Building Dilemma - Contract and Court

• 

  Bafranz on 02/03/2023 - 15:30

  Just confirming, NSW?

  And shared walls or independently built?

  • 

    Pootie Tang on 02/03/2023 - 17:06

    SA, to me it looks like shared walls but the seller said no 'party walls', my friend in the industry said impossible that they were not connected and plans are all joined. So yeah, all connected on the plan and designs etc.

  • 

    HeWhoKnows on 03/03/2023 - 15:36

    -1

    OP is being totally UNREALISTIC!

    Building costs have gone up 30% in the last 18 months alone and more prior to that.
    And we are 2 years past the signed contract date so its already ancient history in inflation terms

    Forget about the current 7.8% inflation rate
    Doesnt apply here not is it a realistic representation of inflation anyway
    In the building industry its more like 20-30%pa
    So an $80K increase is only the start my friend
    Should have been more like $120K increase if you do the maths

    The builder has a right to recover additional costs
    So dont try to be a backyard lawyer because you wont get anything.
    Sorry to say but either wear it or withdraw from the contract
    Those are your only 2 options

    And get in touch with reality!!!

    prices are going up, up and up!

    There will be more increases before you get to the final payment

    • 

      Pootie Tang on 03/03/2023 - 17:34

      Thanks for your input. I will withdraw then and watch them build what they expected to build but in two parts and keep the land seems to be my best option.

    • 

      Thatbargainhunter on 04/03/2023 - 08:38

      +1

      Not all materials and labour has gone up and the pressure has eased.

      However, jobs are priced with escalation in mind.

      I'd want some solid backup of where these costs are.

      I'd be asking for a full bill of quantities from the builder with how he has calculated any rises, including what rate was originally allowed for and what the current rates are. If he allowed high in the first place (which he should have), I'd be telling him to get stuffed.

      If he doesn't want to supply this for an $80k variation, than get stuffed.

      • 

        Pootie Tang on 06/03/2023 - 12:24

        Yes, we requested that initially and it was just ignored so it all smells wrong. Thanks for your feedback

• 

  Xistn on 02/03/2023 - 15:34

  +1

  Welcome to OzBuildings, please hold.

• 

  JuanLove on 02/03/2023 - 15:37

  +32

  Just to clarify - you've paid a lawyer for legal advice but you'd like to double check with ozb?

  • 

    sharka on 02/03/2023 - 16:15

    Seems that way..

  • 

    Gunnar on 02/03/2023 - 16:21

    -1

    Because free advice from strangers quacks on the net makes much more sense than legal advice you paid for…

    OP no experience on the topic but this quack thinks your lawyer is probably right and the builder is trying to hold you to ransom with the build thinking you’ll cave in. If you’re not super attached to the house well you’re in the box seat but you’re going to p.ss some innocent people off (your neighbours) if you don’t go through with it. It’s not your problem I know but it’s also a 20% increase on what you signed for. The real fun will start when the builders lawyers start speaking to your lawyer

    Good luck with it all!!

    • 

      Ocker on 02/03/2023 - 16:34

      And just to reinforce, remember that free advice is worth exactly what you pay ffor it SFA

      • 

        altomic on 02/03/2023 - 16:53

        but it's the vibe of the thing. It's not a house it's a home, a man's home is his castle.

        • 

          Gunnar on 02/03/2023 - 16:58

          @altomic: Glass of water?

        • 

          Pootie Tang on 02/03/2023 - 17:10

          @altomic: Big lols. Lucky enough to see it at the cinema when covid wasnt allowing any new releases.

    • 

      Pootie Tang on 02/03/2023 - 19:06

      Thanks for that. That's the feeling I get. As Ms Syleena Johnson says, it all falls down. I'm not expecting to have a house at the end of this.

      • 

        blitz on 02/03/2023 - 20:45

        I'm not expecting to have a house at the end of this.

        Come on, mate, it's not as bad as that. Disagreements like this get rectified every day. Don't think the worst.

  • 

    Pootie Tang on 02/03/2023 - 17:08

    +4

    Just checking for any similar experiences and outcomes. Sometimes for me its better to get a fresh perspective than bore the same 4 people helping you out. I get you though.

