Building Contract Signed

We have now signed a ‘fixed price’ building contract with Orbit Homes for the construction of the Balwyn 196 on our block on Red Brush Drive, Keysborough. However, as anyone familiar with contracts for residential construction in Australia will tell you, there really is no such thing as a fixed price contract if the term is taken literally. First of all there are variations. I am hoping there will be no need for us to request any variations. Hopefully we have thought through what we need the builder to provide and what we will arrange to installed after the build is complete. Orbit Homes charge a $1,000 penalty for each variation now the contract is signed. That is quite an incentive to keep variations initiated by us to minimum.

However, the building surveyor or builder may require a variation and the builder is permitted to charge for this variation and this charge may include  a 20% markup. Standard clauses in the contract allow for price increases under the following circumstances :

• Increase in taxes
• Provisional Items
• Prime Cost Items
• Interest on Overdue Payments
• The need for a Boundary Survey

In our case there are no provisional or prime cost items in the contract. We believe the other items in the list are unlikely to apply. There are also liquidated damages payable for delays. If building completion takes longer than is allowed for in the contract then the owner is entitled to liquidated damages as specified in the contract.