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Domestic Building Contracts

You have rights under the Queensland law, irrespective of what the domestic building contract may, or may not, say.

Building a new house is exciting. You have likely spent months finalising the drawings, selecting your fixtures and fittings, and obtaining approvals. You now have boots on the ground, and the builder, including yourself, are raring to get on with it, to see that dream house start to take shape, at last.

However, the build process is not easy. There are many moving parts, contingencies and risk areas. When an issue does arise, most of time, the builder and the home owner will find a way to resolve it amicably and reasonably (as it is in the interest of both parties to do so).

This may not always be the case. There are times when the builder will take a firm stance on a legal and/or factual point and seek to take certain action, assert certain rights, impose certain obligations or further financial liabilities, against the home owner in circumstances where it may not be fair, reasonable or even lawful.

As the issue/s will concern the building of a domestic home, there will be, as there must be, a written building contract in place, and as such, you will likely find the builder, or its lawyers, citing various provisions of the building contract in support of their alleged position.

You should be aware that, as a home owner, you have certain legal rights and statutory warranties under Queensland law (more particularly, pursuant to Schedule 1B of the Queensland Building and Construction Commission Act 1991 (Qld) (“QBCC Act“)), which supersede, and are superior to, anything that may, or may not be, written in the building contract, to the extent of any contradictions.

In this article, we explore some of the statutory warranties afforded to home owners under the QBCC Act, which, it is worthwhile remembering, cannot be modified, or extinguished, by the building contract.

This is especially relevant in the current economic climate (as affected by COVID), as suppliers are either delaying the supply of construction materials, or are imposing additional prices (especially in relation to timber supplies), which the builders, in some cases, are seeking to pass on to the home owner (or worse still, are simply terminating the building contracts), which may not be lawful.


To which building contracts does the QBCC Act apply?

The QBCC Act applies to “regulated contracts

A regulated contract is each of the following:

  • a “domestic building contract” for which the contract price is more than the “regulated amount“;
  • a cost plus contract under which the total amount payable for the contracted services is reasonably estimated to be more than the regulated amount;
  • a mixed-purpose contract under which the amount referable to the contracted services is more than the regulated amount.

A domestic building contract is (with some exceptions):

  • a contract to carry out “domestic building work“; or
  • a construction management contract for the provision of building work services for domestic building work; or
  • another contract to manage the carrying out of domestic building work.

Each of the following is domestic building work (with some exceptions):

  • the erection or construction of a detached dwelling;
  • the renovation, alteration, extension, improvement or repair of a home;
  • removal or resiting work for a detached dwelling;
  • certain works associated with the above domestic building work (which may include without limitation, landscaping, paving, the erection or construction of a building or fixture associated with the detached dwelling or home (such as retaining structures, driveways, fencing, garages, carports, workshops, swimming pools and spas) and the provision of facilities and services to the home (including without limitation lighting, heating, ventilation, air conditioning, water supply, sewerage and drainage); and
  • the installation of a kit home at a building site.

The regulated amount under the QBCC Act is $3,300 (or the higher amount, if any, prescribed by regulation, from time to time).

Therefore, if you have entered into a building contract to construct a home, or for the carrying out of any associated works, provided that the contract price exceeds $3,300 (or any higher amount, as may be prescribed by regulation from time to time) you would fall within the protections afforded by the QBCC Act.

What statutory warranties are implied into a building contract?

Subject to some qualifications, the builder, as a requirement of the QBCC Act, warrants to the home owner that:

  • Suitability of materials: All materials to be supplied for use in the building work:
    • will be good and, having regard to the relevant criteria, suitable for the purpose for which they are used; and
    • unless otherwise stated in the contract, will be new.
  • Standard of work and exercise of care and skill. The building work will be carried out:
    • in an appropriate and skilful way; and
    • with reasonable care and skill.
  • Suitability of premises for occupation. If the building work consists of the erection or construction of a detached dwelling to a stage suitable for occupation; or is work intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, then the detached dwelling or home will be suitable for occupation when the work is finished.
  • Adherence to plans and specifications. The building work will be carried out in accordance with the plans and specifications.
  • Carrying out work with reasonable diligence. The building work will be carried out with reasonable diligence.
  • Calculation of provisional sums and prime cost items. The provisional sum or prime cost item has been calculated with reasonable care and skill, having regard to all the information reasonably available when the building contract is entered into (including information about the nature and location of the building site).
  • Compliance with legal requirements: The building work will be carried out in accordance with all relevant laws and legal requirements, including, for example, the Building Act 1975 (Qld).

