Hi all, this is in relation to my previous post:
https://www.ozbargain.com.au/node/685736#comment-11822591
This is an update in which i'm looking for advice.
We signed a cost-plus contract with a 'family friend' owner-builder to build our new home. The original contract was signed December 2020, so we are technically eligible for the federal and state building grants totalling $45k. Due to delays on obtaining the title for the vacant lot, obtaining building and engineering drawings, we had an agreement to build a cost-plus contract home with the builder. One year later, in December 2021, we met with the builder and he quoted us $300k+ for a 3x2x2 (150sqm) home… When originally we were quoted $230k. We understood this was due to labour and material increases. We decided and agreed with the price, as we were still eligible for the builder's grant's.
At this stage, the original contract (2020) was blank with only the original date of the contract written, along with some personal addresses and details for us and the builder, and the original commission of 15% for the builder. In December 2021, the builder wrote two clauses - #1 A deposit of $20k before the beginning of any works to be undertaken and #2 That all invoices are to be paid within 7 days. We signed to these conditions as we didn't know there going to be any issues. These were the builders terms he wrote down and we naively agreed.
I contacted the bank to obtain financing for the build, and they requested numerous documents, which the builder has never provided, nor did he agree to provide them when asked as he didn't have them. He has only ever gotten quotes from tradies for labour and some materials throughout the whole 15 months in contact with him. And these quotes were provided to us verbally, no official quotations were shown to us. I asked him for documents such as the building addenda and cost breakdown, which he said he cannot provide. I then used a template addenda and cost break-down from another builder which a finance broker sent me of which he showed from one of his clients (client information blanked out). I had to myself put together the building addenda and price breakdown for the builder myself. He agreed and signed what I had put together.
The bank then requested a staged-payment summary (e.g. 20% of total contract price to be paid after slab down, 25% after bricks up etc.). The builder refused to provide this as he stated the contract says 'invoices to be paid within 7 days", the bank stated this finance is ONLY for owner-builders and is not available to us, and only their construction loans available are staged payments.
As we are unable to finance this build any longer with the builder putting this clause, in which he never mentioned would be almost impossible to finance through a loan… We requested to cancel the contract with the builder. His response is he will have to charge us a Termination of Contract fee in addition to his "time spent" on the contract and quotes etc. He said this will be approximately $7,000 and he is 'doing us a favour' as most other builders are charging $15k+ for this termination. When we signed the contract we agreed that we would pay him for his time (quotations etc) if we ended up not going ahead. We verbally agreed and he never mentioned a contract termination fee. No fees or hourly rates were ever stated or noted or anything provided from the builder.
As you can imagine we are furious at the lack of professionalism from this builder, and that he is essentially taking advantage of us trying to take money for literally no work, in which other big builders we have approached have provided free quotations for everything. Now we will additionally lose the building grants as well, and the builder is making it seem like it is our fault overall and is taking no responsibility for his actions.
My issue currently, is whether the contract as it stands is valid? The dates and timelines for construction etc. are all blank, and no deposit was ever paid. We are wondering if we have to pay a contract termination fee if this contract isn't currently valid? We can come to terms with losing the grants, although the builder trying to charge us $7,000 for questionably minimal work is ridiculous.
Any advice or suggestions would be greatly appreciated.
Thank you!
I'm afraid this has really been an accident waiting to happen from the get go.
I'm not going to go through the litany of issues here, but it looks like you're down to either paying old mate $7k or having some sort of drawn out battle. Where that battle might go in terms of tribunals/courts is anyone's guess, but it seems like that's where you're at.
Old mate is clearly not running anything like a genuine show, otherwise he'd be all over the banks' requirements. It's not even clear if he holds any building qualifications/certifications at all.
I think it's certainly time to start managing your expectations about what is going to happen with the build though. From what I can see, you are not going to be able to do the build with old mate, and most likely the 30 June deadline is gone.
Is the contract valid? Very hard to say in the absence of viewing all documentation and hearing from both sides, but per above that may get tested by a tribunal/court. Be conscious of the additional costs that may bring to you.
Unfortunately this is often what happens when you "haven't done your homework" on financing requirements and try to get a "mate' rates" deal done.