Article by Nicholas Graham

When your house build does not go to plan

With supply chain issues and difficulties for builders to effectively program construction works becoming the new norm, it is imperative that builders and building owners alike are familiar with the circumstances that clients can cool-off on their building contracts.

What happens after things go cold?

The Building Work Contractors Act is unusual in that it is one of only a few pieces of law that gives a contracting party the right to ‘cool off’ from a contract for no reason at all.  Owners under domestic building work contracts can simply give a notice to the builder within the “prescribed period” that they no longer want to be bound by the building contract.  If they do that properly, the building contract comes to an end and the builder only has a very limited money claim against the owner.  In case you wondered, builders don’t have cooling off rights.

How to cool off

For an owner to ‘do that properly’ they have to serve notice as required by the Act within the prescribed period.

The prescribed period is usually 5 clear business days after the building contract has been signed.  I say ‘usually’ because if the builder does not comply with certain technical requirements under the Act, the prescribed period can extend up to when the building work is completed.

A cooling off notice also has to:

• be in writing;
• be served personally on the builder, or posted by certified mail addressed to the builder; and
• say that the owner does not intend to be bound by the contract.

The Act says that, if the owner gets all of this right, the contract is taken to be terminated and the builder is only entitled to payment for:

• any materials supplied;
• any building work done;
• other services performed under the contract.

Unless you have a written agreement about how much these things are worth, you are heading for a dispute.  So keep a record!

If there is a dispute about how much the builder is entitled to, the builder can apply to the Court for an order for payment for any materials supplied, or any building work or other services performed, by the builder.  Going to court costs money and it is better to avoid it if you can. You should also note that the owner also has the right to apply to the Court for the repayment of the whole or part of any payments already made under the contract.

Some Practical Tips

In light of the supply chain issues, all builders should have a preliminary services agreement, which is a short agreement which usually comes before the building contract and sets out how much the builder charges to do the things that happen before building work commences. This will ensure that both parties are on the same page!

If you’re a builder looking to mitigate risk or a building owner wanting peace of mind about your entitlement to cool-off, get in contact with us.

Some Practical Tips

In light of the supply chain issues, all builders should have a preliminary services agreement, which is a short agreement which usually comes before the building contract and sets out how much the builder charges to do the things that happen before building work commences. This will ensure that both parties are on the same page!

If you’re a builder looking to mitigate risk or a building owner wanting peace of mind about your entitlement to cool-off, get in contact with us!