Builder Increases The Price

Lbasu on 08/04/2022 - 14:32
Last edited 08/04/2022 - 15:02 by 1 other user

Hello there, I had an agreement with the builder for construction of a new house around Sep-Oct 2020 with land and house package. Land was registered on December 2021. The construction has not started yet, even though we did not apply for CDC approval.

The builder increased the contract price on January 2022 and we agreed that and again now the builder sent an email mentioning that they increased the price 17% due to HIA increase. Builder did not mention any clause that they are relying on to increase the price. What will be the solution for this? Can builder increase any amount?

In this case can i cancel the contract with builder? How much should I pay if I cancel the contract? Nothing mentioned on contract.

I will really appreciate your help.

Home & Garden

Comments

  • [Deactivated] on 09/04/2022 - 09:52
    +1

    I'm looking to build as well. So this really worries me.

    Would it be better to go with bigger companies? So you will be dealing with employees rather than business owners?

    I generally find that dealing with employees of large companies better as they have no motive to rip you off (unless they receive commissions). Whereas when you deal with small businesses, you are dealing with actual owners and they have financial motives.

    • Grunntt on 09/04/2022 - 10:58
      +3

      Would it be better to go with bigger companies? So you will be dealing with employees rather than business owners?

      When looking for my new home I spent a lot of time with various sized businesses and found pretty much none that were obviously better than the rest.
      Contract negotiations were more like 'take it or leave it' with most of them.

      I did find a single small business that was excellent to deal with (the owner/builder was the point of contact throughout) but he was so busy we would have been waiting at least 18 months if not more to commence.

      In the end I gave up on building a new home and am very happy with my purchase of the 10 year old property that had 90% of my wishes included.

      We were so impressed with the abovementioned small business that we have employed him on three occasions so far to do minor renovations/improvements on our property.

  • [Deactivated] on 09/04/2022 - 10:03
    +3

    Speak to a lawyer

    Metricon tried doing this, and they got into trouble.

    Google it, it was on the news and they've let it slide for alot of people.

    Anyways, I suggest someone to look over the contract and do research. Plenty of building groups on Facebook, where everyday someone is posting something similar.

    • rahoolz on 09/04/2022 - 21:34

      Can you send me the link ? I just noticed few news mentioned metricon increased the price .. no where is said metricon got in trouble

      • [Deactivated] on 10/04/2022 - 07:16

        Facebook.

        Search for

        Building with Metricon

        There's a huge group, but you can search for

        Building your dream home Australia
        I think it's got 30,000 members

        Use keywords Building Australia, or Building "your state" Try searching your builders name too.

        • Korban Dallas on 10/04/2022 - 08:07

          He's not asking about Facebook pages. He wants to know the Metricon trouble you mentioned.

          Not the best advice mate. Google it, Facebook, lawyer, on the news

          Not sure your background or knowledge. Anyway…

          It's been what 2 years? Land took forever to register. You don't think there has been price rises since then? By the time it actually gets built maybe 3 to 4 years?

          Most builders are renegotiating thier contracts. If their not they are going to go bust. Simple as that.

          Including Metricon.

          Metricon being in trouble is news to me.

          Please backup your claims.

          Speak to a lawyer? Metricon will give you back your deposit. Maybe some damages and your new home might cost you another 150k with another builder.

          Id be careful. Work with your builder, not against. Could come back to bite you in the ass.

          I am in the industry and many clients understand what has been happening. They also are paying extra and while disappointed not complaining.

          The overwhelming majority are paying the increase.

          What you might see on Facebook are some Karen's looking for validation and confirmation bias.

          Funny story. Many Metricon clients are coming to us. We are like stick with Metricon. We can't build it for that much.

          In the end, maybe 9/10 you are still getting a better deal than ripping up your contract and going with someone else.

          Regarding the clause it might be 19 or 20 in your HIA

          • rahoolz on 10/04/2022 - 09:39

            @Korban Dallas: Question - can the builder increase the price after they have started to build on your land and it’s only building contract. For example if build started early last year

            • Korban Dallas on 10/04/2022 - 12:16
              +1

              @rahoolz: Depends what your allowances are in the contact.

              For instance if the builder hits rock, needs to export or import soil those costs will likely be passed on to you.

