When you start exploring your options to building a home, it is an exciting time. Undertaking a new home build means you’re taking a step towards your dream property, but it can also be confusing for owners to understand building contracts.
In New South Wales, all residential building works valued at $5,000 or more are required to have a written contract before building can commence. The type of contract offered by a builder will depend on a few factors including property type, fixtures and fittings, and of course the builder. At Haverton Homes, we always aim to use a fixed price contract so our owners can ensure they are in control of their budget. The contract price is fixed until the agreed build commencement date and once we commence, you will not be charged any additional site cost variation.
What is the difference between a fixed-price and cost-plus contract?
A fixed-price contract structure doesn’t depend on resources used, and holds the build price until the agreed commencement date in the future. It also protect purchaser from any additional site cost once the build starts. E.g Hitting rocks, additional retaining walls due to slope, additional structural due to soil conditions. However, if a statutory authority introduces or changes a requirement, which was not known at the time the build contract is signed then the builder might have to pass on any cost from the requirement to you.
A cost-plus contract, while usually more flexible to amendments along the way, means that the builder obtains material and services throughout the stages of the building process. The costs of materials and services are then passed on to the owner, plus an agreed percentage margin that goes to the builder. In cost-plus contracts, budget can easily be exceeded.
We recommend a fixed-price contract because while there can be necessary to add-on provisional sums, owners can have confidence in their budget from the start. Provisional sums or prime costs refer to any items, fixtures, fittings or selections, which were not priced prior to the contract being signed. This often includes items like tapware or appliances that the owner had yet to select. We provide prime cost estimates for our clients, so they have an understanding of their likely budget, however sometimes based on their selections this gets exceeded.
When we are putting together a contract for a new owner, we encourage them to carefully plan out their fixtures and appliances ahead of time. We want to have as few prime cost add-ons as possible. When you finalise these details before signing a contract, you will have a better understanding of what your final build budget will be. If you’re reviewing a contract and it doesn’t include a prime cost or provisional sum estimate, it’s best to seek some advice to get an estimate.
We Provide Transparent Fixed Price Contracts
At Haverton Homes, we avoid budget surprises. All of our contracts are fixed price: your contract price is guaranteed from the moment you sign up to your build commencement date; we also guarantee no site cost variations once we have commenced the build.
If you want to know more about our fixed price contract policies, get in touch with a member of our team. We will run you through our contract structure, estimates and make sure you have all the information you need to confidently sign a contract and start your new home build.
