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The Importance of Contract Reviews.

As a pending homeowner, ensuring that your contract is fair is a vital first step to building your future home.

Your contract is debatably the backbone of the entire build, as it sets out terms and conditions of the build, costs, plans and any variations you wish to include. The contract is a guarantee between yourself and your builder, a promise that your house will be built in exchange for the agreed cost of the build.

However, contracts can be very complicated and ambiguous, some clauses and conditions confusing to most people without legal knowledge.

Seeking legal advice in the form of a contract review is important for not only understanding the entire contract, what is included and what you are paying for but also for avoiding future dispute with your builder over a misrepresentation or mistake of the contract. Ensuring that an experienced building and construction lawyer has reviewed your entire contract can save you a fortune for a very small cost.

How your contract review will work:

You will be scheduled in for an appointment to review your contract with an experienced solicitor, either face to face or over the phone. In your appointment the solicitor will go over your entire contract and point out the most important parts to keep in mind. Written advice can also be provided if required.

What to look out for in your contract:

It is of the utmost importance to have a qualified and experienced legal practitioner review your contract, but there are some important parts of the contract which you should look out for:

  1. How payments are scheduled
    Make sure that the builder has agreed to receive monies for a particular stage of the building works (frame, lockup, complete etc..) ONLY after it is COMPLETE as is compliant with Australian standards. If you are not satisfied that a stage is not complete, a progress payment to your builder should not be made. If your builder asks for a progress payment before works have been started or even before they have been finished, this is illegal, and can cause turmoil and dispute down the track.
  2. Deposit
    You need to make sure that the required deposit is within reasonable parameters. A deposit of more than 10% of what the entire contract is worth, is not reasonable and should not be agreed to.
  3. Variations
    If the builder or yourself requires any variations to the contract after the build has been started, this is fine, as long as both parties have agreed and are 100% clear as to what that variation is, what it incorporates and how much it will cost. For example; You as the home owner have decided you want tiles instead of floorboards in your living room, but this will cost more in terms of the cost of the material, and it is not within the budget of the contract. You may put this variation into writing, and have a discussion with your builder about it, agreeing on the variation, now a term of the contract and its cost. Variations to the contract are allowed, as long as they are clearly articulated and discussed with the builder or homeowner. If you are unsure about a proposed variation or feel it is unfair, then it is important to seek legal advice in order to avoid dispute.
  4. Mistake/ Misrepresentation
    Often there will be conditions or warranties of the contract which may have been mistakenly added in, or misrepresent the true nature of the terms.
    For example: You have agreed to pay $10,000 for the heating and AC unit, but after installation, you receive an invoice for $20,000. It is important to make sure that the original sum was actually included in the contract, even a verbal promissory statement, and then dispute that you did not agree to pay $20,000 which is double your budget for the particular unit. This could either be an innocent mistake or a misrepresentation of the terms. Consulting a legal practitioner is important when deciding what to do in this situation.
  5. Termination Clauses
    It is essential that you are clear on any termination clauses, and when you have the right to terminate. If you terminate the contract with your builder unlawfully, then your builder has the right to seek rescission or damages from you. This is a situation which you should avoid at all costs. IF and WHEN you think you have the right to terminate the contract, seek legal advice and review of the termination clause to ensure it will have no legal ramifications for you.

To schedule in your contract review and ensure you are on the right path to building your home, call Boutique Lawyers on 1300 556 140 or send us an email. We guarantee that this is the right move.

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