Episode 15: Why You Shouldn’t Sign Your Build Contract, Without Getting a Review

Today we are speaking with Olivia Terziovski principal lawyer over at Boutique Lawyers one of Melbourne’s leading building and construction law firms. Olivia has dealt with 1000s of Building and Construction matters and insurance claims over the last decade. In this information intense episode. Olivia shares with us some of the most commonly asked questions by her clients and some of the most common misconceptions regarding the rights of homeowners. Olivia also provides advice on how you can protect yourself legally as a homeowner. And some of the information you hear today may actually surprise you. This is a must-listen episode for those of you contemplating building or purchasing a new home.

Show Notes

Boutique Lawyers- https://boutiquelawyers.com.au/

Mann v Paterson Constructions Pty Ltd- https://blogs.unimelb.edu.au/opinionsonhigh/2019/10/16/jocic-mann/

Episode Transcript

 

 

Evangelia  00:00

Hello, and welcome to the outlier Podcast, the podcast for everyone who is interested in building better homes. My name is Evangelia, and I’m hosting this podcast with Anthony, founder of outlier who is passionate about creating beautiful and high performing homes. Together we sit down once a month to chat with industry experts to help educate Australians about the potential of creating healthy, comfortable and energy efficient homes. We hope you join us on this journey. Today we are speaking with Olivia Terziovski principal lawyer over at boutique lawyers one of Melbourne’s leading building and construction law firms. Olivia has dealt with 1000s of Building and Construction matters and insurance claims over the last decade. In this information intense episode. Olivia shares with us some of the most commonly asked questions by her clients and some of the most common misconceptions regarding the rights of homeowners. Olivia also provides advice on how you can protect yourself legally as a homeowner. And some of the information you hear today may actually surprise you. This is a must listen episode for those of you contemplating building or purchasing a new home.

 

Livia welcome. So, to begin, can you just tell us a little bit about yourself, what your background is and what it is that you do?

 

Olivia  01:19

Well, first of all, thank you for having me on your podcast. It is an honor and a pleasure. So my name is Olivia Terziovski, I’ve run boutique lawyers for the last 12 years. We specialize in domestic building contracts, some commercial, and also building construction insurance claims. Over the last 13 years, I’ve been specializing in building attraction law, predominantly. Basically, many years ago, when I first purchased a home, it was defective. I was a corporate lawyer back then, and had no idea about building law and how highly specialized that area was. So I engaged a building expert to undertake inspection of my home. And you know, three years later, suing the builder engaged a building construction lawyer back then and realize, well, this area of law is great. There’s consumer protection, if anything goes wrong, the builder, the Building Survey engineers, they all have insurance to protect themselves and also to ensure that the owner is protected. And the same with builders. You know, if they’re if they’ve engaged contractors, depending on who they are, or the Building Surveyors contributed to any defects or negligence there, they’re protected as well. So I thought this is a great area of law, I can help people and here I am.

 

Anthony  02:56

Yeah, nothing beats a lived experience. Like it’s, um, and you believe that was like the instigator for you to then really focus on this aspect of law. And,

 

Olivia  03:04

Yeah, I found a passion in it. Because with the corporate side of things, I wasn’t too passionate about that. So I thought this is this is a way I could help people. And also, you know, in the end when with with some monetary outcome for my clients, not just a paper win, which you could risk with other areas or litigation. Yeah, that’s good. Well, that’s great. And

 

 

 

Anthony  03:29

I’m glad that you also mentioned that, you know, this is, you know, this industry, the web is something that does have a lot of not everyone’s covered by insurance. So you know, that’s one thing that’s really important, I think, for everyone to be aware of, is that going into building a home that everyone that you’re working with, as part of that team does have their own insurances, but I’m sure we’ll get into more about like, how that all works in a bit more detail contractually as well moving forward. Yes.

 

Evangelia  03:53

So Olivia, if you don’t mind me asking, how was your experience? When you engage the building lawyer back then? Was it a positive outcome?

 

Olivia  04:00

Yes, it was actually. So you realize how much you don’t know, unless you specialize in the area, you don’t know. Just like a you know, heart surgeon or a dentist. So I did learn a lot from that experience. And it was the shoe on the other foot really, when you’re the client, so you get to experience all those feelings. Doesn’t matter if you’re a lawyer, and you’ve got a case on it’s, it’s different. So yeah, I wanted to make the experience for my clients better.

 

Anthony  04:34

Glad you had.

 

Evangelia  04:36

I think you’ve already just answered the second question too, by answering that that was all incorporated in your first introduction. So yeah, Anthony, did you want to have

 

Anthony  04:43

Yeah. So I suppose once you were able to dive into that aspect of law and you pursued this yourself and made a career of it and started your own business, you would have had a great deal of information that you would have been able to share with people Bob, and I did know that you’ve written a book to help people who are going through this process, or maybe you have questions or concerns about building contracts and what their consumer rights are, or protections are.

