The Building Contract

Finally, some progress on the building of our new house. Between the last update and up till last week, pretty much NOTHING happened. The land, that was supposed to be titled in December last year finally got titled last week. Settlement is due by 20th this month, afterwhich we will officially own it. In preparation for the building to proceed, we also started negotiating the building contract with Simonds last week and eventually signed it on the day of Hubby's 40th birthday.

When we first bought the land, the developer was confident that the title would be issued by December last year. But, like many inefficiencies in Australia, the title did not come on time. It was quite usual for titles to be late but no one expected it to be so late. This caused us to have some contention with Simonds due to a fixed price clause. Simonds would only guarantee the fixed base price until 30 April '11. If we do not get the building permit by then, we could be charged a $1000 per month contingency.

Of course we were not comfortable with that. But we had no choice then as we wanted the land. We were hoping we will not have a need to challenge that clause. But as time progressed and it became clear that we are walking on a thin line, we started to worry we might be charged for a delay that was not our fault or even within our control.

Luckily for us, we refused to sign the contract with Simonds any earlier. We told Simonds we will only sign the contract after the land is titled. Simonds people kept reminding us that if we did not sign the contract we might incur the contingency charges. We didn't care. As long as we had not signed the contract yet, we had the bargaining power. When we knew the date of the title was near, we agreed to meet them to start negotiating the contract.

We took the contract home after the first meeting where we talked about the contingency charges issue and had no compromise. They kept using the contingency charges to pressurize us to sign the contract which was really irritating. And the more they do so, the more we refused. At that time we had no idea the exact date the land will be titled. We needed to feel sure that we will not be penalised for any delays that was not within our control. I was prepared to walk away if they ever charged us any penalty.

At the same time, we also consulted a solicitor over the terms in the building contract. As this was our first time, we felt it was worth it to pay $200 for some professional advice and we were glad we did. The solicitor went through the whole contract with us and told us which items were against our interest and to negotiate with Simonds. Since this contract was written by Simonds, naturally all the clauses inside protects them more than us. Simonds was rather cocky and initially tried to 'con' us by saying that this is a standard contract, implying nothing is negotiable. But don't be fooled. As with any contracts, many terms are negotiable.

We managed to up the amount that they have to pay us if they failed to complete building within 220 days from $200/week to $250/week. We also refused to go for a new progress payment schedule that will give them 50% of the price by the frame stage. There was a clause that said 'fixed site costs' but we had to pay for any 'importation of fill' if they need to fill up excavation holes. We got them to remove that as well. Most importantly, they agreed to extend the fixed price timeline by another month. By then, the land was titled and we were confident we should not be charged any contingency.

At the end of the day, we agreed to sign the contract only when we were satisfied and achieved what we wanted. We closed one eye to some conditions that they refused to budge but overall we were happy to proceed. But not without first complaining about their high-handed tactics and threatening to walk away. :-p

The building contract is one of the most stressful yet important stage in building a house. We spent a few days reading through the whole document and scrutinizing the plans. One of the most unreasonable condition inside stated that if we made any 'variations', we would incur administrative charges of $1,000 on top of the cost of the variation! So we had to make sure that we make any mistake or don't change our minds once we signed the contract, otherwise they'll make a lot of money from us. But the most important thing is, don't be pressurized by the builders to sign a contract you are not comfortable with. Remember, if you walk away from the deal, they have more to lose than you.