              Just before you go to site the builder knows how much your build will cost. In saying that I have seen 5% margins erode to -10% once the build has been completed.

            • whitelie on 10/04/2022 - 12:30

              @rahoolz: There can be provisional amounts in there but I would say you are talking about a price variation once construction has commenced?

              • rahoolz on 10/04/2022 - 12:55

                @whitelie: Nah variation is different .. coupe of builders have increased the price during the build and have asked the owner be ready to have 10% extra cost as the price have gone up .. with no details provided

                Build commenced early last year and has been delayed for various reasons including covid and rains and still not in completion stage

                Couple of owners I know they are worried, I don’t have that much cash sitting around to pay for this 10 % increase

                • whitelie on 10/04/2022 - 13:00
                  +1

                  @rahoolz: An increase is generally passed on as a variation though. I got one for $12k, which was 4% of our build price. If it's 5% or over we can terminate the contract so I would say they were strategic in the amount as the itemized increase came to over $30k when we asked for it. We negotiated with them but probably could have fought to have it wiped. Without a doubt it would have increased again but we got a clause put in stating no further price increases.

                  • rahoolz on 10/04/2022 - 13:15

                    @whitelie: Above case is half way through the build .. owner agreed to pay for variances which opted for any change ms they did however sudden price increase is bothering them

                    • whitelie on 10/04/2022 - 13:18

                      @rahoolz: Mine is also during construction. It's still called a variation.
                      Sounds like you're talking about provisional sums rather than variations.

                      • rahoolz on 10/04/2022 - 13:57

                        @whitelie: Isn’t variation are one when you are upgrading or changing something ? I understand additional cost there however what if they are increase the cost which was part of contract ? For example just tiles if there are no change in tiles why there should be increase in tiles .. if th contract was signed over a year ago and you are getting same tiles. I assume builder would have booked the tiles last year how can builder justify to put extra price on the something which was part of original contract ?

                        • whitelie on 10/04/2022 - 14:19
                          +1

                          @rahoolz: It's any variation to the contract, whether that be price, a material, colour, structural etc.

                          When you sign the contract, the builder doesn't purchase all materials necessary at that time, they will schedule the purchases as required. If the price goes up or down, the supplier will pass it on at time of purchase.
                          With a fixed price contract, the builder would generally wear any increases as previously they would be quite minimal in terms of the margin. With those margins eroding away in this environment, many are having to pass on some form of increase and can use either the delay in titles/finance or the pandemic being a cause of delay outside the builder's control.

                          Provided the owners finance and titles were sorted within the 45 day time frame, they should be able to get out of most price variations.

  • BuDWiZe on 09/04/2022 - 10:07

    this is why a lot of builders going bust recently as so many materials have increased in price, the labor has increased with demand ect
    shit some builders have even given $10 to people to STOP their build with them

  • Davo1111 on 09/04/2022 - 10:31

    What does the contract say?

  • Grunntt on 09/04/2022 - 10:59

    What did your lawyer say when you asked them?

  • netjock on 09/04/2022 - 16:04

    Lesson for OP. Don't buy house & land packages. You sign contract for a land not yet titled and you can't build on it. The world has change in 18 months.

    Problem with cookie cutter house & land packages is you can't substitute different (cheaper) materials unless the builder let's you and they will take the chance to scam you.

  • OzzyOzbourne on 09/04/2022 - 16:39
    +3

    Tradies are paying more for their utes, boats, jet skis, caravans, motorbikes and all the accessories that go with them. The money has to come from somewhere!

  • Lucille Bluth on 09/04/2022 - 18:22

    In this case can i cancel the contract with builder? How much should I pay if I cancel the contract? Nothing mentioned on contract.

    Sir, this is Wendy's

  • cms1 on 09/04/2022 - 18:32
    +3

    Builders are like leaches… As are most tradies.

    • Korban Dallas on 10/04/2022 - 08:27

      Wow seriously.

      This is false. The tradies are price gouging not the builder's mate.

      Cost of materials also have gone up.