 

Olivia  05:12

Yeah, I’ve written a book called How to prosper as a property developer. However, the information in there would help builders and owners and developers, not just for for the greater the owner, it’s in simple language, so anyone can understand. And I do use case studies. So you could and you can understand the concepts on it. So anything that can go wrong on your development, or your build, should be in that book, I do need to add an extra chapter now. But if anyone does want a copy of the soft copy of the book, just email through and I’m happy to send him a free one. Otherwise hard copy on Amazon.

 

 

Anthony  05:48

Oh, thank you. Yeah, that’s great. We’ll have the contact details of how to get in touch with you to you know, if if anyone out there listening wants a copy of the book in the show notes. So it’d be great. Thank you. So in your career, what have been some of the most commonly asked questions that you get from your clients?

 

Olivia  06:05

Funnily enough, I usually get a call when, when there’s a problem. So it’s probably about 1% of people do get their contracts checked and obtained advice prior to signing, which is a bit shocking to me. I, the the most commonly asked questions is after the fact. So when an issue has arisen. One is, do I have to pay the builder? You know, when do I pay them? And on the flip side, the builder asking, do they need to pay me? So it’s it’s delays, defects and issues with variations, increasing costs. And another big issue is what’s included in the scope of the contract? Because sometimes, you know, the specifications aren’t clear, or there’s lack of detail in the engineering drawings. Your contract does deal with ambiguities. However, if there’s lack of detail across all documents, then whose obligation is it to ensure that there’s enough detail engineering, you know, computations, for instance, to build? You know, that structure? So? And if it’s an extra 50,000 of still that it wasn’t SPECT up in the plans? Who pays for that?

 

Anthony  07:33

Okay. And what’s usually your answer to that?

 

Olivia  07:38

If there’s lack of detail on the plans and specifications, and a reasonable builders should have picked up on that, then it’s the builders obligation to ensure that that is covered. If usually, it’s, it’s to do with engineering designs or computation, there’s lack of detail in there, so won’t speak up, whether it’s wood or steel, or, you know, for instance, a retaining wall may need to brick columns. But they’ve they’ve priced up for one brick column, but haven’t actually provided a breakdown of the costs on the one brick, and there’s a there’s an issue there. So the builder does need to ensure that there’s enough detail in the working plans and drawings to build what’s required.

 

Anthony  08:21

And for builders that are listening, what would you recommend that they do on those instances where they feel that maybe there is detailed lacking,

 

Olivia  08:28

Put a condition in your contract. If there are, if there are details lacking, so they can’t contract out of the domestic building Contracts Act, they need to make sure there’s certain provisions that you can contract out of. However, there’s one in particular where anything to do with foundations data, so they can’t, for instance, speak up if you’ve only got planning drawings and not working drawings, which you shouldn’t be signing a contract then anyway, because it’s too many problems. But let’s just say you’re planning approval, you’ve SPECT up or you’ve priced up a Waffle Slab, which again, I wouldn’t use it Waffle Slab, but just for argument’s sake, and and then, you know, you can tell from the sore report, and the type of land that it is that you know, waffle slim won’t work on it. You can’t then charge a variation to amend the slab to a board pier slab, for instance, because you ought to have known from the foundation or data provided to you that that was required or if the levels were thrown out. So there’s prohibitions on what you can claim as a variation from a builder. Just don’t try and swindle your way around it just do do it right the first time and cost it up properly the first time otherwise you won’t be entitled to that payment and you’re running at a loss.

 

Anthony  09:46

Which yeah, was pretty hot topic at the moment as well. Yes. So what are some of the disputes that you work with? You know, do you have some examples, like the most common ones that you come across your disk essentially,

 

Olivia  10:00

Yeah, for builders, it’s always variations. So I don’t, I think there’s a lack of education in the industry, especially for builders, they, they have, you know, there are trade, they apply for the builders license. And then they go on and sign up and have no idea how you know what their legal or their liabilities are, what they need to do to comply with the domestic building contract, what’s a criminal offence, and what they’re entitled to. So it is illegal, it’s called an unlawful variation. But it is illegal for a builder to claim a variant, it’s gone to 3%. Now, so any variation that increases the contract more than 3%, you have to comply with the Act, which is you must must provide a breakdown of the quote, for the extra cost, the owner has to approve it or the developer, the work is done. And it’s claimed at the next stage. If you don’t do it that way, the builder will not be entitled to that variation. There is case law on this recently. So if you know your contracts mill, and the owner terminates you because of unlawful variations, breach of contract, or what have you. And you want to then claim quantum murder or unjust enrichment. You only capped at the contract price to claim that. So if you’ve given them an extra 50,000, or 100,000, you won’t be able to claim that over a meal.

