Pay As You Go

When you’re build­ing a home, make sure ev­ery progress pay­ment re­flects a job well done, writes

Australian House & Garden - - News - Har­vey Gren­nan.

Builder’s progress pay­ments re­ward a job well done.

Asucker for hard-luck sto­ries, that’s me. Not long ago, I was ap­proach­ing the end of a home­build­ing project that in­volved a lot of steel­work, done by a weld­ing fab­ri­ca­tor un­der a con­tract that had noth­ing to do with the builder. The fab­ri­ca­tor asked for his fi­nal pay­ment early so he could pay for ma­te­ri­als and ap­ply all his time to com­plet­ing my job. I paid him – silly me.

Of course, he dis­ap­peared. I spent weeks try­ing to track him down, ring­ing a phone that never an­swered, bash­ing on his front door, all to no avail. The mat­ter ended up in court and an­other con­trac­tor fin­ished the job. The les­son? Never pay a progress pay­ment be­fore it’s due.

When you sign a con­tract for a house to be built, it will in­clude a sched­ule of progress pay­ments. Dodgy builders some­times try to ‘front-end load’ this sched­ule so that they’ll get big, un­war­ranted pay­ments early on.

De­pend­ing on which state you live in, leg­is­la­tion may limit the amount you pay the builder as a de­posit to five per cent. Typ­i­cally, you’ll then pay 10 per cent for the slab/foun­da­tions, 15 per cent when the frame is erected, an­other 35 per cent at lock-up stage and 25 per cent when the ‘fix-out’ (ar­chi­traves, doors and the like) is done. The 10 per cent bal­ance is the fi­nal pay­ment.

While leg­is­la­tion varies across states, the Hous­ing In­dus­try As­so­ci­a­tion ad­vises that, gen­er­ally, any progress pay­ment should be for work that has ac­tu­ally been per­formed and ma­te­ri­als that have been sup­plied. A builder can­not, for ex­am­ple, de­mand a progress pay­ment for bricks un­til the bricks have been de­liv­ered to the site.

Don’t sign a build­ing con­tract be­fore check­ing it with both your bank and your so­lic­i­tor. Some­times a bank will have spe­cial re­quire­ments for progress pay­ments, and these may need to be cov­ered in ad­di­tional clauses.

State fair-trad­ing or­gan­i­sa­tions sug­gest hav­ing a progress in­spec­tion done by an in­de­pen­dent build­ing con­sul­tant or ar­chi­tect be­fore each pay­ment is made. It will then be the con­sul­tant’s job to make sure all the work set out in the con­tract has been done and meets the ap­pro­pri­ate stan­dards. Ex­pect to pay be­tween $250 and $500 for each of the in­spec­tions.

An in­de­pen­dent in­spec­tion is es­pe­cially im­por­tant when it comes to the fi­nal pay­ment at ‘prac­ti­cal com­ple­tion’. This is when all works are done, with the ex­cep­tion of ‘mi­nor de­fects or omis­sions’, and the house is fit for oc­cu­pa­tion. At this stage, be­fore you pay up, you should be given all the rel­e­vant war­ranties and cer­tifi­cates for things such as wa­ter­proof­ing and ter­mite pro­tec­tion.

If nec­es­sary, with­hold the fi­nal pay­ment; it’s one of the best ways to en­sure that your builder stays on the job un­til it’s fin­ished and the ma­jor de­fects are rec­ti­fied. Just make sure you give the rea­sons in writ­ing.

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