    • 

      HeWhoKnows on 03/03/2023 - 15:42

      Who here has gone through building costs going up 30% pa?

      Its a new phenomenon

      Just like everything else

      You either pay the higher cost or dont buy/go-ahead at all

      But I can assure you that costs are going to contuniue escalating so this is as good as it gets right now.

      No builder is going to get screwed into making a loss by anyone.

      Would you take on a $500K job and agree to lose a heap of money???

      • 

        Thatbargainhunter on 04/03/2023 - 08:35

        +2

        This isn't true.

        Some costs are falling. Eg. Structural Steet

        You obviously don't work for a builder. I've been on many jobs (I'm a contract administrator) in which the builder is making a loss on the project due to lump sum contracts and escalation.

        As a home buyer, I'd be very careful about signing documents with a cost escalation clause into it.

  • 

    HeWhoKnows on 03/03/2023 - 15:41

    Lots of know-it-all backyard lawyers here that will cost you much more in bad advice in the end.

    • 

      Pootie Tang on 03/03/2023 - 20:09

      What's your advice? Or what would you do?

• 

  boomramada on 02/03/2023 - 15:39

  +1

  Since it's a land-and-build package, the builder can cancel the contract and sell it for a higher price. That's happened to one of my neighbor's. Since then the law has caught up with it.

• 

  netjock on 02/03/2023 - 15:58

  +3

  I think you lawyer is arguing it is an unfair contract as there is no end date and costs have gone beyond reasonable or something like that.

  I wouldn't trust your builders to be honest advanced math isn't that thing. So the 80k was just having a laugh and see who is going to cough up. Looks like you caught them out. But they won't make it water tight.

  I'd check whether they are financially sounds and whether they have complaints / claims against them. It is even worse if they get part way in and it comes to a stand still and nobody else wants to pick up the work unless they charge you another big fee.

  Do you actually own the land? If so then try to sell the land if it is worth something (your partner don't want to live there).
  Alternatively look at finding another builder who can slap on a decent 3BR 2 Bath on there for cheap and quick then flog it off.

  Not sure what the rules are but not really worthwhile being a landlord in Victoria these days.

  • 

    Pootie Tang on 02/03/2023 - 17:12

    +1

    Thanks for your response. Basically the jist of it. Land is one back from the beach so I will keep it for a bit at least. Only a small block but my only asset effectively unless you count eneloops and hayfever tablets.

    • 

      netjock on 03/03/2023 - 00:54

      Without knowing size of your land and what your build looks like I'd suggest having a look that this bunch?

      Imagine Kit Homes example

      The $100k is only for above ground materials not including slab and fit out.

      You will need to find a builder, plumber and electrician etc. They say $100k for the kit home and probably 1.5x on top to complete which will make it $250k.

      If you are game enough find an architect and use one of their plans and adapt it to your block. I am doing an 18sq at the moment and architect + planning is about $18k in fees then add $250k on top (per above) you could probably have it wrapped up for $300k to $350k.

      Good luck!

  • 

    HeWhoKnows on 03/03/2023 - 15:48

    -1

    Cost have gone up beyond reasonable?

    Are you serious?

    we are looking at cost increases of 30% pa in the building industry
    And its way out of control of the builder

    They are just trying to cover thier costs and lots are going bust because they are not keeping up with the cost increases being passed onto them.

    And the builder going bust half way through the profect is by far the greater risk for OP

    • 

      netjock on 03/03/2023 - 16:35

      +4

      Lets look at it this way. You want to buy a OzB top the line TV. You get an offer of say $4000, no delivery date but you know don't worry I got "mates" fast forward 2 years and that top of the line TV is now $4,800 and still don't give you a delivery date but please agree to the difference.

      The housing industry needs to get a grip. Don't sign fixed price contracts 2 years out expecting prices to be the same. Typical people without common sense filling up pipelines of work and giving people lies on expectations.

      Don't take on work you can't start in 3 months and finish within 6 months. Time is money. In this instance it is money that will send a builder bankrupt as we now know.