 

Anthony  11:38

Yeah. Is there any way that you could recommend for anyone to maybe see a transcript of that case study that most recent Oh, sorry. Yeah, that case law most recent one.

 

Olivia  11:46

So the Patterson and man case, I’ll just break it down in simple terms, basically. And believe me, it’s taken me a while and to understand this case, and to break it down in simple terms, barristers have the same issue as well. But just simply put, if it’s an unlawful variation, you can’t enforce that under the contract. And if the only way you can claim, the cost of that variation, is if the owner wrongfully terminated you. And or you can claim an unjust enrichment for those variations kept at the contracts price. So no matter what, what that variation was, or the cost, and who will who was wrong or right, you can only ever claim the contract price. So and most of the time, the variations, you know, dealt with at the end builder will do their tally up the calculations, and it’s too late, because they’ve paid you the full amount.

 

Anthony  12:53

From a home owners perspective, what would be the most common queries that they have with yourself?

 

 

 

Olivia  13:02

Well, it’s, I’ll start off with delays. So a lot of them sign up. And there’s zero liquidated damages, or $250 a week, or the builders asked for an extension of time, and they didn’t respond within seven days, and they automatically obtained that extension of time to the construction period, or they don’t ask for further information as to what the delay was and why and, you know, so that’s, that’s, you know, you know, what I do with the builder, they’ve taken over a year to finish. And they haven’t, or in the instance, where they haven’t asked for an extension of time, you know, what do I do? So that’s number one, delays? Number two, is, are the variations do I need to pay for this in and tell me that this was a variation? I don’t have an extra $100,000 to pay this. So that’s, I think I’ve answered that question previously. And the last thing is, defects. So you know, the house looks different, or do I need to pay the builder this has taken over a year to get to this stage. And usually, when they take too long, two things have happened, something’s gone wrong on site, or they’ve run out of money. So you need to get that that house checked, plumbing, and a building consultant as well. It’d be a minimum to make sure what’s been done is according to the plans and specs and what you’re paying for. It just, it’s restricted to just minor defects. So then the builder wouldn’t be entitled to payment.

 

Anthony  14:34

So would you recommend that that that instance there that the consumer engages with an independent building inspector and has a full report done of the current state of the home? Is that probably the best approach that

 

Olivia  14:48

Yeah, so what you would do is part of more or less when you sign up with a builder, you need to it’s more or less your contract managing your built A lot of the big developers will we would engage a project manager. But as a homeowner, you would manage your own contract. And you can’t manage it without a team and a bit at a bare minimum, you need a building consultant, and a plumbing consultant. And if there’s any issues with structure, or whatever you would, you would get an engineer involved. But that would be bare minimum, and before you made any payment to the builder, you would get that building consultant to check or the plumber if it includes plumbing work. And if they give you the, you know, all clear because building surveyors don’t check everything, they don’t check quality. They don’t check whether your your plumbing pipes are broken under the slab. You know, they don’t even obtain a copy of the compliance certificate from the plumber until the end, which is shocking to me. You know, and they’ve approved

 

Anthony  15:54

It’s too late by then, yeah.

 

Olivia  15:56

So it’s it’s you do Haven’t you know, contract works, insurance policies and stuff like that, but you came on, but you know, some of the excess on those 100 grand, depending on the builder. So there’s ways of protecting yourself, it’s better to hold on to your money than to pay it out if there are issues. And the builder then is more likely to ensure that those contractors aren’t paid as well and fix what’s gone wrong.

 

Anthony  16:22

What would you say would be some of the most misunderstood areas with building contracts, you’ve been very articulate there, and then provide a lot of helpful advice, I think, to both builders and consumers. But yeah, some of the things that people maybe misunderstand when it comes to contracts.

 

Olivia  16:40

I’m surprised that a lot of clients just sign it. And they don’t engage a lawyer to review it, you know, it’s more expensive not to have it reviewed and to fix something later, just like your home. So it’s, you know, one of the biggest things is, you know, oh, well, the builder said he could do I needed to sign now, because things were going to be delayed, blah, blah, blah, and they’ve signed at the plant, not even planning approval stage, especially with design and construct builders, I was advised clients, you’re better off to get your own, engage your own architect, draft up your own plans, and you have ownership over those plans. You can tender it out, you can change chop, whatever you like, pick your builder, and you’re in control of it, and you don’t engage or quote output out to tender and you have working plans or drawings. And if you do have a builder in mind, you can get them involved in the process, the beginning to make sure it’s within your budget. So but if you engage in design and construct builder that you know, cookie cutter designs, not custom, they’re more likely to get you to sign up before you even have planning approval. So it’s like buying a picture of a design of a car that doesn’t have an engine in it and hasn’t been approved by Vic Roads to drive on on the streets with and you’ve signed up say anything is that that is changed after you sign. When your engine gets designed, and Vic Roads approves it is going to be an increasing cost. It’s a variation. And that’s what people don’t understand. So it usually goes up in price a lot.

