PERTH Variation Cost Ridiculously High ($55K)

Pandaboss on 06/10/2021 - 11:51

A rant but also drama for ozbargainers to read about.

My sister in law is building in Perth, she has subdivided a block and went with a builder DNB to carry out the build. Papers were signed a year or so ago and till this point no slab has been completed. They have cleared the land and ripped up the driveway(which after wards collapsed the wall and she and neighbour forked out costs to fix) they had to cut part of the existing house roof to get access and patch that up. That has been leaking ever since, but insisted it was there before they cut the roof.

She was given a $55k variation cost to be paid to continue the build. At this point no slab has been put down, their reasoning for this appropriate variation was increase to labour and materials.

The initial fixed price contract signed a year ago, was for $225k house build. Asking for another $55k on top is a huge increase, especially when most of her savings and available funds had been used.

We told them that we can't and the bank can't provide that $55k and ask them to reconsider. They then replied with another number $30k variation and take out the house painting, this to me triggered bells. Easily Going from $55k to $30k and taking paint out? The house is 4x2.

Shocked with the variation we wanted to see the actual breakdown of the costs, asking the builder to provide this in writing but constantly she has been left in the dark and with very little progress on getting the breakdown.

Is the builder up to something with the delay in response? Not providing breakdown costs?

It's a fixed price contract and are they able to ask for such a large variation without justification?

We are helping her to get through this as she English isn't her first language and don't want her to be put in unnecessary debt.

Home & Garden

Comments

Almost Banned on 06/10/2021 - 12:16

+6

Your sister-in-law needs to see a lawyer.
Jerome87 on 06/10/2021 - 12:17

Sounds like a terrible situation, but building a house isn't a game, and all the risk is generally borne by the purchaser. The only thing you / they could do now is seek independent legal advice as to the validity of the increases. Sorry to say, but there are likely to be several 'subject to escalation' clauses in the contract that absolves them of the financial risk. Her best bet might be paying them for their costs out of her own pocket for the earthworks and trying to get out of the contract - again independent legal advice here is essential.

If you are asking if 20-25% increases are valid, based on the increases in material prices I've seen, it's absolutely valid, and they likely have further to go. On the labor side, I've heard horror stories of framers turning up to a job site demanding an additional $10k cash from the builder or they won't start the job - and the builder (and the client) payed it. YMMV

As always if you don't have a good grasp of English, and you enter a common law contract without completely understanding your liabilities you won't find much sympathy anywhere - builders aren't charities.
Hithere on 06/10/2021 - 12:17

Suggest that your SIL contact Legal Aid WA.

If you are building or renovating your home, you may need help if something goes wrong or you would like to make a complaint.

Legal Aid WA does not give advice in this area, but we can refer to you someone who does.

https://www.legalaid.wa.gov.au/find-legal-answers/homes-and-…
rektrading on 06/10/2021 - 12:37

This was expected.

Western Australia's overheated building industry could see builders going broke in a boom
ABC Mid West & Wheatbelt / By Michelle Stanley
Posted Sun 22 Aug 2021 at 9:29pmSunday 22 Aug 2021 at 9:29 pm, updated Sun 22 Aug 2021 at 10:28 pm

Building materials such as timber and steel are in short supply which, Mr Taylor says, is leading to price increases of more than 40 per cent in some cases.
https://www.abc.net.au/news/2021-08-23/western-australia-bui…

Find the money now, pay it and make the next buyer pay 2x the cost the next time it's sold.
Drakesy on 06/10/2021 - 12:53

+2

I'm in engineering and in no way could a contractor raise a variation on a lump sum contract once signed if the cost of materials and labor increased. The only variations we would sign off on are ones brought about by us altering the design/deliverables.

The benefit of lump sum contracts, the builder wins out if they can complete the project under budget and efficiently (good for the builder).
However if builder costs go up they need to absorb it. If it was a rates contract then they can vary the costs, but as the change wasn't a result of the client the builder can't claim a variation. This sounds like the builder is having their cake and eating it.

You signed a contract for a sum, now the builder is reneging it.

There's a potential that the builder call pull out, you take on a new builder and then could sue the previous builder for the difference in costs from your original contract.

Admittedly though for the builder i hear brickies are getting paid $2-$4 a brick up from $0.20 a brick pre-covid.
- oscargamer on 06/10/2021 - 13:12
  
  ^ this, but seek legal advice. Preferably NOT legalaid. They are not the best. They can give quick cheap advice, but it's not always complete advice. IMO
- weezlebub on 06/10/2021 - 15:36
  
  this guy seems to know his stuff …
  
  they're bound to the terms of the contract, the delays are their own fault (being 12 months in and not having a slab down) … but this is a good thing if he leaves, another builder won't touch it (or will add 10-20% to costs) as you can't see what's inside the slab and they'd have to guarantee their work, when it may be the previous builders fault - messy!
- Pandaboss on 07/10/2021 - 00:38
  
  Thank you for this. We thought the same, how could such a high variation be put forward.
  
  It isn't our fault and the builder may or should have factored in the rising costs prior to build. Its a fixed contract and SIL has been complying every step of the way, having full trust in the builder to do the right thing for her.
- spackbace on 07/10/2021 - 02:49
  
  I'm in engineering and in no way could a contractor raise a variation on a lump sum contract once signed if the cost of materials and labor increased
  
  Ah the internet, where someone can say something like that, from an industry the OP isn't referring to, and everyone gives them a high 5…
  
  Ever heard of conditions? Most contracts has them. Yay for yours not having price increase associated ones, but OP's would.
  