      The building course is obviously not enough, you need to get them to do economics and advance finance (finance is actually thought in the building course) because obviously they are not too good at reading it. The HIA actually has economic briefing publish to members (and a breakfast, we know tradies love to have breakfast), they obviously don't pay much attention.

• 

  Drakesy on 02/03/2023 - 16:08

  +2

  Yeah this wouldn't fly in private industry (lawyers would jump in at first notice).

  But understandably the builder is used to residents rolling over and getting them to scratch their belly. First thing you did right was to push back with a lawyer.
  Yes everything has gone up in price, ~10-15% is standard across the market. It sounds like the builder is having cash flow issues which may be weighing on it.

  I'd be wary of handing over money given the number of bust builders that leave a slab and walk away.

  Unfortunately there's no limits to the variations they can impose and due to the contract wording you're hostage to them until its complete.
  And yes a lawyer drawn up addendum isn't industry standard, costs can continue to escalate throughout the build. I'd question the legal weighting of this as well.

  When we get issued a variation we require invoices from suppliers to justify the increase. (not that we ever get hit with it as lump sum contracts aren't subject to cost increases generally.

  • 

    Pootie Tang on 02/03/2023 - 17:13

    +1

    Thank you. Yes, the initial correspondence was to justify the costs and heard crickets. I have not agreed to the new terms of the contract yet so its in a holding pattern until resolved.

  • 

    Pootie Tang on 02/03/2023 - 18:28

    To clarify please, when you need to issue invoices to justify your cost increases, how long is it from when you know about the increase to when you communicate that with your client? Does it become unenforceable if a certain period of time elapses?

    • 

      Drakesy on 02/03/2023 - 21:59

      +1

      The invoice could come any time during the construction process, even then, as residential houses aren't lump sum (which is one of the standard contracts for private and government) there's no upper limit on the number of cost increases they can impose.

      All i'd require is an itemised breakdown of the cost increases - related back to your original costs and query every one that could be related to an invoice (materials etc.) labor costs should be capped at say a 15% increase which is palatable.

      But yeah, unfortunately the land and building packages are generally written in the builder's favour. In this case they'd probably still make their money back if you decided to pull out.

      I wouldn't work with 90% of builders seeing how they complete shonky work and charge like a wounded bull.

    • 

      HeWhoKnows on 03/03/2023 - 15:53

      Pls be realistic
      You cant ask for invoices for work that hasnt commenced
      And the builder doesnt have to provide them either.
      In these days of high inflation you either:
      a) accept that costs are going up and up and up and proceed
      OR
      b) dont proceed and watch your dream home disappear into the clouds of inflation

• 

  garetz on 02/03/2023 - 16:27

  +2

  Follow your lawyers advice, that is what you are paying them for.
  Whatever the addendum is specifically, if the builder does not want to sign that, then they are probably looking to screw you over in the future.

  • 

    Pootie Tang on 02/03/2023 - 17:14

    Yep, thanks.

  • 

    HeWhoKnows on 03/03/2023 - 15:55

    Rubbish
    Every business has a right to recover inreased costs

    If anything its builders being screwed over

    Thats why so many are going bust

    OP should pray theirs doesnt go belly up becasaue they will end up with a lost deposit and no home

• 

  dcep on 02/03/2023 - 16:37

  +1

  I can assure you this won't be the last hurdle (or increase) let alone the built haven't even got started yet so expect more nightmares to come for something that you don't want anymore. Ask yourself if it's worth it.

  • 

    Pootie Tang on 02/03/2023 - 17:15

    Can you please elaborate on the worth. You mean the lawyer fees and the ongoing build or just the whole thing. It is draining but just wanting some light at the end of the tunnel which I thought we (builder and I) had agreed on.

    • 

      HeWhoKnows on 03/03/2023 - 15:56

      -1

      Its simple
      You either accept its going to cost 50-60% more by the time you finish or you dont go ahead

      • 

        Pootie Tang on 03/03/2023 - 23:08

        +2

        Or I can reserve my rights under the contract which says rise and fall is not enforceable on a contract with no end date

• 

  orangetrain on 02/03/2023 - 16:45

  +3

  Welcome to Home and Land packages where builders tell you to take a hike if you want the solicitor to look over the contract, a contract worth hundreds of thousands!!! The builder knows that there are many idiots that are happy to sign without a solicitor review.

