Home Building Contract (3) - WA

What is a contract?

A contract is a formal agreement that sets out in writing the arrangement between the homeowner and the person undertaking the work. The Home Building Contracts Act 1991 requires that a contract must be in writing, however the form that a contract can take ranges from a detailed quotation for a small job, through to a number of documents bundled together (including drawings and specifications) as happens for a new home, major renovation or swimming pool installation.

What should be in a contract?

A contract must contain all the terms, conditions and provisions of the agreement, and must be dated and signed by both parties to make the contract legally binding. If these requirements aren’t met, the homeowner can terminate the contract at any time before the work is completed simply by notifying the builder in writing. In addition, by not abiding by the conditions of the Home Building Contracts Act 1991 a builder can be fined up to $2,000.

Price Rises ‘Rise and fall’ clauses are prohibited under the Home Building Contracts Act 1991, meaning that the contract price must be "fixed". Any attempt to incorporate these into a contract can attract a $10,000 fine. Some price-rise clauses can be written into the contract to accommodate increases in actual costs after the contract has been signed, such as changes to State or Commonwealth laws, taxes or duty, or delays not caused by the builder. Special conditions also apply to ‘cost plus’ contracts.

Deposits

Deposits must not exceed 6.5% of the total cost of the work. If the builder takes a deposit more than this then the homeowner has the right to terminate the contract before the work is completed.

Progress Payments

Progress payments must be stipulated in the contract and must only be claimed for work actually completed or materials already supplied. Failure to comply with these requirements can result in a penalty up to $10,000.

Contract Variations

Variations to a contract must be signed and dated by both parties with a copy given to the homeowner before any variation work has commenced. Exceptions include changes resulting from directions given by the local government building surveyor or from an unforeseeable circumstances.

Workmanship Defects

Builders are liable to make good defects in home building work where notified in writing within 4 months of practical completion. This is to be at no extra cost to the homeowner. The Builders’ Registration Act 1939 also gives power to the Building Disputes Tribunal to issue an Order to Remedy on a builder where work is found to be faulty or unsatisfactory up to six years from completion.