent, travel and other out-of-pocket expenses your pay incur if the builder fails to complete your build on time. However, the amount must be a reasonable estimate of your expected loss, not exorbitant or out of proportion.
If you are unsure whether your building contract contains any provision for liquidated damages or if you require assistance calculating the amount and navigating this with your builder, you should obtain legal advice.
Terminating your building contract
If your build is substantially delayed, or if it has stopped altogether and the builder appears to have no intention of continuing, you may consider terminating your building contract. However, termination is not necessarily a straightforward process and, if done incorrectly or without proper basis, could lead to costly adverse consequences.
Your building contract will most likely set out the process and requirements for termination. Depending on your situation you may also be entitled to terminate your building contract pursuant to statute. For example, Section 41 of the Domestic Building Contracts Act 1995 (Vic) states as follows:
A building owner may end a major domestic building contract if—
either—
the contract price rises by 15% or more after the contract was entered into; or
the contract has not been completed within 1½ times the period it was to have been completed by; and
the reason for the increased time or cost was something that could not have been reasonably foreseen by the builder on the date the contract was made.
If you are considering terminating your building contract, or if your builder is attempting to terminate the building contract, it is important that you obtain legal advice. Legal advice will help to ensure that the necessary and correct steps are taken and to ensure that your rights are protected.
Some key points:
It is important to know the "completion date" for your build, which is generally set out in your building contract. If there is not a completion date, or it can't be calculated with information available, you need to discuss this with your builder or a lawyer.
There may be many reasons for delays to your build. However, it is important that you know what delays are reasonable and what are unreasonable so that you know your rights and can take steps accordingly.
If the builder requests an extension of time for the completion of your build, he/she must do so by following the process set out in the building contract. Depending on the extension requested and the terms of your contract, you may be entitled to object.
If your build is delayed, the terms of your building contract may require the builder to pay you liquidated damages.
Terminating your building contract due to delays with your build should be carefully considered, as terminating incorrectly may have severe and undesired consequences for you.
Getting Expert Advice On Delays & Building Disputes
If your build is delayed (or has stopped altogether) you should get assistance with interpreting your building contract and/or understanding your rights and obligations, and those of the builder. Consulting with a lawyer who specialises in domestic building contracts can provide invaluable guidance and readily answer any queries you have.
At PCL Lawyers our building and construction lawyers can assist with any of your building related disputes or queries. We seek to ensure your interests are protected and provide representation so your in the best possible position to have your dream home completed on time.
Having represented many clients and industry members in residential and commercial construction, we can quickly advise you and provide trusted advice. Our clients benefit greatly from this industry specific knowledge, speak to one of our building lawyers today on how we can help you.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