  Look at Whingepool for more examples of builders doing a dodgy. Even your solicitor can't suggest anything except to work with your builder. I'd try to cut your losses and run before costs increase further.

  • 

    Pootie Tang on 02/03/2023 - 17:19

    Never again re: house and build.

    Solicitor has offered the avenue of termination of the contract or the fact they need to accept the original terms of the contract as it was poorly drafted. I would have obviously never have picked up on those things. Its been dodgy the whole way and this was just the final straw/extortion.

  • 

    HeWhoKnows on 03/03/2023 - 15:57

    -1

    "Even your solicitor can't suggest anything except to work with your builder."

    Correct!

• 

  shangoz on 02/03/2023 - 16:48

  Agree, not the good time to build especially interest might up to 6.5% or, even 7.5%, it means you borrowing 1mil, just interest need to prepare 65k or 75k first year let alone principal.

  • 

    Pootie Tang on 02/03/2023 - 17:20

    2/3s that with the land but yeah. Still not fun.

  • 

    HeWhoKnows on 03/03/2023 - 16:02

    RBA rates are currently at 3.35% which is still very very low by historical standards…
    Quite simply the RBA rate is still highly "expansionary" and so encouraging way too many people to take on too much debt and spend way too much.

    JP Morgan suggests that to get rates back to just "Neutral" the RBA rate would need to increase thier cash rate to 7%. Add about 2.5% for mortgage rates.
    And I repeat, thats to get back to "Neutral"

    Then to contain inflation the rates need to rise above the inflation rate

    So lots more pain to come for Op and its not just in the rising cost of building a new home

• 

  TurboTortoise on 02/03/2023 - 17:35

  +1

  'Solicitor has offered the avenue of termination of the contract or the fact they need to accept the original terms of the contract as it was poorly drafted'. Can you be more specific on exactly what happens if you pursue the 'avenue of termination'? Do you retain the land? Does the builder? Is the builder holding any of your deposit? What role does your lender pay ie do they have to approve any additional payment etc Until you are very clear on what happens if you terminate it would be difficult to make a call in my opinion

  • 

    Pootie Tang on 02/03/2023 - 18:18

    Correct, it was poorly drafted. They do have a buy back clause on the land but they said they wouldn't enact it and I have that in writing and queried at the time of build. I also signed an addendum so they could have that buy back clause (another red flag), my conveyor and separate friend in commercial law said its a standard clause so I signed it. So yes, I would retain the land (per legal advice now as well due to the flakiness of the contract). The builder has my deposit which is 7.5k. The lender, the builder and the land agent, I learnt down the track they are all intertwined. The developer used company x to sell the sub division, I went with the lender next door as he did back flips to get me approval, now I am with the builder, looking back on it it was all coordinated and they would all be speaking, hence my engagement of a lawyer once I put it all together. So yes, if I terminate, I keep the land. Id rather have a house built but maybe with interest rates it would be an idea to hold off but then I fear trying to get something built between two constructions sites as my understanding much better/cheaper to do all at once. Not to mention the dumping on the land that will occur if they dont build mine and build the other two sites. So I am hoping they look at it and just roll over as what they are expecting of me.

    • 

      TurboTortoise on 02/03/2023 - 18:40

      So you keep the land (and title is in your name right?), the builder wont give up the 7.5k deposit, the loan for 400k was for home and land but you are not getting the house built. Do you know exactly how the loan would e restructured?
      Do you know you can actually build on the land and there is not a specific planning type restriction etc Just a bit suspicious the developer may have more leverage than you think. Hopefully not. Good luck.

      • 

        Pootie Tang on 02/03/2023 - 19:11

        My lawyers have said I would keep the land and title in my name, yes. Loan for build is 400k but has not kicked in as have not gone to site. Currently I'm paying a loan for the land and when building starts hypothetically, I'll have a loan for the build. Unsure regarding the dwellings on the property but I'm guessing they would need council approval to adjust the design if I pull out. Thanks for your input.

