Builder Increases The Price

Lbasu on 08/04/2022 - 14:32
Last edited 08/04/2022 - 15:02 by 1 other user

Hello there, I had an agreement with the builder for construction of a new house around Sep-Oct 2020 with land and house package. Land was registered on December 2021. The construction has not started yet, even though we did not apply for CDC approval.

The builder increased the contract price on January 2022 and we agreed that and again now the builder sent an email mentioning that they increased the price 17% due to HIA increase. Builder did not mention any clause that they are relying on to increase the price. What will be the solution for this? Can builder increase any amount?

In this case can i cancel the contract with builder? How much should I pay if I cancel the contract? Nothing mentioned on contract.

I will really appreciate your help.

Home & Garden

Comments

  • [Deactivated] on 08/04/2022 - 14:34
    +21

    can builder increase any amount?

    yes, did you read the building contract?

    • basu on 08/04/2022 - 14:46

      if builder increase the reasonable amount i will definitely agree with them. contract doesn’t mentioned any percentage that they can increase.

      • jv on 08/04/2022 - 14:48
        +7

        contract doesn’t mentioned any percentage that they can increase.

        What does it mention ?

        • basu on 08/04/2022 - 14:49
          -1

          it mentioned that it may vary with

          • [Deactivated] on 08/04/2022 - 14:53
            +16

            @basu: which means it can increase = may vary

            • jv on 08/04/2022 - 15:12
              +7

              @[Deactivated]: It may also decrease…

              • Daabido on 08/04/2022 - 18:10
                +32

                @jv: Unbloodylikely.

                • Kangal on 08/04/2022 - 23:25
                  +12

                  @Daabido: .
                  It may * wink* even decrease! * wink*

                  (someone tell em he's dreamin)

              • this is us on 09/04/2022 - 08:55
                +13

                @jv: -Sir, just ringing to let you know that we will be offering a 10% discount from the initial agreed price due to the magnificent economic scenario. We are so happy that we can transfer the difference from our well negotiated prices.

                That's a dream…

    • verio on 08/04/2022 - 17:55

      It depends on your contract. If it is a fixed amount contract and there is no separate clause that allows a price increase due an increase in price of materials/labour, then the builder have a hard time increasing the contract price.

      However, if your contract does not have a fixed amount and/or that amount can be explicitly increased, then it is a different story.

  • Muzeeb on 08/04/2022 - 14:38
    +72

    What will be the solution for this?

    You pay the extra money.

    Builders are not a charity. Their prices have increased dramatically with covid. Someone needs to pay. How can the builder absorb this when the matching jet skis he ordered are due for delivery and full payment in September?

    • Jason Genova on 08/04/2022 - 15:13
      +58

      someone needs to pay for that extra range rover and hilux

      • DoctorCalculon on 08/04/2022 - 17:27
        +42

        Those ARB 4x4 accessories for the Hilux aren't cheap either.

    • dcep on 08/04/2022 - 18:03
      +3

      or just go bust like probuild

      • netjock on 09/04/2022 - 15:58
        +2

        Get the Hilux and Ranger, pass go. Straight to bankruptcy because most of them think it is free but they decimated their cashflow.

      • pauly85 on 10/04/2022 - 14:55
        +5

        Overpromise.
        Underdeliver.
        Get the Hilux(es).
        Declare insolvency.
        Write off debts.
        Open exact same business under new name.
        Rinse.
        Repeat.

    • JimmyF on 08/04/2022 - 18:21
      +7

      Builders are not a charity

      hahahahaha you lost me here… Most builders rap clients for every dollar they can get!

      • lonewolf on 09/04/2022 - 20:00
        +6

        Yup, I cant believe people are trying to defend Builders…WT.. they have been making a killing in general (unless they have grossly mismanaged their accounts) and have been rorting clients and the system for decades, get away with sub par work for high priced fees…I am sure there are decent ones out there and ones that follow the rules and do a good job. But there seems to be alot out there just trying to cut corners every where to pay for their mansions…

    • alUK234 on 11/04/2022 - 05:34

      Such clauses in a contract should not be allowed in such a one sided way full stop. If the builder wants the right to change the price, then give the buyer the chance to cancel it. Can't have it both ways. Such predatory practices should be illegal.

  • Amaris on 08/04/2022 - 14:38
    +5

    As above. Read the contract. It will say what the builder can do

    • basu on 08/04/2022 - 14:44

      yes they can increase but the thing is how much? it does not mention in contract.