      • cms1 on 10/04/2022 - 08:36
        +2

        You seem to have taken it personally. Anyways, I had an extension done a few years ago and dealing with the builder was such a pain. As a part of extension, I asked the builder to put ethernet points in each of the extended room. He quoted me $1200. I declined and got it done by another electrician for ~$500. So, yeah the builders are not as innocent.

        • Korban Dallas on 10/04/2022 - 08:40

          Did you question the price? Cause they probably just threw a number at it.

          A Ethernet point we charge $135

          • cms1 on 10/04/2022 - 08:44

            @Korban Dallas: They probably did. I showed the quote to builder's electrician, even he was shocked to see it.

        • whitelie on 10/04/2022 - 10:19

          My builder wanted nearly $300 per data point and this was nearly 2 years ago so would have gone up by now lol
          It's always cheaper to get stuff done after the fact, which suck as you essentially need to get the builder's trades to chase the walls and put all your stuff in after the fact.

          • cadwalader on 10/04/2022 - 10:29

            @whitelie: I got my data points and power points added for about 80 per piece with the builder just last year.

            • whitelie on 10/04/2022 - 10:41

              @cadwalader: Double GPO's were $77 but data/TV points were nearly $300. Couldn't believe it. Just got the walls chased and conduited will get the cable run and terminated after handover.

              • Korban Dallas on 10/04/2022 - 14:46
                +1

                @whitelie: A tv point $300 😂 the wiring would cost more than the point.

                Ah these cheap builders end up costing a fortune.

                GPO is reasonable.

    • Jason Genova on 10/04/2022 - 17:34

      yep and most wont hesitate to ask for cash for payment to dodge GST

      when i was doing renos had a few dodgy painters, tilers ask for cash in hand. get f'd

  • serpserpserp on 09/04/2022 - 20:16
    +1

    This is why you buy established homes

  • MessyG on 09/04/2022 - 21:54
    +2

    17% - you're doing well, lock that in now because it's only going to get worse. I've seen people have 50%+ rises.

    • pompompom on 10/04/2022 - 19:45
      +2

      I highly doubt that

      • euk on 10/04/2022 - 22:18

        My colleague had to pay 70% more to continue the build
        Cost prices have skyrocketed in cases above 100%. That 70% was already subsidised.

        • pompompom on 10/04/2022 - 23:34
          +1

          So if the build price was say 300k, they revised the contract to 70 per more or +210k, i.e. total build price of 510k for a less than a year increase. You colleague must have been high to accept that as anyone else would have terminated the contract.
          Build prices have not skyrocketed to +100%. What stats are you using to state that ?

          • euk on 10/04/2022 - 23:50

            @pompompom: Not high, she's quite smart.

            I said up to.

            From anecdotal evidence + industry data, but you're more than welcome to Google for the data as well. Here's an example: https://www.afr.com/politics/cost-of-building-supplies-will-…

            • pompompom on 10/04/2022 - 23:57

              @euk: I'm not disputing the price increase. Just saying 100% or even 50% is a ridiculous amount which cannot be backed by any actual evidence. If anything it will reduce as China opens up and Ukraine war wraps up. The prediction is infact 15% reduction in house prices over next three years.

              • euk on 11/04/2022 - 00:06

                @pompompom: It's not common to have to cite data sources when talking unless requested. We are talking/typing on a forum, not writing a scientific paper.

                Analysts also got their prediction wrong re: COVID and 20% drop in housing prices.
                The predictions from what I can see don't fully account for increases in immigration due to planned government policy from both major parties in conjunction with COVID tapering off and migration increasing again.

                There is a lot more pain to come for everyone.

              • Korban Dallas on 11/04/2022 - 16:00

                @pompompom: Timber frames and trusses have gone up 120%

                Look at the lumber index

                Aluminium about 30%

  • gstfree on 10/04/2022 - 00:47

    https://hia.com.au/resources-and-advice/covid-19/managing-yo…
    This link may help.

    In general it depends on how the contract was worded. If there any "force majeure" clause?

    My employer delivers contracts as per agreed. For 1 particular SKU we lost millions (Sales - CGS - Freight), but still honour the price agreed with customer.

  • amsaini15 on 10/04/2022 - 07:19

    If it is fixed price contract and builder goes bankrupt, does the building Industry insurance covers the customers fully or there is significant additional out of pocket cost still for the customer?