 

Anthony  18:25

I can imagine, I love a good car analogy as well. Back to that, I’m sure there’s a couple of other good examples of maybe misconceptions that you commonly get as well further to that.

 

Olivia  18:35

A lot of people think that, you know, once they sign up with a builder, they pay their 5% deposit. And the builder does everything for them, the building surveyor will check everything for them, and everything’s fine. They just make the payments. And that’s it. That’s not the case. You’re the builder can it’s actually illegal for the builder to request a 5% deposit, and it’s capped at 5% Without providing you with a domestic building insurance policy first. They can take less than 5%. If you’ve engaged a design and construct builder, they may say pay me you know, $10,000, which is less than 5% for the plans and specs. And if you don’t proceed with them, or to sign a building contract with them. They’ll retain that money. However, they can’t just retain that money. You can basically argue that you have a license over those plans because you’ve paid for them, or they’re to refund you and provide you a whole breakdown of the costs. And most of the design construct builders. It’s cookie cutter. So it hasn’t cost them anything for that design that hasn’t been approved by council or anything. They’ve just handed you, you know, a Mac, Big Mac package. Yeah. So it’s it’s, you know that they took the burdens on them to show him what the costs are and there should have been a preliminary works contract signed off with the agreement with regards to the costs of that.

 

Anthony  20:05

So essentially, yeah, if it’s not a preliminary works agreement, and that builder is asking for more than 5% as a deposit on your design construct scenario, be wary. Yeah. Do you do diligence and ask why? It’s, yeah, it’s it’s, there’s so many things that you’re saying seems so logical, and but we’re all guilty of this, I’m sure where we’ve had our blinkers on. And we’ve found ourselves in this situation going God, I’m an idiot, like, Why did I think that this was going to be the case, but often that’s too late. It’s, if it’s common practice,

 

Evangelia  20:37

And you just accept it, as you know, the standard you don’t question it. Most people wouldn’t, I guess that’s why they don’t.

 

Anthony  20:43

There’s a lot of faith in certain builders with like, from the consumers perspective, they think that yeah, they’re going to get the image that’s on the front page of the magazine, and here’s my money, and it’s going to be right, okay. Like, I trust you. I’ve never met you before, or have any idea of your backstory or business quite

 

Evangelia  20:58

emotional to for people. So first time, it’s, you know,

 

Olivia  21:01

you fall in love, yeah, you fall in love with the with your home, they’re selling you your dream. But, and it all always starts off really well. Hopefully ends well, but if it starts off, you know, if you don’t know what your rights are, and you’re blind blindly trust someone. And majority of the time builders don’t know, you know, I’ve I’ve, in the last 13 years, I keep asking myself, okay, is it the fact that the builders don’t know, and they’re swindling people? Or is it the fact that the, they’re not educated, and they’re just not educated with it, you know, no one’s there’s no courses, no one’s teaching them on how to, you know, there, there’s case law on how to interpret certain sections of the domestic building Contracts Act, you know, there’s, you know, identifying, identifying what’s a reasonable delay, for instance, because under the Act, the builders entitled to reasonable delays extension of time. So it’s, it’s to, it’s not that simple. But the the main things they should know is when to take the deposit, and when not, you know, insurances when to make a payment claim, and we’re not, make sure you do your lawful variations. You know, make sure you’re clear and transparent on how you’re quoting as well, because a lot of builders won’t break down the quotes thinking are not going to, you know, they’re just going to need picking on this or that. But what happens later is the owner may want to credit with something or do something, and then you’re going to have an argument over Well, that wasn’t $200, it’s $2,000. And you’re just better off being transparent with that. With increasing materials and costs. I’ve had a lot of builders asked me whether they can claim that extra, you know, 20% for the timber. I know this is sustainable. But as an example, you can only enter into cost plus contracts, if the builds over over $1 million. And or if it’s a renovation, or something that you can’t quote on because it’s a special type of build. So and if you asked me cost plus contracts, quite, you leave yourself open to more disputes,

 

 

Anthony  23:25

could you define the difference between the two different types.