• 

  Tiredman on 02/03/2023 - 17:58

  +2

  "doesn't have an end date" This is a major red flag. Should've walked away immediately. If the builder can't even afford to start the entire 6 units build without your one unit, that's another red flag. Probably trying to use the neighbors to put pressure on you. End game for this is probably terminate the contract like what you are trying to do.

  I just got out of a major war with my previous builder and also with VMIA (Victoria gov's building insurance). End of the day, it's a competition to see who can stomach the most legal fees before tapping out unless there is some form of compromise.

  • 

    Pootie Tang on 02/03/2023 - 18:20

    +1

    What was your ending if you dont mind sharing? Yes, my stomach is churning but hopefully with mentioned lawyer costs it all falls on them if it goes to court but I dont think it will, the costs are a risk I am willing to take based on the advice I have received.

    Thanks for your input.

    • 

      Tiredman on 02/03/2023 - 19:06

      +1

      We were building 2 units in Melbourne. So each unit has a limit of $300k insurance so $600k all up. I managed to claim the full amount but legal feels were close to $100k at the end and engaging a new builder at the new market price meant my build costed me more than what the previous builder quoted. But we had no choice. the previous builder was going bankrupt and there is no intention to get it built at all. VMIA also tried to deny me my claim with plenty of excuses so we went to war with their lawyers and won. Not for the faint hearted though. Whole process took 2 years so the 15% completed site was just sitting there rotting. So i think your case is much better than mine!

      So end of the day, best if there is compromise with the builder to end the contract. With a prolonged battle, only the lawyers win. Takes a while to find good builders, a lot of them are dodgy as f. But i found a couple of good ones that i am working with now so all is good.

      • 

        Pootie Tang on 02/03/2023 - 19:13

        Thanks for sharing. Glad you got there. So you were not awarded costs? Yes, your situation sounds significantly dire to mine and I try put that on perspective that is the whole of Australia being jerked about, for sanity anyway.

        • 

          Tiredman on 02/03/2023 - 19:30

          @Pootie Tang: Yeah VMIA just cut me a cheque for the full claim. I could use the money to cover all the legal costs and pay the next builder.

          • 

            Pootie Tang on 02/03/2023 - 20:24

            @Tiredman: Fantastic. Congratulations to get to that point. Pay the $15 so it deposits overnight.

• 

  Ghost47 on 02/03/2023 - 19:39

  +7

  Everything that has to do with houses in this country is dodgy. Do not trust anyone when it comes to anything remotely related to housing.

  • 

    Pootie Tang on 02/03/2023 - 19:50

    That's the sort of advice I needed. Trust your instincts. Cheers guru

    • 

      netjock on 03/03/2023 - 00:58

      +2

      One thing you learnt the hard way is not getting firm deadlines with out clause. If they don't start in 3 months and finishing building say 9 months then forget it.

      It actually only takes 2 months from breaking ground to lock up stage, internal fit out takes a few months because of lack of labor but if you had people on site every day I wouldn't be surprised to be able to be fully complete in 6 months (I did a few units a decade ago and it was about 6 months, people are just having a laugh these days building a cookie cutter home taking 12 months unless you are building a mansion and need Italian marble to be shipped in).

  • 

    netjock on 03/03/2023 - 00:55

    I agree with this. It is hard to find a good trades person. Probably because it trades are not professionalized. They would like to make it sound like that. voted +1

• 

  decryption on 03/03/2023 - 07:47

  +8

  Sounds like you've done everything right by engaging a lawyer. Probably shouldn't have agreed to the contract without a date in it. This is just how builders act - untrustworthy and when something doesn't go their way, instead of sucking it up and doing the right thing, they bitch and moan and turn it into your problem.

  Fact is, there's more consumer rights for buying an iPhone than there is to build a house. Their contracts aren't negotiations, they're take it or leave it and are heavily skewed towards the builder.

  I don't have any advice, but don't feel like you (profanity) up, I don't think there's anyone out there who has built a home who hasn't been let down by their builder. If there is, they would be in the minority.

  When I built the home I'm living in now, 7 years ago, the quality was atrocious. I got a building inspector to check everything before paying the final invoice and the builder refused to fix anything but the most minor of issues. For months we argued back and forth about Australian Standards and how their work doesn't meet it and that they need to fix it as per their contract.