      • jv on 08/04/2022 - 14:48
        +25

        you should have asked before you agreed to it.

      • Donaldhump on 08/04/2022 - 15:18

        you should not have signed it, as it is its open ended

      • GrueHunter on 09/04/2022 - 09:56
        +1

        Then you should have got a rise and fall clause pegged to an external ABS or industry body index rather than "yeah, I reckon it's gone up by holds up licked finger 15%…wait, want those new rims…17%"

      • dust on 09/04/2022 - 20:38

        If it doesn't say how much then it can be whatever the builder says.

      • euk on 10/04/2022 - 11:14

        There is no limit. I know of some colleagues who have had their price increase by 40-70%, and have had to stump up the money to continue building.

  • rektrading on 08/04/2022 - 14:51
    +22

    they increased the price 17% due to HIA increase.

    Tradies ripping off property owners, again.

    Why do owners keep putting up with this 💩?

    • jv on 08/04/2022 - 15:13
      +13

      They don't need to, they can build the house themselves if they really want too…

      • AuSlade on 09/04/2022 - 11:32
        +1

        Not with a house and land package you can't. You buy the land with an attached building contract, with a specific builder.
        This is happening a lot lately, with quite a few developers having increased control over what gets built and by whom.

        • jv on 09/04/2022 - 12:54
          -6

          Not with a house and land package you can't.

          if you build your own, you can decide on how you want to 'package' it.

    • orangetrain on 08/04/2022 - 16:49
      +1

      Owners think it's as simple as ordering online, forgetting that there's hundreds of thousands at stake.

      • serpserpserp on 09/04/2022 - 20:04
        +1

        Don't builders just go on the Bunnings website and order 1 standard 3 bedder then the subbies and parts turn up?

    • fullmetal on 08/04/2022 - 22:06
      +3

      Owners are at the losing end of the stick. Probably only build one house in their life time while tradies are already an expert in this 💩. Not many choice for the owners as they face delay and re-negotiating another contract with another builder.

      • AuSlade on 09/04/2022 - 11:39
        +2

        If this is a house and land package, they cannot re-negotiate with another builder. That builder is attached to the land upon purchase of said land. The buyer goes into the transaction knowing this.

        Their only choice is to pay the higher costs or sell the land and let the next person take on the burden. Every building contract / tender I've seen (and it ranges in the several thousand) has an effective expiry date for off the plan purchases. This is done to protect the builder in the event of a significant increase in costs. That expiry is usually 180 days, but I've seen shorter and longer.

        I saw yet another builder go under the other week. From what I can tell, they're not a big builder, but it affects the owners with half finished projects.

    • rektrading on 08/04/2022 - 15:02
      +4

      Imagine how many Mexicans would kill to work in Aus with our wages

      Not many.

    • Brian McGee on 08/04/2022 - 16:36
      +5

      What party is labour?

    • greatlamp on 09/04/2022 - 07:38
      +3

      And what happens in a few years when you lose your job and you have to complete with all these international workers with perfect English, a Masters degree, and willing to accept terrible working conditions?

      You sell out your country so cheaply…

    • hobo123 on 11/04/2022 - 01:24

      So why haven't the Liberals done it in the last 9 years they've been in power?

  • Hithere on 08/04/2022 - 15:01
    +10

    There's a shortage of building materials Australia wide and prices for building houses have increased accordingly.

    The clause regarding the varying of prices has been written into building contracts for 30+ years that I know about, and possibly longer than that.

    OP signed a contract agreeing to this, obviously without reading it or understanding it.

    It'll likely cost them mega dollars to cancel the contract and they'll have to approach the builder not a random forum to find out their options.

    • netjock on 09/04/2022 - 16:01
      +1

      There is a shortage of what everyone wants.

      It is like cars. There is plenty of stock if you want to buy the big standard fleet model.

      Bunnings isn't half empty last time I went.

    • cheesecactus on 09/04/2022 - 20:08
      +3

      "The clause regarding the varying of prices has been written into building contracts for 30+ years that I know about, and possibly longer than that."

      I work as a Project manager, and all our construction contracts (from ~$1m to $15m) we have with builders are lump sum. They cannot increase the cost due to labour shortages or material shortages. They have to eat the costs (and they do)

      We can also go after them for damages if they dont deliver on time (we dont obviously, but we can).

      Annoying that big corporations can dictate terms, however individual homeowners cannot :/ I get why, but still it's unfortunate.