  Guess what, I'm in car sales and if the manufacturer puts the retail price up, so too can we. If you don't like it and don't accept it, contract can become null and void.
  
  Every home building contract is having the same issue lately, this isn't isolated. In fact, OP is really late to the party to comment about an increase in costs.
  - Drakesy on 07/10/2021 - 09:49
    
    If you buy a car and between paying and signing for it and actually receiving the car the manufacturer/dealer increases the price then you have broken the contract.
    
    Whats the point of having a cost and contract if a party can change the conditions of a sale whenever they like?
    - spackbace on 07/10/2021 - 11:33
      
      Because there's outside influences… Cost of doing business increases, so the business doesn't have to cop the loss.
      
      I get it if you don't understand this concept, but it completely applies to the OP, your contracts don't.
      - Drakesy on 07/10/2021 - 11:35
        
        @spackbace: …
        Then you're breaking the contract and liable
        
        We hand out $4 million+ construction contracts and if its a lump sum the price agreed to is final, it would already have factored in contingencies such as this. If the builder fails to deliver on budget then the builder has to wear it. Thats construction.
        
        If your contract states that the builder is allowed to increase costs how they see fit then you have some serious flaws in your contract and should never have signed it.
- popsiee on 07/10/2021 - 13:36
  
  brickies are getting paid $2-$4 a brick up from $0.20 a brick pre-covid.
  
  I'm going to set up a team of brickies .
  - spackbace on 07/10/2021 - 15:04
    
    It wasn't $0.20/brick recently, more like $1/brick
    - popsiee on 07/10/2021 - 15:06
      
      I can afford my wall then :)
oscargamer on 06/10/2021 - 13:10
Read your contract, then put it down (because you don't actually understand it - not being rude, just real). Seek legal advice NOW, this week

Until they provide a breakdown and reason for the variation, tell them to comply with the contract. Do not tell them to keep working or to lay the slab or whatever. ONLY that they are required to comply with the signed the contract

Seek legal advice NOW (might have already sid that, but do it, TODAY)
PissLUR on 06/10/2021 - 13:46

Shonky Builders WA @ Facebook
tsunamisurfer on 06/10/2021 - 14:40

In every construction contract there is almost certainly a clause that covers the any increases in costs to be covered by the buyer.

There are very few real fixed cost contracts and it it were I would be concerned at what the contractor is doing to fulfil the contract and stay profitable.

Admittedly though for the builder i hear brickies are getting paid $2-$4 a brick up from $0.20 a brick pre-covid.

Yes builders are going around pinching each other's brickie teams and the bidding wars have made the costs astronomical. It however has not been $0.20 per brick in decades, it would have been around $1.50 - $2 a brick pre covid.
- weezlebub on 06/10/2021 - 15:37
  
  In South Australia, builders were complaining about 1$ per brick pre-covid (6 months before)
- Drakesy on 06/10/2021 - 16:11
  
  In every construction contract there is almost certainly a clause that covers the any increases in costs to be covered by the buyer.
  
  That sounds dangerous, in my sector this would be the first thing the lawyers would get removed from the contract, the contract has an agreed price to avoid this otherwise whats the point of having an agreed price?.
  Bit rough when the client has no say/hasn't changed anything and suddenly would get a bill for increased costs, this is what lump sum contracts are put in place to avoid.
  
  Admittedly the $0.20 per brick might've been a bit low, but still, brickies costs have doubled/tripled. I guess thats the success of their industry. They're there to capitalise when the going's good (or the government turns on the subsidy taps).
  - dasher86 on 07/10/2021 - 13:30
    
    well yes your sectors have lawyers on their book.
    
    most of us don't, and most contracts are written in the favour of the people writing them.
Tiredman on 06/10/2021 - 15:19

Read the contract and get a lawyer to read the contract. a 25% variation of the whole build? You are somewhat lucky the build has not started yet so if you need to change builders, it won't be too bad. Why has it been delayed so long though? In Victoria, if the variation is too excessive, you can get out of the contract.

But hard to say a new builder will be cheaper since materials have gone up a lot since. I know as i have two sites running. Just got out of a big 2 year VMIA lawsuit with our previous builder too. Be incredibly careful. Sometimes when builders are going under, they will be asking for money a lot. See if you can have a look at their other projects and see how those are going.

But really, spend few hundred $ to talk to a building lawyer and if you have some questions, feel free to message me.
- Pandaboss on 07/10/2021 - 00:35
  
  We tried to renegotiate to a more reasonable fee and just asked in writing the costs for the high variation but we have just been delayed responses and false promises.
Pandaboss on 06/10/2021 - 23:49

Guess what. SIL was fed up really and offered to pay $15k but include painting and as per contract or will have to seek department of mines assistance. Builder said if you go to the DMP I won't be build you a quality home. When we heard what had happened over the phone we just laughed at this. What a joke.
- Drakesy on 07/10/2021 - 09:52
  
  Start building a case
  Report them to the master builders association if they start playing that game.
- dasher86 on 07/10/2021 - 13:33
  
  get out as fast as you can.
  if you're dealing with this now… imagine defect and warranties etc going forward.

PERTH Variation Cost Ridiculously High ($55K)

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