    • Korban Dallas on 10/04/2022 - 08:22

      No. Did you see the link above. Cause it answers your question.

    • whitelie on 10/04/2022 - 10:39

      My understanding is that HII covers up to $100k. Anything over this amount in the new price to finish the house would have to be covered by the owner

  • Raj09 on 10/04/2022 - 14:51
    -1

    With an ongoing war and covid lock downs in China, increases are expected. Deal with them

  • drfuzzy on 10/04/2022 - 16:25
    +1

    The mistake here is you signed something you don't understand.

  • Lucille Bluth on 10/04/2022 - 16:51
    +5

    OP hasn't come back since yesterday. Probably left rattled after reading some of the comments 💁

  • alUK234 on 10/04/2022 - 22:22
    +1

    It always surprises me how harsh people are. Contacts for things like this should be regulated as it's clear one party has a lot more experience/ massive advantage compared to the other. How is it fair to ever have a contract like this? If there is a get out for the builder in the contract, it should have an equal one for the buyer. To me whether it was signed or not, read or not - it's a predatory practice that shouldn't be allowed. Imagine if the phone or NBN contract you sign, had some small print that said the amount will increase by whatever amount they decide whenever they want but you must still keep a 24 month contract. Would everyone also think that was fine? Can you guarantee you would notice and not accept the contract if such a clause was in there?

    • Carmen Sandiego on 11/04/2022 - 08:51

      That's what they do on health insurance. It's not uncommon.

      The devil is literally in the fine print - case in point, I was reading a property's section 32 the other day for funsies (yes, I am insane, I know) and I spotted that one of the lines says that if you die during the mortgage repayment, your descendants have to continue to pay until the payment has been paid 100%. I would hazard that is written on all section 32's.

      Any time there is a contract, and they start defining what "You" and "We" are, engage in someone who knows law. Doesn't necessarily have to always be a lawyer - I'm not and I read Insurance contracts that start thus.

    • knasty on 11/04/2022 - 09:18

      Pretty much every consumer contract is drafted by one side (the business) which has far more experience and a massive advantage over the consumer. The question is at what point does the consumer decide that the contract is so material that they decide to get their own advice? I wouldn't for a telecommunications contract but I would certainly consider it when signing up to a 300k contract.

      • alUK234 on 11/04/2022 - 18:58

        I get that but what's the logic in allowing it in the first place. What if instead said that the builder has the right to shoot him in the head upon completion. Would you still give the same justification? In other countries courts just throw rubbish like this out..

  • minotaurian on 11/04/2022 - 09:22

    I've built based on a fixed price contract, the draw back is the higher quote figure compared to a rolling contract. But knowing that building (not enough roofers and council slow to title land) can take a year in this climate, there a high chance the cost to blow out. I'd rather know that I'd be paying the same upon completion.

    Put it this way, if OP paid for a fixed price, he would be paying 10% more anyways. So 17% price hike is reasonable, especially when wood gone up 300%.

    Another perspective is, if the builder DID NOT increase prices and went broke during a build. You're left with a house that will never be finished .

    So either suck it up or cancel to build and lose your deposit. I'm sorry to say but that's the risk with any decision we make in life. Each decision we make has its pros and cons you got to live with.

    • whitelie on 11/04/2022 - 11:24

      A year? That's optimistic, ours will be more like 2 years construction time, possibly more

      • minotaurian on 11/04/2022 - 15:31

        I live regional, but i planned for worse case, they said it will take 4 month to build, but blew out to a year. Bare in mind this was 2 years ago, so I predicted the supply shortage hence why I negotiated the fixed price contract rather paying the 10% cheaper, cost plus contract.

        I'm sorry to hear that it takes 2 years to build now… That's must be frustrating as it did for us.

  • clayb123 on 13/04/2022 - 17:10

    They may be relying on Clause 2.2 - if the preconditions hadn't been met prior to the anticipated start date then the Builder may terminate or update the build price prior to proceeding with the build commencement. Generally one of the conditions is title, so if it hadn't registered when you signed Contract then you couldn't have met the conditions under 2.1.

    That's QLD position anyway, I'm not sure if HIA varies between states. QBCC has requirements as well for any variation to be valid - may be the same in different States.

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