  • AndyC1 on 08/04/2022 - 15:04
    +5

    Read your contract!!!!

    • John Kimble on 08/04/2022 - 15:22
      +17

      They did, they just don't like what they read and want us to magic a way out of it for them.

      • AndyC1 on 08/04/2022 - 15:24

        Correct. Or gave up after read X pages more like it based on some of the responses.

    • dust on 09/04/2022 - 20:39

      Did you just assume that OP can read?

  • freefall101 on 08/04/2022 - 15:30
    +14

    Welcome to OzContracts, new account, please press one for free legal advice.

    I really think you need to get a lawyer to read the contract because you seem to be struggling with what it says. That is what lawyers do.

    I'd be surprised if it said absolutely nothing about ending the contract though.

    • BartholemewH on 09/04/2022 - 00:11
      +1

      True, most lawyers can read.

      • Carmen Sandiego on 11/04/2022 - 08:45

        Maybe they can but, I've had to literally head desk when one asked me for an explanation about something…and I had to tell him it was below the section he had to complete.

        It's insane what I've had to say to people with various levels of higher education

    • Carmen Sandiego on 11/04/2022 - 08:46

      Considering an insurance policy is a legal contract, and we've had endless (sometimes) inane questions, what makes you think people will read a building contract?

  • CyberMurning on 08/04/2022 - 15:55
    +2

    ok so builder can increase, but buyer can cancel if disagree, right? so then just cancel

    • CrowReally on 08/04/2022 - 16:02

      "Certainly sir, and how will we be paying the break contract fees (spelt out in the same contract)?"

      • Muzeeb on 08/04/2022 - 16:05
        +6

        Do you accept cashrewards as payment?

      • serpserpserp on 09/04/2022 - 20:07

        Defo with Zip pay and hope they go out of business before I pay.

  • May4th on 08/04/2022 - 16:09
    +5

    as above, it all depends on whether you have a fixed price contract or if there is cost increase clause
    having said that 17% does not sound unreasonable in the current climate. there may be option for you to terminate the contract but i doubt you'd find any builder that has not increased their prices since 2020

    • gromit on 08/04/2022 - 23:52

      It's a house and land package, cancelling usually means losing your deposit and the land with it, they are unlikely to let you choose another builder.

    • Kangal on 09/04/2022 - 00:02

      This.
      A good lawyer can get you out of it for free, but then the lawyer would cost you a pretty penny. And you'll be back to square one, negotiating with other companies that have higher prices and also want to add cost increases to it nilly willy. Or pay even more to have a fixed price contract.

      It is not like OP can "wait it out" and allow prices to return to normal. They were high, now they're higher, and in a year it will stay that way or probably go even higher.

      • oO0Dam0Oo on 09/04/2022 - 00:11
        +5

        And yet the recent RBA prediction is for houses to drop by 15% over the next two years. Go figure.

        • greatlamp on 09/04/2022 - 07:43

          If prices drop in any meaningful way, there's going to be a lot of unemployed builders willing to work for less

          • rektrading on 09/04/2022 - 07:52
            -1

            @greatlamp: May be 🇦🇺 should🤞that prices cliff dive so that 👫 👭 can buy cheaper.

            • Kangal on 09/04/2022 - 08:47

              @rektrading: Australia the government, or Australia the country as a whole?

              The pollies really don't care, so nothing will come of it. The country as a whole will suffer instead. This leads to the funneling of wealth out of the nation, the creation of the hyper-elite and the erosion of the middle class.

              • Chandler on 11/04/2022 - 10:12

                @Kangal: The pollies do care - this is their investments and friends you're talking about. So many people have so much money tied up into property it's not funny - why do you think we still have negative gearing?

                Get someone else to give you a good proportion of their money just because you happened to have the capital and/or income to support purchasing multiple residences, which you then don't have to pay for because someone else is doing it.

                • Kangal on 12/04/2022 - 19:36

                  @Chandler: rektrading said: "Maybe Australia should promise that prices cliff dive so that families can buy cheaper"

                  The pollies don't care about families, nor do they care about affordability/price dropping. So they won't do anything for it. And if that keeps going on, then people who are born or immigrate without a house will suffer —they will keep feeding landlords. And these landlords will keep feeding the banks. And if you cycle that a couple times, then tough times will come to people born after 1980, and even tougher times for people born after 2000, and so on and so forth. That is what will erode the middle-class, and concentrate the wealth to the top of the hierarchy.

