More often than not, homeowners approach a new home building contract with the view that the terms are standard, so they will assume they protect the homeowner. This is not the case when dealing with industry association home building contracts and quite often we see clauses in standard form contracts that can be an absolute disaster for the homeowner.
HIA has recently introduced the HIA – Queensland Peace of Mind New Home Construction Contract (QC22015), which includes a brand new addition, clause 25.5:
“A party is not entitled to end this contract under this Clause if, within 5 working days of receiving notice to remedy breach, the party in substantial breach refers the matter to the Queensland Building and Construction Commission (‘QBCC’), and/or the Queensland Civil and Administrative Tribunal (‘QCAT’) under Clause 34.”
On the face of it, this clause seams harmless but the clause has the effect of potentially:
Stopping homeowners from rightfully terminating their home building contracts;
Stopping homeowners from being able to rely on statutory home warranty insurance; and
Putting the home building project and the homeowner in a hiatus while the building dispute is determined in QCAT some 6-12 months later.
This clause operates after a party to the home building contract (either the builder or the homeowner) has served a Notice of Substantial Breach under clause 25.3 of the contract. By serving a Notice of Substantial Breach, the other party is put on notice of the breach (or problem) and given 10 working days to rectify the breach.
Under clause 25.5 of the contract, after a party has been served with a Notice of Substantial Breach, they may choose (instead of responding or taking steps to rectify the breach) to refer the matter to QBCC or QCAT. If a party does this within 5 working days, then the other party (who served the Notice) is no longer entitled to terminate the contract.
Effectively this clause completely removes a right to terminate that homeowners otherwise had under the contract.
Consider this scenario
You have entered into a home building contract with a builder, you pay the deposit and work starts, exciting times. The build moves along nicely, but then you notice things are not quite so nice and the build starts going very wrong.
You try to resolve the issues with the builder numerous times, but your attempts fail. Your beautiful new home is now full of defects and already months behind schedule. Your builder refuses to communicate and work on site is at a snail's pace.
You consider your options and decide the best way forward is to serve a Notice of Substantial Breach on the builder. You are hoping this will either get the build back on track, or if needed you can terminate and move on. You serve the Notice of Substantial Breach on the builder, they then don’t respond to you at all and instead file a QCAT Application.
While QCAT is a lot faster than the more formal court process of Magistrates Court, it still can take 6-12 months before you get any traction. You are suddenly in a dispute in QCAT and your right to terminate completely removed from you.
You can’t lodge a claim for non-completion under the Home Warranty Insurance Scheme or consider appointing a new builder. Instead you are stuck waiting on the processes of QCAT before you can take any steps.
For most homeowners any time delay also causes extra costs like rent or additional interest charges on a mortgage.
So what can you do?
Simple - get advice from a building lawyer before entering into any home building contract to make you aware of these sneaky clauses that may exist in a ‘standard form contract’.
Once you are aware of these clauses you can negotiate the home building contract with the builder and either amend or delete clauses to make them reasonable for both parties.
If the builder won’t negotiate, you can then decide whether you would like to go ahead with the contract or walk away and find a more suitable builder. Even if you decide to go ahead with the home building contract, you then enter into the contract aware of the risks before you sign it.
Simply being aware of your risks usually leads to a less stressful and more productive home build.
Worried about a domestic building contract for your home build? At Aitchison Reid, we deal with domestic home building contracts on a daily basis. We understand the legislation, the industry contracts and the policy behind them. Who better to give advice on perhaps one of your biggest investments – your home?
We provide a set home building contract review that gives a written report on the builder’s licensing record, a commentary on the clauses in the home building contract that you need to know about and our recommended amendments. We also include a one hour phone call to go through all of your questions.
Call our friendly team at 07 3128 0120 or contact us at email@example.com.