 

Olivia  23:29

So the cost plus contracts, basically, you get an estimate of the build, you get a complete breakdown of what the costs are in accordance with your scope of work. And the payment claims are made, say monthly. For the work done with all the invoices and the builders project management fee or or percentage on the top at the end. You know, usually so if there’s costs increases, or, you know, if there was a piece of work that needed to be rectified, and the builders charged you or the builder hasn’t charged you, but has charged you for something else that was a variation, they still have to comply with the variation regime under the Act, even though it’s a cost plus contract. That’s when disputes arise. You know, you may get to frames and you know, you have a look or anything well this is not half a million dollars worth of work. They fix x y&z and they’ve they may have charged me it just sort of opening up a can of worms, but with a fixed price contract, which isn’t really fixed price, there’s always variations. The good thing is with for builders, if you get legal advice, you can actually say you’re prohibited from charging extra cost escalation clauses unless it’s approved by the Commission Commissioner. So but there’s ways around it so you can put in a prime costs item so if you know that timber is going to go up, or steel is going to go up so Something else is going to go up, you will then break it down as a prime cost in your contract, you’d say, well, there’s 20 pieces of timber at $20. I’ve allowed you know, 20 grand for for timber, and then you get to the timber, you know, you’re doing timber and is going up by 20%. Well, guess what, you can charge that. Yep. And you protect yourself. But a lot of builders didn’t do it during the increase, because there was no increase. And most of them didn’t know that you could do that. And then just issued variation illegally, and most owners ended up paying anyway, because they wanted them to finish the build. And in the scheme of things, the extra costs wasn’t, you know, that

 

Anthony  25:38

that’s significant. And that’s probably a common theme that we hear as well is that there’s that pressure? Well look at my bit delay, and then you don’t want to have a delay. So you just kind of accept that and move forward. And, you know, that’s unfortunate as well. Is this something that you’re able to help builders out with as well? Because it’s education, it does seem apparent that, you know, it’s education. And so, you know, in all fairness, like, contracts are pretty involved. And a short unit in a certificate for or diploma in construction is probably not going to suffice to understand how contracts work entirely. And for some of those who are taking those courses as well, they, they may not fully comprehend it coming out the other side of it. So yeah, it’s it’s something that you can provide assistance with to builders who want to learn more, or have someone oversight some of their contracts and provide feedback,

 

 

 

Olivia  26:28

yes, so we can assist builders, one of the things we do apart from training them up on how to contract manage their build themselves and protect themselves. So they are able to enforce those price increases variations and what have you, and know when they’re entitled to make a claim. So if you make a payment claim, you’re not entitled to you’re in breach of the contract. So how to protect yourself, we can also look at compliance with their processes in office. So we’ve we’ve got a large build at the moment where they’ve, you know, I’ve had the process over the last 10 years, and we’ve had a look at him saying this is we need to review this, it’s not compliant. So we’ve given them checklists, updates, and how to, you know, ensure that it’s all compliant the processes internally as well. And also with special conditions to protect them. You know, we can’t wait, there’s there’s main or general conditions that we can use, but it’s more or less dependent on each build as well.

 

Anthony  27:33

That’s fantastic. Yeah, I’m gonna circle into the car analogy now. So quite often, we’ll get clients or Consumers ask us how they can make allowances in a building contract to ensure that their energy rating is going to be, well, the construction of the home is going to be in accordance with the energy rating. So is there anything that clients or clients or consumers can do something they can put in that contract to ensure that the you know, the installation is what it says it’s going to be the windows are what they’re meant to be in their contract to ensure that the build is going to do the right thing there.

 

Olivia  28:07

The funny thing is, Anthony, it’s already in the contract, because it’s in the plans and specifications. However, I would protect myself as an owner to by ensuring that it’s a material term in the contract. And that depending on which which stage for instance, that that it’s subject to an inspection, or compliance of the energy rating at each stage, so if it’s in your plans and specifications, a builder must build in accordance with the plans and specifications. And if there’s insulation or the energy rating isn’t met, we all know that buildings advisable, prove things anyway. You know, and it’s non compliant, you don’t want to get stuck, where you’ve reached the end, build your handout, handed over all your money and it doesn’t comply with the new G rating, and then you end up in litigation over that because it’s a defect is so important to the plans and specifications. So to ensure that you you you don’t hand over the money, you don’t end up in litigation, or find out once you’ve moved in that it’s the energy rating is non compliant, you’ve got air coming in, I would put a special condition in your contract to state that and you don’t want to make the contract too stringent either. Because it’s that may cause problems too. So it’ll be a special edition such as you know prior to the plaster going on, you are to the builders to allow an inspection to be undertaken by your building consultant to ensure that it’s built as per the plans and specifications that the installation is compliant, it’s laid properly and what have you because builders will just issue a compliance certificate on the installation and as we know, it may not be compliant. So and it will be you know, we can put a special condition in there saying we need prior to fixing stage. You know the builders to advise us once the installation is done. claim to allow the inspection there to furnish the furnish the compliance certificate on the installation. Otherwise, that stage is incomplete and make it subject to that, that. That inspection.