  That was going nowhere and the builder was pretty much happy to just not get paid the final invoice and not give me the keys to the house and the occupancy permit. Knowing they weren't going to budge and tired of my house sitting empty for months, I got on Ozbargain, made a post about it, it went viral and the builder shit themselves begging me to take it down as it was the first result when looking them up on Google (even higher than their own social media & web page).

  We managed to negotiate a fee (which was pretty much the same as the final payment) that would allow me to get someone else in to fix their mistakes in return for taking the post down. It would have been way cheaper and easier for them just to have built the house properly in the first place. I assume they just slap any old shit together and if 90% of the customers just take it and 10% fight it, that's still more profitable than doing it right in the first place.

  A family member built a home (different builder) and it wasn't as bad, but still a major headache with having to watch the builder like a hawk. Every stage of the build they'd take short cuts, not do their work to the bare minimum of standards and every time you'd point it out they'd argue and argue as if we were trying to solve the Israel & Palestine conflict. It's their tactic to stall and delay as they know you're in the weaker position paying a mortgage, paying rent on where you live and needing to move in to the house.

  I am certain that the vast majority of the trades working on a normal home build have never read the Australian Standards and have no idea what they're supposed to actually do in order to do a job to those standards.

  I hate the building industry with a passion. They cause so much heartache for so many people, they are grubs. Government should really be tighter in regulating them, but they're greasy (profanity) that have incredible sway over the government not to touch their precious little industry - look at the Homebuilder grant program introduced during COVID. The slightest sign they might have a downturn and the government's wallet opened up with unlimited money. They ended up with too much work and not enough trades and materials!

• 

  [Deactivated] on 03/03/2023 - 09:03

  @Pootie Tang
  Are you willing to name the builder?
  It sounds like my experience with a SA builder. 🤔

• 

  OzBargainGirl on 03/03/2023 - 09:27

  +1

  Pootie: you have been clearly shown danger signs, and you still want to jump in the volcano, and you are asking for advice on how to jump in the volcano?

  $7,500: money down the drain, say goodbye, grieve, and get over it.
  $X,XXX: money to the lawyers, say goodbye, grieve and get over it.

  Your wife does NOT want to live there.
  If you build, you can already see that you will not be happy with it; they will take the money further down the road from you - they will find a way.

  Sell the land ASAP. Offer it to people building next to you first. You can still get a decent price for it.

  Free the money, get out of debt, and start new life where your partner wants.

• 

  OzBargainGirl on 03/03/2023 - 09:28

  You are lucky that you did not come with a story where builder went bankrupt.

  • 

    Lord Fart Bucket on 03/03/2023 - 11:21

    +2

    That's in 6 months.

    • 

      OzBargainGirl on 04/03/2023 - 12:25

      That's true. Because what is coming for housing is worse than 1896 in Melbourne.

      So it would be in his interest to build the one build his future wife would be happy with, and drop this one like a hot cake.

      No dates of any kind.

      Building multiple things concurrently and no signs of the building entity being organised.

      If they do not have a sense of time (dates), space (yes, you exist and your build is important), costs (have not calculated projections based on previous inflationary environment), location (hello, we are building these all at once???) then what exactly do you believe they will do for you?

      This is worse then being stuck in a bad marriage. You already know that all parts are crap, and you still are looking for words of encouragement to go along with it.

      What the poster has described is quick-sand, designed to eat your money (already has), time (already has), effort (already has), will (already has), life (already has) with nothing in return - but an overcapitalised build on a block that will drop in price/value as the time goes on.

      • 

        Pootie Tang on 06/03/2023 - 17:18

        Quick sand is the most accurate explanation anyone has ever said. So re partner we are going to hopefully build something together and keep what I'm getting built as a holiday house/air bnb. Thanks for all your input. Very valid and glaring points that I know existed but trusted the builder, agent she developer and hence after all the trust and broken promises I got a lawyer.

• 

  pencilhead on 03/03/2023 - 11:06

  Maybe ask on home1 forum. It is good for most building advice/reviews.
  https://forum.homeone.com.au/