                  Your second paragraph basically says what I was thinking. It is expensive to be poor. And if you're well off, life gets exponentially harder. For some reason, this phenomenon is very natural but it isn't intuitive, and we teach the opposite to kids (at least in the public sector).

        • kl2999 on 09/04/2022 - 09:36

          I got a friend saying this for the past 18 years. Never happened at least not in Sydney.

        • serpserpserp on 09/04/2022 - 20:10

          No. They said house prices could fall 15 per cent if interest rates rise in line with market expectations.

  • garetz on 08/04/2022 - 16:21
    +5

    I do not understand why people sign contracts without understanding them.

    Do yourself a favor and talk to a solicitor to explain the contract you already signed after the fact.

    • orangetrain on 08/04/2022 - 16:52
      +2

      I do not understand why people sign contracts worth over $100,000 without understanding them Or talking with a lawyer.

      FTFY. So many naive owners. OP is letting themselves be milked.

  • dcep on 08/04/2022 - 18:04
    +5

    fixed price contract , or don't build

    • Takeonme on 11/04/2022 - 07:29

      I signed a fix price contract for my build and even then you sign more paperwork saying prices may increase out of the builders control and you pay the difference.

  • Tee Rex Arms on 08/04/2022 - 18:21
    +5

    Builder increase is still less than the money you’ve made since you purchased it

    • donkeydoc on 08/04/2022 - 21:09

      Oh for sure, and to be fair, the builders are not making the money, the tradies are, especially carpenters. The price of timber materials has more than tripled.

      • Kangal on 09/04/2022 - 00:07
        +5

        No, the builders are making the money.
        It's a system where one feeds the other. And at above both of these people is The Banker who is has the least risk and most reward.

        While property builders have to suffer sometimes, the bigger victim are the future tenants. And the biggest loser in this equation are the subsequent generation of people.

        • donkeydoc on 09/04/2022 - 09:15

          The only concession here is property market has risen by more than building costs.

          Those that are losing out are first home buyers, there is no housing supply issue, it's superficial due to negative gearing and low interest rates.

          Most buyers in this market are not first home buyers and there is an increasing wealth gap that'll be detrimental to the health of our society.

        • serpserpserp on 09/04/2022 - 20:13

          How does the banker have the most reward? A builder will make 20-30% from a house he builds, bankers don't make that much from a house.

      • Grunntt on 09/04/2022 - 10:50

        the builders are not making the money

        The builder is not the guy actually physically building your home - they are just co-ordinating the build by subcontractors in most cases.

        There is a 'builder's premium' added to every single item supplied in the build.
        eg when I was considering having a large building company construct my new home there was a 30% builder's premium on every single item.

        This meant that if you added anything like a larger window you paid the cost of the window to the subcontractor plus 30% to the builder.
        If you removed an item from the plan, only the cost of the item was removed - not the 30% builder's premium.

        ie the builders are making money for basically organising everything.

    • ribze1 on 08/04/2022 - 22:51

      My thoughts exactly.
      But also, you shouldn't be doing a house and land package without a very good cash buffer for unexpected expenses.

      • Cletus vandamme on 09/04/2022 - 19:14

        Everyone thinks oh it costs X amount I'll borrow that and I'll be sweet.

  • Halo375 on 08/04/2022 - 18:40
    -2

    Try to get a quote from another builder if you can. Might give you some perspective.

    • OzBrogains on 09/04/2022 - 11:23
      +3

      "Hello Builder #2, I'd like to use your time and get a quote from you even though I have no intention of building with you. I just want to see if my current builder is taking the piss"

  • Tiredman on 08/04/2022 - 20:15
    +1

    Unfortunately bad couple of years to be building. Building materials are through the roof. I have to push back building till next year and see how it goes.

    • souljah on 08/04/2022 - 22:56
      +3

      Username checks out

    • WhyAmICommenting on 09/04/2022 - 23:54

      Through the roof. I see what you did there ;)

  • souljah on 08/04/2022 - 23:18
    +3

    I agree with the sentiments around people not reading contracts thoroughly, especially when dealing with hundreds of thousands of dollars. This isn't some 'user license agreement' for some software you install on your PC… Or maybe having so many "contracts/agreements" to click through in this day and age desensitizers us?

    To be fair to the op and others in this situation though. How often has there been such significant price rises in the past? When I built it wasn't even something I was aware or concerned about. I know a lot of people who have built over the years and none of them have had a rise until these past few months. It is easy to look back in hindsight and say you should have expected etc but getting called for an extra $50k-100k+ just wouldn't have been in most people's thoughts.

