Domestic Building Contracts – Why homeowners and developers should obtain legal advice before signing – Construction Lawyers Melbourne – Level Playing Field Lawyers

Domestic Building Contracts – Why homeowners and developers should obtain legal advice before signing

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Lessons from the liquidation of Porter Davis, Hallbury Homes and others.

Method B is commonly used in Domestic Building Contracts, and many future homeowners sign them without full knowledge of the potential consequences.

However, the illustration of what that payment structure is, is labelled “Method A”

Method A

The standard payment schedule (“Method A”) is:

Deposit stage 5%;
Base stage 10%;
Frame Stage 15%;
Lock up stage 35%;
Fixing stage 25%;
Final stage 10%;

Method B

In comparison, an example of “Method B”) is:

Deposit stage 5%;
Base stage 20%;
Frame Stage 25%;
Lock up stage 30%;
Fixing stage 15%;
Final stage 5%;

It’s clear that a Method B may bring forward further payment. In this example, you have paid 50% by ‘Framing stage” instead of 30% under Method A.

Method B payment schedule can often result in overpayment of works by future homeowners. This is a huge risk for you if your builder becomes insolvent. If you have overpaid a builder for your home and they become insolvent, this may put you under cash flow pressure.

Also, if your building contract is terminated, overpayment can place you under cash flow pressure. For example, if you are unable to obtain additional funding to pay a new builder to complete your home.

Solution

With the increasing number of Domestic Builders becoming insolvent, we recommend seeking legal advice before signing your Building Contract. We also recommend seeking legal advice if your Builder wants to terminate your contract.

If you are thinking of entering into a Domestic Building Contract, feel free to give our office a call on (03) 9041 4674 or email [email protected].

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