8.0 Before you sign the building contract - Land and Planning Services

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Consumer guide A contract must specify the extent of the work tobe undertaken and the total contracted price. -Regulation 41H(d)The extent of the work may be detailed by reference toplans and specifications as well as a description inwriting. The total contracted price is subject to changedue to things such as prime cost items/provisionalsums and if variations occur. Those variations aredifferent from cost-plus contracts, which are prohibitedby this provision. Read your contract carefully tounderstand how the total contracted price may beaffected. Consider whether the plans andspecifications are clearly detailed and checked. Youshould consider speaking with someone withknowledge of construction matters who may be able toadvise you whether there is sufficient detail. A contract must specify the amount of anydeposit payable and the deposit must not bemore than 5% of the total contracted price -Regulation 41H(e) A contract must specify the percentage of thetotal contracted price which is only payable aftercompletion of all contracted stages of thebuilding works and when the owner has receivedeither an occupancy permit or a builder’sdeclaration and a copy of all relevant documentsor certificates have been provided to the owner.This percentage amount must not be less than3% of the total contracted price (the Final Stagepayment) - Regulations 41H(f), 41HA and41HB(e) A contract must specify either the standardprogress payments or a variation of the standardunder a progress payment agreement -Regulation 41H(f)&(g) Standard progress payments are set out inregulation 41HA(1) and specify the percentagesof the total contracted price, payable as progresspayments, to be made after completion of thebase stage, the enclosed stage, the fixing stage,the frame stage and the practical completionstage. Each of those stages is defined inregulation 41HA (2). An example of the standardprogress payments on a $500,000 build is at theend of this list. A varied progress payment agreement may vary both thestages of work and the percentages payable for the workexcept for the mandatory limits on the deposit and thefinal payment. This agreement must be made in theapproved form, available from Building Advisory Serviceswebsite at http://www.lands.nt.gov.au/building/factsheetsforms-faqs/forms- Regulation 41H(g), 41HB and 41HE A contract must include a provision in relation todispute resolution. Such a provision is of no effect if itpurports to restrict or remove a person’s right toaccess a dispute resolution process available under alaw in force in the Territory. Such a provision is of noeffect if it requires a dispute to be referred to a thirdparty for a final and binding decision - Regulations41H(h) and 41HC and Section 54BAThis does not prevent the parties from agreeing, once adispute has arisen, to appoint a third person to determinethe dispute (expert determination, arbitration, andmediation) or referring the matter to the Commissioner ofResidential Building Disputes if the matter concerns aconsumer guarantee dispute. An example of a disputeresolution clause is at the end of this list. When you receive a claim for a progress payment,the invoice from your builder must include adeclaration to the effect that the work to which theclaim relates has been completed - Regulation 41HF. A contract must include the consumer guaranteesprescribed in section 54B of the Building Act.It is an offence under the Building Act not to include theconsumer guarantees in the contract and any provisionattempting to restrict or remove a person’s rights in relationto the consumer guarantees has no effect. The consumerguarantees are: The builder will carry out the building work in aproper and workmanlike manner and in accordancewith the plans and specifications specified in thebuilding permit for the work and specified in thiscontract. All materials supplied by the builder will be good andsuitable for the purpose for which they are to beused. All materials supplied by the builder will be newunless there is a special condition in this contractspecifying otherwise.Building and Renovating in the NT17
Consumer guide The builder will carry out the building workin accordance with the Building Act, theBuilding Regulations, the NationalConstruction Code and other laws in force inthe Northern Territory. The builder will carry out the building workwith reasonable care and skill. The builder will complete the building workby the date or within the period specified inthis contract or if no date or period isspecified, within a reasonable period. It is also an offence under the Building Act fora builder to demand or receive any payment(whether a deposit or otherwise) under aresidential building contract, BEFOREResidential Building Cover has been takenout, and a copy of the policy or certificate hasbeen provided to the owner.Example - Standard progress stages andpercentage of total contracted price for each stagebased on a build of $500,000.DepositNo morethan 5%$25,000Example - Dispute resolution – suggested clauseThe following paragraphs comprise a suggested clause whichcomplies with the Building Act. You need to check the disputeresolution clause in your contract and ensure that it does notrequire you from the outset of a dispute to take the matter to athird party for binding resolution.If the owner or builder considers that a dispute has arisenin relation to any matter covered by this contract, duringthe progress of the work, that person must promptly writeto the other party and give notice of the matters indispute.Upon notification of a dispute the parties are to attempt toresolve the dispute informally.If the parties cannot resolve the matter informally, theowner or builder may refer the dispute to theCommissioner of Residential Building Disputes for amediation or conciliation.If the dispute relates to a consumer guarantee and theparties cannot resolve the matter informally, the owner orbuilder may apply to the Commissioner of ResidentialBuilding Disputes for a technical inspection and report.If the dispute does not relate to a consumer guaranteeand the parties cannot resolve the matter themselves,they may enter into a separate agreement to mutuallyrefer the dispute to a third party with the ability to mediatethe matter, arbitrate the matter or give an expertdetermination.Base stage – oncompletionFrame stage – oncompletionEnclosed stage – oncompletionFixing stage – oncompletionPractical completion –when reachedFinal completion – afterissue of OP or BCNo morethan 10%No morethan 20%No morethan 25%No morethan 30%No morethan 7%$50,000$100,000$125,000$150,000$35,000At least 3% $15,000Total 100% $500,000In the event that the parties are unable to resolve thedispute, either party may pursue other legal avenuesavailable to them.Notwithstanding the existence of a dispute, the partiesmust continue to perform their obligations under thecontract unless they lawfully cease to perform inaccordance with a specific provision in this contract.Work not subject to the requirements in the Building Actand RegulationsIf your proposed building work is not of the type subject tothe requirements in the Building Act and Regulationsdiscussed above, regardless of the size and price, NTConsumer Affairs still recommends that you have a writtencontract or agreement. The contract or agreement shouldinclude plans and specifications for the work, items to besupplied, the amount agreed upon, and full details of thetrader including an address and an Australian BusinessNumber (ABN).18
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8.0 Before you sign the building contract - Land and Planning Services

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