A clear, thorough and workable building contract is integral to the success of any building project. In fact, when it comes to a construction project, a contract is equally important as your plans, design and selections.
According to the HIA, a building contract should be used for every residential construction project – whether it’s a minor bathroom renovation or a completely new custom home.
A building contract outlines clear guidelines for which both parties; builder and owner, need to abide by throughout the construction and warranty period of a project. The contract will specify the build timeframe, scope of works, contract price, payment schedule, delays penalties and variations.
After a building contract has been signed by both parties, any adjustments to plans and specifications needs to be approved in writing in the form of a variation, as per Victorian legislation.
When is a variation needed?
Either the builder or the owner may ask for building works to be varied. The request must be detailed in writing and signed by both parties.
Owner Requested Variation
An owner can request anything from design changes, to the upgrade of fixtures and fittings, or even adding extra electrical or plumbing points.
Mandatory Variations (requested by builder / surveyor / architect / engineer)
When problems arise with plans, drawings or specifications during a projects initial review, mandatory variations may arise. For example, a building surveyor may require privacy screening to open areas. The builder will need to specify and price the cost to add this. For a renovation project, unforeseen building works may also arise.
Who needs to approve a variation?
A variation must be signed off by both parties – builder and owner. If a client doesn’t sign off on a variation document, the builder should accept the client does not agree and should continue with the original specification. This may cause site delays while the variation is pending approval or reject.
If a variation is more than 2 per cent of the contract price, a variation document must be prepared and signed by the client before the variation work can be undertaken. If there is no written approval, it proves difficult to demonstrate that the client agreed to the variation and additional cost.
Variation time delays
Some variations may require an adjustment to the building contract time period. For example, additional labour and time may be required if a client decides to upgrade their tiling in all wet areas to floor-to-ceiling. This could add 5 days to the build time. While this may seem insignificant, if there are multiple variations and changes it’s important to take note the extension of time to the building period.
There may be a small fee required to cover the administration side of a variation, in addition to the cost of building works i.e. amendment to working drawings or structural engineering. If the plans need to be resubmitted to council or a building surveyor there may be also be small third party fee.
Variations are due after the completion of works at the next progress payment. For example, the charge for adding an extra powerpoint or light switch will be invoiced at the rough-in / lockup stage.
Latest legislation on variations
From July 1 2019, it became mandatory for any variations that increases the building work by $15,625 or more, to be notified to the Victorian Building Authority within 28 days.
To find out more about contract variations, or to get started on creating your very own building contract, get in touch with the Mornington Peninsula’s renovation and custom home building specialist, Glenco Building Group today!