Victoria - Home Build Variation - Could I Get a Sense Check?

ActualActurary on 04/02/2022 - 15:36
Last edited 04/02/2022 - 21:30 by 1 other user

I am currently building my own home. And there were delays in securing finances for almost 9 months. I signed the contract in December 2020. And we're only just submitting the building permits. The builders recently issued me a variation with these items:

Variation: Underground rock and bricks $1400+GST
Variation: Vacant site (Fence, Toilet): $1375+GST
Variation: Company overhead/Opportunity Cost (base on 5% of $300,000 contract value. Already discounted from $500/day project overhead cost): $15,000
Variation: Subdivision coordination and additional administration (Staged Permit): $2275+GST
Variation: Building material price increase over past 9 months (base on 10% of $300,000 contract value): $30,000;

Is anyone who is experienced in this field, could you give me your 2c?

Also, is there someone professional who could appraise this. I'm really not sure if I'm being taken advantage of.

Home & Garden

Comments

  • jv on 04/02/2022 - 15:37

    Could I Get a Sense Check?

    Yes

  • brendanm on 04/02/2022 - 15:46
    +3

    Building costs have gone up a heap. 10% increase is probably cheap really.

    • ActualActurary on 04/02/2022 - 16:06

      Thanks for your comment. Are you building at the moment, are you seeing similar increases?

      • brendanm on 04/02/2022 - 16:10

        I was considering building a month or so ago, and have decided not to due to blown out time frames and uncertainty in the industry.

    • jv on 04/02/2022 - 16:18

      Building costs have gone up a heap.

      Timber has.

  • Drakesy on 04/02/2022 - 16:08
    +2

    This is why i think the construction industry is taking private residents to the cleaners.
    If they tried this with our contracts in government they'd be turfed in terms of cost shifts etc.

    If it were me i'd reject the company overhead/opportunity cost and ask for justification. Just because they bill you doesn't mean that it's qualified.
    Underground rock and bricks (this would be dependent on your site - justified if unexpected ground conditions
    Fence/Toilet should've been included in the initial contract - unless you made changes that extended the hire timeframe, if they delayed it it's on them.
    subdivision coordination and additional admin - tell them to get stuffed (should've been in the original cost, unless you've changed the plans/designs to warrant this)
    Building material price increase - 10% is quite fair so i'd allow this given the climate.

    But yes, unfortunately the way the housing construction contracts are worded leaves the home builder (owner) open to these open ended variations, they take advantage of the fact that we don't have contract lawyers on retainers and we're small fry.
    It's just one of the risks you take when building a house unfortunately.

    • ActualActurary on 04/02/2022 - 18:40

      Thanks for your comments. I appreciate it.

  • thepigs on 04/02/2022 - 16:17

    yeah wow. how much you already paid them?

  • AndyC1 on 04/02/2022 - 16:20

    If I read it correctly then:
    Original contact $300,000
    Price Increase $50,050

    New Price $350,050

    Calculates increase: 17%

    So overall the increase seems a bit excessive for 9 months when prices were already going up in 2020 and in the first 3 months of 2021. If the price was from 2020 then it may be acceptable, BUT what about increases as the build progresses over the next 6+ months (houses are taking longer to build now due to supply shortages).

    • ActualActurary on 04/02/2022 - 18:41

      Yeah, thanks for the comments. So much uncertainty right now.

  • TheBilly on 04/02/2022 - 16:27
    +1

    Your questions are very loaded and difficult to respond too without knowing the details of your contract and the nature of each of these claims. But I can assure you this builder is ripping you a new proverbial and going for everything they can possibly get out of you. The reason I say this is because nothing just goes up in price by a perfect 10%, especially a house which has like 20-30 different aspects to it. Every price increase or decrease would have occurred on something specific and is able to be justified if it is real. Like bricks would've gone from 82c per brick to 95c per brick (and it's easy to present a quote) or concrete went from $200 per m3 to $205 per m3 etc. Saying that the prices have increased by 10% is just a lazy way of taking money from you without having to put in the work. You need to read your contract and review each of the below items individually to determine how your contract treats it. Also the amount is significant enough for you to lawyer up and get professional legal advice. For example if your contract says that the owner is responsible for approvals and your approvals take longer than 3 months then the contract might state they are entitled to a 10% increase in cost of materials if there is any delays greater than 6 months for instance. This is purely based on how your contract is written. From this you can determine if they are telling porkies of if they are entitled to this claim.

  • GourmetFoodie on 04/02/2022 - 21:06

    There is a lot of nuance there. At face value i don’t think you are being ripped off but only if you were responsible for the delays. Building materials have actually gone up more like 20%. The opportunity cost maybe you could argue eg. We’re they really not able to re-deploy labour during that time - though they can argue they plan out labour and timelines 1 year in advance. The smaller dollar amounts all sound relatively reasonable.

  • godofpizza on 04/02/2022 - 21:33

    is this with Metricon?

  • Switchblade88 on 04/02/2022 - 22:19
    +1

    Charging a variation for a vacant site to cover their loo and fencing rentals is a bit rich. This should have been in the original contract since they were going to have to pay for this 9 months ago anyway. It should not be a contract variation.

    Opportunity cost? They're charging YOU because they haven't done any work for the last 9 months?? Rubbish.

    Rocks and subdivision stuff would be quite reasonable variations though.

    Building materials increase would be a bitter pill, but since you were responsible for financing and couldn't do that on time then it makes sense.

    • stirlo on 05/02/2022 - 11:05

      Depends if the toilet was included in the first quote/contract. If it wasn't it was always going to be added on at some point anyway.

  • bradl822 on 05/02/2022 - 08:30

    I am seeing more and more people now buying with minor renovations due to the drastic increase in cost of building materials and/or lengthy delays. I know some manufacturers of steel frames have had a 25% increase in the raw material.
    I feel for you because its obviously well and truly above anything you planned for, you just have to be ready to pull the trigger as quick as possible or you will probably see further increases.

  • stirlo on 05/02/2022 - 11:03

    Some of the stuff like billing for a Toilet and Fence is kind of obvious, your builders can't work without it. Same for the subdivision fee (assuming you're doing one).

    A 10% building material increase seems very fair and probably below the real increase of the last year.

    • Lord Fart Bucket on 05/02/2022 - 14:37

      While it may be fair, the question is if it's legal.

  • Lord Fart Bucket on 05/02/2022 - 14:36

    You should look at your contract if those variations are legal. Unless it was added as a special condition, in a standard HIA contract i don't think this is possible. What does your solicitor say?

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