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Thing’s you didn’t know about – Extension of Time Claims in Major Domestic Building Contracts for Owners.

As the saying goes ‘time is money’ and when it comes to delays in construction, this couldn’t be closer to the truth. In fact delays quickly generate financial costs associated such as accommodation expenses, loss of use, construction loan interest and equipment costs (e.g. hired skip bin). These costs cause not only stress but may generate further disputes such as where progress payments become due. The fact is that delays cannot always be prevented, in fact some say they should be expected. That’s why it is very important to understand how your Major Domestic Building Contract allows you to manage delays and when the Builder can rightfully request extra time to finish your build.

Commencement Date and Construction Period

A Major Domestic Building Contract often contains the construction period for your build, being the days it will take to complete your build from the commencement date to the completion date.  The stipulated time period should calculate for foreseeable delays such as inclement weather, weekends, public holidays and rostered days off.

Liquidated Damages

Major Domestic Building Contracts also contain a liquidated damages clause, which means that for each week the builder is late with the completion of your project, you will be credited a set amount of damages for that delay and vice versa, if you were to delay the builder during construction, you would be liable to pay the builder the weekly cost for you causing the delay.

The best method for preventing delay is to ensure that the completion date and the commencement date is inserted into the Major Domestic Building Contract as well as noting a true figure of liquidated damages that truly represents your loss for each week in the event where the builder delays the completion of your build. For example, if you are constructing an investment property that would be rented out for $600 per week and but for the delay you could rent it out for this figure, your loss would be $600 per week and that figure should be inserted into your contract as your liquidated damages.

Strategies to manage delays

Having your build completed on time is usually the result of detailed plans and specifications and schedules being prepared which reflect exactly what is intended to be completed and by when. This may mean hiring experts, such as architects, building consultants and engineers that have experience in the specific construction area as they may be able to foresee possible variations before construction occurs, saving lots of time, money and energy in the long run.

Nevertheless delays may occur and if not managed properly can result in a dispute that put a halt on your build. In order to prevent this from occurring you should maintain complete documentation of all activities that may be affected by the delay and always obtain an update on the progress of works and schedule. All extension of time claims must be in writing and if not responded to by the other party would be deemed as accepted, therefore it is imperative that you always respond to an extension of time claim if you disagree with it. This is important as often the party who keeps the better records will also be the party to prevail in extension of time claim.

Builder’s right to request extension of time

A request for an extension of time if approved by you, with entitle the builder to an extension to the completion date of your build which means you cannot claim your liquidated damages for the approved extension of time claims. In general, the builder must follow a prescribed process to request an extension of time. This is usually recorded in the Major Domestic Building Contract which would dictate;

  1. Acceptable causes of delay for which an extension is to be granted,
  2. Requirement that the event has the effect of delaying construction
  3. That the builder/contractor has complied with all procedural requirements.

For instance, if your build has been delayed as a result of a current product not being available and the builder has requested an extension of time for the build, you would be inclined to request proof of when the request for the product was made and whether it would be reasonable to accept or deny the request on the facts. On the other hand, if you failed to make a selection on time the builder would be entitled to liquidated damages as a result of you causing the delay to the build.

It is important to review your Major Domestic building Contract and seek legal advice prior to entering into a Major Domestic Building Contract to avoid disputes later. In general, acceptable delays for which an extension can be granted are events outside the builder’s control. If there is an acceptable event that has caused delays to construction, despite the builder following all procedural requirements then the builder must serve an extension of time claim.

Upon receipt of the of an extension of time claim, you may refuse the claim if the claim was made in breach or disregard of the specified contractual process for delay. Furthermore, if the period to request an extension of time has passed then the builder the cannot make a claim.

Protecting yourself from the emotional and financial stress of delay does mean spending more time on reviewing your contract prior to signing. Delays are the one of the most complained about issues with building, there are ways of preventing them or otherwise being compensated as a result just seek the legal advice you need from an expert building and construction lawyer.

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