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. Hence it is very important to understand how your contract can provide for delays, strategies to manage delay when it occurs and the entitlements of your builder to request an extension of time.
Calculated delays in a building contract
A building contract often contains a clause regarding the time for completion. The stipulated time period should calculate for foreseeable delays such as inclement weather, weekends, public holidays, and rostered days off. Nonetheless, building contracts often have liquidated damages clauses as an incentive to avoid delay and as a remedy in the event that it occurs.
However, the best method for preventing delays is to ensure that the completion dates are as accurate as possible as liquidated damages clauses only provide a reasonable estimate of your loss. Accurate completion dates are the result of detailed plans and schedules which reflect exactly what you want or need from the property. This may mean hiring experts, such as architects 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.
Strategies to manage delays
Nevertheless, delays may occur and if not managed properly can result in disputes that put a halt to the construction of your home or investment property. In order to prevent this from occurring, you should maintain complete documentation of all activities that may be affected by the delay and always update the progress of works and schedule. This is important as often the party who keeps the better records will also be the party to prevail in a construction delay claim.
Builder’s right to request an extension of time
A request for an extension of time if approved prevents the entitlements associated with delay (such as liquidated damages). In general, the builder must follow a prescribed process to request a delay. This is recorded in the domestic building contract which would dictate;
- Acceptable causes of delay for which an extension is to be granted,
- Requirement that the event has the effect of delaying construction
- That the builder/contractor has complied with all procedural requirements.
Circumstances where the builder should be granted an extension of time is:
- item not available even though ordered on time
- unforeseen circumstances such as injury, health or accident
- third party negligence such us unforeseeable planning or design issues
- delay to consent to protection works
the builder should always provide you with evidence of the cause for the delay and seek your approval to extend the completion date with no liquidated damages payable by them
It is important to review these provisions in your building contract and seek legal advice where necessary. In general, acceptable delays for which an extension can be granted are events outside the builder’s control such as any faults of the principle or a dispute between third parties. If there is an acceptable event that delays construction, despite the builder following all procedural requirements then the builder must serve notice of delay and intention to claim extension to the owner/developer. Generally, this notice must be served within 28 days from when the delaying event first occurs.
Upon receipt of the claim, the owner can refuse if the claim was made in breach or disregard the specified contractual process for the delay. Furthermore, if the period to request an extension of time has passed then the builder is denied from making this claim.
Protecting yourself from the emotional and financial stress of delay does mean spending more time and therefore more money on contract drafting, reviewing, and understanding the delay process for your builder. However, it puts into place a building job that is equipped to deliver you your home or investment property as smoothly and quickly as possible. Contact Boutique Lawyers on 1300 556 140 for your free initial 30-minute consultation