Do you need a written ‘project’ contract?
It can be easy to avoid writing the details of particular jobs when all you want to do is get in, get the job done and get out; however, as Paul Cott explains, that isn’t the right option.
The issue of recording ‘project details’ in a written form is of little interest to some in the building industry; however, as a builder, the process is in fact critical for a number of reasons.
Of course, generally speaking, with any type of business dealing, at least the key terms of the dealing should be written down to avoid pitfalls down the track, chief among them being avoidance of disputes.
It is a fact of human nature that people will view a situation in a manner favourable to them, and of course, in a dispute involving events that may have occurred some months or even years previously, there is plenty of room for differences of opinion, and memories fade.
These differences of opinion can result in much stress, loss of time, productivity, and of course money.
Essential to Know for Builders and Owners
Though a written contract is not actually required in some instances, in others the law requires it.
Broadly speaking, when work is done on a home such as the building of one from ‘scratch’, including associated work such as landscaping, paving, building of driveways, fences, retaining structures, garages, carports, workshops, pools and spas, demolition or removal of a home, and various other pieces of work such as site work, work to do with plans, and lighting, heating, ventilation, air-conditioning, water supply, sewerage and drainage, the Domestic Building Contracts Act applies to the work.
In addition, importantly, in cases of renovation, repair, alteration, extension or improvement of a home, the Act applies.
The critical consequence of the Act applying (note that as the name suggests, the Act only applies to domestic or home building work) is that in cases of work exceeding $5000 in value, a written contract is required. Then the contract is termed a ‘major domestic building contract’.
A copy of this contract must then be given to the owner within five days of the entry into the contract. A daily (for every day of non-compliance) penalty applies for a builder if this is not done.
Of course, there are works which are not covered, being exceptions to the law, as there often is.
In cases of work involving farm buildings, or work involving business premises, buildings to house animals, specified design work, work involving the obtaining of foundations data, and transport of a home from one place to another (i.e. removal and transport of a ‘transportable’ or ‘removable’ home) the Act’s requirements do not apply.
In addition, and commonly, where work is for only one type of work (and there is a long list of included works, such as electrical work, attaching of awnings, balustrades, security screens, and insect screens, glazing works, laying of floor coverings, painting and plastering works, specified types of plumbing work, enclosing a tennis court with a chain link fence, and finally, erection of a pole, antenna, mast, aerial or similar structures) a written contract is not required.
Less commonly, there is an exemption for types of work based on the particular type of premises, where parts of such premises are or can be lived in, such as prisons, schools, universities, and youth and community centres. Finally, works associated with subdivisions are excluded.
Note that it is critical for a builder to not enter into a major domestic contract as described if they are not registered. There are large penalties for ignoring this requirement – 100 penalty units currently equates to $15,167, in excess of three times the minimum amount of a major domestic building contract. This amount can increase from year to year.
Such a contract is required to have certain prescribed details which are set out in the Act. The Act should be consulted for these details, failing which, professional advice is recommended.
One of the most important consequences of the Act applying is that work completed must meet certain minimum standards as far as quality of workmanship, materials, suitability and fitness for stated purpose are concerned.
These standards cannot be given or taken away. Inspectors have power to examine and inspect a building site and building works to ensure builders and or ‘subbies’ comply with the Act and with other applicable laws.
In the event of the Act applying, and thus in a case where a written contract must be entered into, the dispute provisions of the Act apply so that in the event of a dispute arising, that dispute can be conciliated or go the state’s Civil and Administrative Tribunal.
Know your Act
The relative simplicity of the above statements can be misleading as there are often cases ‘at the margins’ where it can be difficult for a builder to know for certain whether he or she needs to enter into a written domestic building contract. Having said that, in most cases it is fairly clear.
As stated above, there can be some pretty serious consequences by builders for non-compliance with these and other parts of the Domestic Building Contracts Act. In cases of doubt, it is best to seek professional advice or seek the assistance of a relevant professional association, such as the HIA.