Hi, I wish to purchase a land and build a house. Our bank…

Hi, I will only answer on a generic basis, as indicated in the quote just sent.

The first decision is which building contract to use. Please be aware that you do not have to accept the standard builders contract.

The standard builders contract is heavily biased in favour of the builder.

Please let me know if you are OK with proceeding on a generic basis.

If not, I will opt out and you can see if another professional wants to answer your query.

Hi Kim, I have assisted you in the past with architect issues. I assume you have resolved these, or are dealing direct with a builder who has a design ready to go.. can you please advise if the house is designed by your architect or a standard home provided by the builder ?

I assume the house will be built in NSW.

You will need to request and search the builders licence # XXXXX to ensure the licence is current and determine if there are any previous or current complaints regarding the work of the builder. Have you inspected any of their other completed works ?

Can you advise which standard Building contract is proposed to be used.. as whether it is proposed to be a fixed price or a cost plus contract ?

OK, I understand better now. Who told you that you need to enter a contract with the builder before getting the approval from council ?

Normally, you pay some fees to the builder to prepare the plans and lodge for council approval. These are non-refundable, however they pay for the builders outgoings to do this work for you. Once council approval is obtained, you can then look at the contract.

Can you afford to pay the builder to prepare the plans and lodge for council approval, without first getting funding approval ?

Regardless this money will need to be spend and is non-refundable whatever the decision is regarding building or not.

How much has the builder quoted to do this work ?

Can you please confirm with the Builder.. that if you pay for the plans to be lodged and approved with Council.. and then decide not to proceed with the Builder *for any reason.. such as the pricing of variations... do you still have the right to proceed with construction of the house using another Builder.. as I suggest that this would be the case.. and would remove the risk you are concerned about.

Do you understand why I am suggesting this approach ? If you still wish to enter the building contract before lodging for council approval, let me know and I can work on an escape clause as you have requested.

*I do not recommend entering into a building contract until as much detail regarding any special requirements of the site, such as earthworks, retaining walls, etc. and/or any special apporoval conditions are known. There are what is known as a Preparation

of Plans Agreements, and this is what I suggest you consider initially, for the reasons above. If you still want the clause... then please advise which of the following Building Contracts you are proposing to enter into.. each are different and must be carefully considered before you enter them..

• the Office of Fair Trading Home-Building Contract,

• the Master Builders Association BC 4,

• the Housing Industry Association Plain English Contract,

Here is the Office of Fair Trading Building Contract..

http://www.fairtrading.nsw.gov.au/biz_res/ftweb/pdfs/About_us/Publications/Home_building_contract_over_5000.pdf

It includes a right for the owner to terminate on the following grounds..

Right to terminate the contract for variations due
to unforseen matters or a requirement of council
or other statutory authority
If the work must be varied due to a matter that could not reasonably be
expected to be necessary for the completion of the work or a requirement
of the council or other statutory authority which was not known at the date
of this contract and the owner notifies the contractor in writing that the owner
is unable to meet the cost of that variation, then the owner will be entitled
to terminate the contract by notice in writing to the contractor (Clause 25).
If the contract is so terminated, the contractor is entitled to payment:
• in accordance with Clause 12 in respect of completed stages
• the actual cost of the work done since the completion of the last stage,
and for any materials on the site, together with a margin of %
for profit, supervision and overhead on the cost of that work and materials,
and GST payable.

Please let me know if this is the contract you will be using and your comments on the above standard right to terminate.