What is the meaning of a "provisional sum", and "prime cost item", under the QBCC Act?

A provisional sum, for a domestic building contract, is an amount given by the builder as an estimate of the cost of providing a particular “contracted services“.

A contracted service, for a domestic building contract, means the thing done, being done or to be done by the builder under the building contract in relation to domestic building work, being either:

  • the carrying out of the work; or
  • the managing of the carrying out of the work.

A builder is generally only allowed to give provisional sums in respect of work which the builder, after making all reasonable enquiries, can not state a definite amount for when the building contract is entered into with the home owner. Also, it is important to remember that the provisional sum should cover the cost of not only providing the works but also the cost of supplying materials needed to carry out the subject works.

A prime cost item, for a domestic building contract, means an item, including, for example, a fixture or fitting:

  • that has not been selected, or the price of which is not known, when the building contract is entered into with the owner; and
  • for the cost of supply and delivery of which a reasonable allowance is, or is to be, made in the building contract by the builder.

It is important to note that the allowances for any prime cost items in the building contract (which is a common industry practice, in relation to fixtures and fittings, such as bathroom accessories, kitchen cabinetry and appliances, wardrobes etc), must be calculated with reasonable care and skill by the builder, having regard to all the information reasonably available when the building contract is entered into with the home owner (so as to avoid unreasonable “budget blow outs”).

Is the builder entitled to terminate, or to charge an additional price under, the building contract?

This will not be a straightforward answer.

The issues must be carefully considered against the provisions of the written building contract (actually in place between the parties), the statutory protections afforded to home owners under the QBCC Act, and other circumstances bearing upon the matter (including, potentially, other laws and legal principles existing outside of the QBCC Act).

It is important to keep in mind that if a builder is seeking a variation of any kind, or an extension of time, under the domestic building contract, the QBCC Act imposes very strict procedural and other rules, in relation to how this may be lawfully done. If the builder is seeking to suddenly terminate the domestic building contract, due to the occurrence of some event, then, there must be a clear and lawful basis underlying that purported termination, under the domestic building contract and/or otherwise as a matter of law. The reality is, to determine the legality of what the builder has done, or is threatening to do, will often, and inevitably, require the careful consideration of the case as a whole (including the interpretation of the written building contract, which generally exceed 30 pages in length).

In saying that, when you are talking about your dream home or investment, or you stand to lose significant amounts of time, money and effort invested into the project, it may be worthwhile, and overall commercial, to obtain some legal advice as to your rights, and options, in the circumstances, with a view to, whether yourself, or via your lawyers, bringing the builder around to seeing things as they should be seen, honouring what has been agreed, or in the alternative, agreeing to a variation of the terms which are fair and reasonable (and cause the least amount of disruption and loss to the parties).

Contact Us

If you need legal advice or assistance in relation to a domestic building contract, please contact ADVIILAW today to speak to one of our experienced construction litigation lawyers.

Contact us on 07 3088 7937 or email us at [email protected].

Disclaimer

This commentary is of a general nature only, containing some general information for the reader.

It is not intended to be legal advice, nor can it be relied upon as legal advice, as each case will depend upon its own specific facts, matters and circumstances.

To this end, please kindly read our Website Terms and Conditions including the disclaimer contained therein carefully.

Laws, rules and principles may be subject to sudden and unexpected changes and you should always consult a lawyer about your specific circumstances before committing an act or omission in relation to your matter.

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