 

Anthony  30:14

Yeah, fantastic. So I guess that’s kind of congruent with, you know, what you’d expect for the inspections that are in the fixed price contract typically anyway. So yeah, just make an additional insertion in as a special condition. Yeah. For those who don’t know how to go about that, again, is that something that you can assist with? And yeah, yeah, fantastic.

 

 

 

Evangelia  30:34

Yeah. Okay. So this next question is a little bit of a long winded one, but I’ll do my best to make it not sound so. So what what can I do in case of a dispute? So basically, where should I start? For example, the contract? Or how do I recognize if the time to get legal support is now and rectifying any shortcomings? I guess, can you describe that process, I can sort of break it down for us, for those of us that are completely naive to the process? And yeah, we would how we would go about that.

 

Olivia  31:07

So for the last 30 years, I’ve had owners and builders call me, and it’s really the same advice over and over again. There may be different circumstances, but it’s the same advice. So if we’re looking at it, a building dispute is usually once you’ve signed and construction has started, or construction hasn’t started, and it should have. So we look at it in safe that if the catch, let me say, if the contract is on foot, you’ve got to do what the contract says you must do. If no one if there’s an issue with performance of the contract. You know, the builds delay, there’s defects, there’s variations and what have you. So if there is a substantial breach of contract, if the builder, I’ll give you an example. So if the build has taken too long to finish your build, you don’t, let’s look at it where you’ve, you’ve engaged, you’re an architect to draft up the plans, you’ve had working plans and drawings and construction has started. However, since the frame stage to fixing it’s taken over a year, you’re friends with the builder, you’re on good terms, but you’ve just had enough and he keeps, you know, pulling the COVID card. And, and he’s told you that this has this has been happening a lot lately, but he’s told you that I don’t have enough money to finish your build as quick as I could, because I’ve because of the price increases? What do you do? You’ve been waiting a year and a half. And it’s not even at fixing stage. So they call me. And the truth of the matter is, if the builder doesn’t have the money to finish your build, that’s a repudiation under common law. Not really willing or able to complete the build. There’s no, you know, if he’s not going to finish a building, we waiting another two years, the planning permit will expire your your building permit will explain what have you. So there’s two options there. One is you do what the contract says and you serve the builder notice, and then it’s a notice of intention to terminate, outlining the breaches of the builder and they’ve got to be significant breaches. There’s also statutory right to terminate under the domestic building Contracts Act. So when a half times longer than your construction period, you can terminate under that term. I would not do that though. Because if you terminate under that term, you will not be entitled to costs of difference in cost to complete the build with another builder, because you haven’t terminated under breach, or, and you’ll have to pay the builder reasonable value of the work, right? If you terminate that way, and so wouldn’t do it on that alone, that would be your last resort. And with one of our burger with the lot notices that I call them, but I would, I would first rely on that on the breaches. The first thing you need to do, and a lot of owners don’t do this is all out they’ll engage a building consultant that doesn’t have any experience with VCAT. We we refer, you know, we’re not associated with them, but an independent expert that does attend VCAT. To inspect the property, we refer a plumbing expert to check underground because if there are broken pipes, you can claim that on the contract works insurance policy. And you know, especially if you build not finished or you’re not at the occupancy permit, you don’t have a compliance certificate. Usually it’s never filed until the end. So if that you do have plumbing defects and you we find out that’s probably if that’s what’s delaying the build, you know, we’ll be able to put that in the notice and also get the plumbing on it but on on his insurance too. So the inspection will give us a pair of eyes and the story of your build. So what’s gone wrong? Is it really delays? Is it really they’ve run out of money? Or is it the fact that there’s major defects to the property and they’re never gonna obtain a complete occupancy permit, and 99% of the time? The owners will tell you there’s nothing wrong with the build, or the builder will say there’s no defects. But there always is, whether they’re minor or major. There’s always defects I’ve yet to see a perfect home.

 

Anthony  35:29

Yeah, I think that’s unrealistic to expect that you’re going to get perfection in anything. Yeah. It’s, it must be quite emotional. Yeah, we touched on it earlier, it is quite emotional to go through the process of your own home. And I’m sure you do being when you’re typically contacted, there’s a lot of emotion flying around. Is there any process or steps that you would advise if soon as someone has sort of this gut feeling? Or they’ve sort of flag something doesn’t seem right, like, the processes that they should then take before? You know, maybe? Is it direct to get best to get in contact with yourself? Or what would you advise to do there?

