On 1 July, 2015, new contractual requirements took effect and the new laws have a direct impact on residential building work. It is hoped that the new laws will minimise disputes, while also improving fairness for all parties to the contract. So with that being said, let’s explore some of the changes that were recently introduced.
Contractual requirements based on the work’s value
Level 1 Renovation, Extension and Repair Contract: for domestic contracts priced more than $3,300 but less than $20,000. A Level 1 regulated contract will apply for lower-value domestic work, and is less regulated when compared to Level 2 contracts.
Level 2 contracts and the New Home Construction Contract: for domestic contracts equal to, or more than $20,000. In addition to providing a Consumer Building Guide (the Guide) by the contractor to the client prior to signing the contract, Level 2 contracts have more onerous general provisions related as pricing, the methodology used in calculating price, and warnings if there are any price changes.
Cooling-off period
An owner may withdraw from the contract within five business days of receiving copies of the signed contract, and the contractor must be informed in writing. Additionally, an owner may withdraw from the contract within five business days if they have not been provided a copy of the signed contract, and in addition to a Level 2 contract, the Guide after the cooling-off period.
Commencement Notice
For works relating to Level 2 contracts, the contractor must provide the owner a signed Commencement Notice within 10 business days of work commencing on site. The Commencement Notice must outline the date in which work has commenced on site, and the Date for Practical Completion.
Deposits and progress payments
For Level 1 contracts, the maximum deposit allowed is 10%, while for Level 2 contracts, the maximum deposit allowed is 5% and 20% where the value of the work performed off-site is greater than 50% of the total contract.
In terms of progress payments, it is up to the parties to determine the number and timing of progress payments. However, the Queensland Building and Construction Commission Act 1991
(Qld) (the Act), requires that a claim is proportionate to the value of the completed work on site. So, for example, an owner shouldn’t pay more than 50% if less than half the work has been completed.
Variations
One significant area for cost overruns and building disputes involve variations. Therefore, there are a number of requirements when there have been any changes to the work done or in materials used for the building work.
An owner has to agree in writing to a variation, however, there is no requirement that an owner sign a variation but rather, the variation could be agreed upon via email. Although, any work on the variation cannot begin until the owner has agreed in writing to the commencement of the variation.
Contractors are to provide owners with a copy of the variation prior to the following events:
• five business days has passed from the time the parties have agreed to the variation; or
• any commencement of works related to the variation has begun.
For either single or multiple instances of variations where the contract price has increased by an amount greater than $5,000, an insurance premium must be paid to the Queensland Building and Construction Commission (the Commission) before the commencement of any variation work. For speculative residential construction work, and in instances where optional addition insurance cover has been taken up by an owner, the requirements still need to be met.
In the event of a variation, the document must meet the formal requirements as prescribed by the Act.
A failure to adhere to the aforementioned requirements in relation to variations, may attract a maximum penalty of 20 penalty units.
Extensions of Time (EOTs)
A Date for Practical Completion must be outlined for the building project, or how determination of the date arises. The Act outlines circumstances where a contractor may seek an extension of the date which must be done in writing. Owners upon considering the extension of time claim can respond in writing, and can be done via email. If the claim is approved, an extension to the Date for Practical Completion will be extended to the claimed period, and a signed copy of the claim must be provided to the owner within five business days of approval. In the event that the owner does not unreasonably reject the claim, the extension will be considered as ‘disputed’.
Concluding remarks
With the new laws affecting residential building work coming into being on 1 July, contractors should be mindful of the heavier penalties and the increase in the maximum number of demerit points for contractors failing to comply with the new requirements under the Act.
This article or the information contained therein does not purport to provide a full explanation of the law, give advice or any guidance to anyone in connection the Queensland Building and Construction Commission Act 1991 (Qld) or drafting of construction contracts or any other issue and this article is not to be used by anyone to support their legal position or otherwise. For clarification purposes and further to the above this article does not purport to be advice in any regard. This firm cannot take responsibility for any action readers take based on this information. We would be happy to assist you with any property, real estate, development, building, construction and engineering related legal issues you may have, please get in touch via [email protected] or telephone our Brisbane office on (07) 3087 3463, Sydney office on (02) 9293 2546 or Sunshine Coast office on (07) 5413 9270 and one of our experienced lawyers will respond to you.