    I know some people have pushed back and been able to reduce the amount being called for, depends on relationship with builder and what wiggle room they have…

    I've never heard of a builder lowering the contract cost when materials have fallen and they definately have over the years. I think the fact you don't really have anyway to challenge or fight this means odds are always stacked in builders favor. I am concerned that many builders will exploit this after materials costs start coming back down. Up like a rocket, down like a feather. Much like petrol prices and banks with rates.

  • oztite on 09/04/2022 - 00:15
    +6

    I feel for you. Unlike most people, I think there is always an element of "trust" when signing contracts. Unfortunately the pandemic has made people less trustworthy in general. There is also a bit of a chain reaction: he gets hit by price of petrol, grocery, flights etc., and overtime people will start to pass that cost onto their clients no matter what industry they are in. Builders move faster than the rest, but I am told conveyancing cost has shot up by about 20% this year by a friend of mine in the industry (probably citing "chip shortage and supply chain" as reasons).

    A relative of mine signed a fixed cost building contract April last year, price guaranteed for 18 months. Demolition happened fairly quickly in June last year, and literally nothing has happened since apart from temporary fencing. Excuses after excuses, now he is convinced that the builder will drag it out the whole 18 months and then hike the price.

    • ATangk on 09/04/2022 - 01:06

      Considering the lumber shortage, if you pay extra you get your materials now. If not, sit in the queue. And this isnt the builder to the landowner, this is the lumberyard to the builder.

      • ribze1 on 09/04/2022 - 12:40
        +2

        *timber, lumber is the American term.

        • rektrading on 09/04/2022 - 15:10

          Is it Australian made or imported?

    • Chong on 10/04/2022 - 00:21

      Your relative should check their contract, generally there is a timeframe they have to start the build after demolition.

      • oztite on 10/04/2022 - 07:25

        Yes there is, within 18 months. The builder said it is "obviously" in their interest to start building, they don't make any money before they start building, blah blah blah. Build price fixed, materials go up, and the builder won't start now. Dragging on and on as they slowly move towards the 18 month period time.

        • Chong on 11/04/2022 - 21:50

          Whats the penalty rate if they miss the 18 month period? Surely they are not hoping your relative cancels the contract.

          The price in increase would costs more than the penalty, usually the amount is few hundred per week till it is done. And your relative would have the contract to get them for compensation, sounds like an incredibly silly thing to do for the builder.

          At least they should ask HIA for advice if they think the builder is acting in bad faith.

  • duluxe2000 on 09/04/2022 - 01:25
    -1

    I feel for you. People says read the contract but the contract OP signed is pretty standard, I.e owners bear all(most) the risks. And since the property market is so hot, people auction or sign the contracts hoping these risks won't be materialised.

    In most case, owners accept the price increase, hoping no more delay and no more increase and the property is increased. This is still a good scenario.

  • Herbse on 09/04/2022 - 07:55

    So has anyone ever read the contract and said no, I don't agree to random price increases? Or negotiate a price with no increase or a cap?

    Is a potential price increase standard? Or only something some builders do?

    If I was to build I'd be keen to know other people's experiences

    • souljah on 09/04/2022 - 08:02
      +3

      You can sign a "fixed price" contract that usually has some sort of time limit i.e. 12-24 months but expect that will cost you 10-20% more upfront which is why most people don't do it.

    • whitelie on 10/04/2022 - 10:10
      +1

      Rise and fall contracts aren't allowed in WA, fixed price or nothing.
      There's plenty of clauses in there that allow the builders to increase the price in these conditions but if it's over 5%, the owner has the right to terminate the contract. Obviously you'll be out of pocket a decent amount and potentially have a half finished house that another builder then has to take on which will probably cost more than sticking with the original builder and their price variation.

  • TilacVIP on 09/04/2022 - 09:11
    +4

    And they call this the great Australian Dream.

    Seems like everyone's a winner except the buyers.

    Getting loans at 1.99% comes comes with a few nasty side affects unfortunately.

    • ribze1 on 09/04/2022 - 12:40
      +2

      10 years of terrible governance under the LNP has not been good for the average person.

      • orangetrain on 09/04/2022 - 14:24
        +7

        10 years of great governance under the LNP has been fantastic for the top 1%.

        • WhyAmICommenting on 09/04/2022 - 23:55
          +2

          10 years of great governance for the top 1% under the LNP has been fantastic for the top 1%.

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