 

Olivia  36:09

Well, first thing because I’ve, again, I’ve been through these actions speak louder than words. So if the builders saying to you, no, it’s this, it’s there, but there’s no progress on site. Go with your gut. Second thing is yes, do call a lawyer, make sure you call a specialist that deals with Building Construction Law, predominantly, because it is a specialized area. The contracts are governed by the domestic building Contracts Act, there’s, you know, the building act, all these things that the builder needs to comply with. And they can refer you to a proper expert, because 90% of your case is going to be relying on these expert reports. Because those reports will tell you, if the builders built in accordance with the plans and specifications in your contract, I would ask the building surveyor and another tip, try and pick your own building surveyor, rather than than the builder choosing theirs. The problem there is if if the building surveyor is in bed with that builder, and there is an issue, you you know, you’re gonna have difficulty obtaining your file. And or, you know, if there’s a building notice issued or something like that, you may not be aware of it. So, or changes to the, you know, alternative solutions to the build where they reduce the waterproofing areas, and the building surveyor signs off on it to save costs as well, because they’re their friends. So I shouldn’t assume that of all building surveyors. But this is just my experience in the past. So you know, obtain your complete file from the building surveyor, make sure you ask the building surveyor. So a lot of people think build the building surveyor goes in, you know, throughout the whole bill checks everything, and it’s all amazing. No, they come out pre poor of slab, they don’t even check, they don’t check your plumbing your pipes, they rely on the compliance certificates from the plumbers. So they’ll just check pre pour of slab and the footings there, then they’ll check after the poor of the slab. Again, they don’t check everything they will, they don’t check the levels of land. So if you had a home there that you demolish prior and the levels around, they might they won’t get a whole land survey done again. So you’ve got to ensure that those terms and conditions are put in your contract to and then they’ll come out at frame. And they may pass the frame with conditions. So past subject to X, Y and Zed being undertaken some minor issues, then they don’t come out until the occupancy permit. So and even then, I’ve had instances where there’s been a three meter high party wall built that was there from the frame. And we’ve gotten to the occupancy permit, building surveyors signed off. Clark got a landscape inspection done the council come out, pet inspection done for the council to come out cross over. And they’ve seen this wall that doesn’t comply with the plans specifications that the builder has the building surveyor has approved. And, you know, the cost of that wall being reduced and what have you. It’s something that the building surveyor should have picked up on. Sometimes they do go in with blinkers, or they send out a building consultant to go do it for them and they rely on that. So just, you know, don’t want to properly get your own people involved. Double check everything. Because you just you know, prevention is better than cure.

 

Anthony  39:35

Yeah, yeah. No, and that’s these are the things that people aren’t aware of a building surveyor who was issued your building permit may never stepped foot on that side. Instead, use a contractor as a building, such as a building inspector to carry out that report back. So if you’re and also fantastic advice to recommend that every homeowner has a copy of the entire documentation pack that’s been submitted for that application for the building permit We always advise that too, because it includes an energy rating, which we think that every homeowner should have a copy of. So yeah,

 

Evangelia  40:07

Couldn’t say I mean, yeah, that information you provide are just in the space at the time. We’ve been sitting here talking, I feel overwhelmed. You know, I’ve never gone through the process of building my own home myself. But, you know, just even from this conversation, I, I would Yeah, I don’t know how I would actually traverse through that experience without having someone like yourself your professional advice, I think, yeah, it’s, it’s, it’s a no brainer, immediately.

 

Olivia  40:34

And it is scary to you know what, during the build, you get all excited, you sign up and I tell that to clients, they’ll they’ll ring me and say, I’ve got a contract that I want you to review, because I want to sign up with the builder. And that’s 1% of people really. And I asked them, Okay, do you have working plans and drawings and council approval? I don’t know what that is. So you know, if they do have working plans and drawings, basically I did say to them, listen, imagine that your house is completely built based on the paperwork given to you. So if you’ve Specht up your you know, your your where you want your electricity, your plugs to go, your lights, your mailbox, everything that you want the builder to include in your build with approved plans, working drawings, your engine in the car, the types of tires, you want that leather seats, all that Specht up in your contract. So there’s your prevent variations, then you’re ready to sign. Not not before. And a lot of people well, the builders told me to hurry up, because they’ve got another project. And but guess what, it’s going to take another six months, even 18 months to even get planning approval. Yeah,

 

Anthony  41:45

Yeah, we we quite often. I think people take them back when we caught up and say like, this is the expected timeline, you know, they think they can have a home built started in six months. But this is a 12 to 18 month process, typically, especially if there’s planning involved. And everyone’s you know, there’s some staffing issues and most councils and a lot of applications to get through. Yes.

