Understanding a New Home Building Contract
When you have made the jump and selected a builder for your new home, one of the key milestones in the early stages is signing your Building Contract. This can be a very daunting time, particularly for first home buyers new to the process.
Below is an explanation of some of the key components to the contract:
Most people want to know how long it will take to build their home. On a standard home, construction should take no more than 4-5 months. That being said, a builder must allow for delays, public holidays and wet weather. For this reason, the Building Period in the contract is often 2-3 months more than the expected completion date. This doesn’t mean it will take that long, it is just the builder allowing for worst case scenario.
Construction cannot begin until the builder has all the permits and approvals in place, and the client has capacity to pay (funds or finance approval). While everyone wants to know when construction will start, the above can be affected by a number of factors outside the builder’s control. This is why as a default, Commencement begins a number of days after all the approvals are in place.
Read through these so you understand when the builder will invoice you for each stage. Some builders provide different progress payment structures, so ensure you check through. A common mistake is that the Final Payment is due when you get the keys. If you check your contract, in most instances Final Payment is due at Practical Completion. Also, if you don’t make progress payments on time, not only can you be charged interest, the builder can cancel the contract if not addressed promptly.
These are simply three of the most common areas where people are unsure or ask questions. If you have any questions, ensure you talk to your builder before signing the contract.