 

Evangelia  42:06

So that pretty much wraps things up. I do have a final question for you, Olivia. If there’s anything that you could change within the building process itself, what would it be?

 

 

 

Olivia  42:20

That would be requiring the building surveyor to request compliance certificates from the trades, at the stages for the stages that they approve. So for instance, you know, the plumbers compliance certificate on the work done even though it’s incomplete, but the work done for underground plumbing to be issued at base stage before they approve, because I’m absolutely shocked how a building and surveyor can improve the base stage without and they rely on the compliance certificate from from the plumber to claim indemnity, that they’re not liable for the plumbers work.

 

Evangelia  42:57

Can I just ask them? Because I’m not so are you saying that the plumber completes the work and then provides a certificate himself to say that I’ve completed the work without any floors?

 

Olivia  43:05

Yeah, right. That’s right. But they don’t supply that until the house is finished with the occupancy permit. And a lot of plumbers or builders believe that you can’t issue a compliance certificate until everything’s finished, which is wrong. They can issue a compliance certificate saying I’ve been engaged through underground drainage, sewerage gas and what have you, excluding this is the work I have not done the incomplete work. So if the building surveyor, I just find it quite strange that the building surveyor can then claim indemnity based on the plumbers compliance certificate issued or occupancy when they approved base without viewing it. So same with you know, electrical, all those additional items with the compliance certificates are issued at the end.

 

Anthony  43:53

That is, is so common sense that it is actually surprising to hear that there is no yeah. No partial compliance or even at that, yeah, that stage compliance so that and that, I suppose there are so many easy ways that you can inspect these things at that stage to now the cameras systems that are available are very quick and easy and affordable to have those checks. So again, that’s probably something that could be put into a contract to have that inspection carried out prior to you know, the construction being finalized when it’s too late. To Yeah, is there anything further that you’d like to share it all with us or

 

Olivia  44:35

End of the day it is you could have an amazing contract with wonderful terms and conditions, but it’s going to end up or really come down to who you choose as a builder. And who you choose. As your architect and building surveyor. You need to just really you’re only as good as your team. Do you have you know your special conditions or what have you will protect you but the proof formance of the contract is going to be based on on the team that you engage. So make sure you know people do make mistakes, make sure you’re working with people that are aware of what they’re, they’re obligated to do in the contract that it’s clear. And it’s someone that is capable of doing it and has experience, because I have seen some contracts which are shocking, there’s no special conditions or anything, and the builders done quite a good job on it. So it’s really just boils down to and also on the flip side, but it boils down to who you choose. So do you do due diligence, diligence, you know, look at previous builds, engage a building consultant to check their previous builds, because, you know, normal person will walk in say, this looks great, but you won’t know until you move in if something’s gone wrong if something’s not compliant. And yeah, it’s it’s just do your due diligence, ask questions, ask for you know, can you refer this refers to a previous client. Ask Don’t be shy, ask them about their financial capability, because again, it could fall, they could be an amazing builder, and then they’ve something’s just gone wrong.

 

Anthony  46:11

I do want to say thank you very much for your time. It’s been amazing to be here have your knowledge and just expertise on this. It’s extensive, it’s very evident.

 

Hey, outliers, post recording this episode, a large volume building went into liquidation. Now, it was discovered they were signing contracts without providing the necessary documentation to do so. So I just wanted to add to what we’ve just discussed here, and make sure that you hold a copy of domestic builders insurance alongside your build contract and building specifications before signing any contracts. I just want to circle back and expand on the car analogy that didn’t make it into this recording initially. If you were to buy a new car, and you’re expecting it to be a V eight, and you got home and you pop the bonnet and realized it was a four cylinder engine, would you keep it and not say anything? Or would you go straight back to the car dealership and ask for what you’d paid for? That seems to be the problem that occurs in most Australian homes, we get an energy rating conducted. And that rating says our home should be performing in such a way. But when we test it, which is very rarely, for most, it’s probably less than 1% of Australian homes currently are tested during construction, we realize that that home is not performing in accordance with that energy rating. So what would you do? Would you ask for the builder to then make sure it’s fixed or rectified and is actually performing as part of that energy rating? Because you absolutely should be. That’s what you’ve paid for.

 

Evangelia  47:33

Thank you for listening to the outlier podcast. You can find helpful links and contact information regarding this episode in our show notes and on our website, outlier studio.com.au forward slash podcast. If you like our show, please leave a review and make sure you subscribe to never miss a new episode. If you have further questions for us or want to share some additional feedback, please feel free to DM us on Instagram or Facebook. Until next time on the outlier podcast

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