Property owners should never reply on verbal contracts! The Joint Building Contracts Committee frequently receive questions from property owners about builders claiming extras, far above the contract amount.
We receive complaints that the builder is running later and the quality of work is not up to par. The most common problems include the builder abandoning the site and owners want to know how do you fire a non-performing builder.
On the other side, builders complain about property owners agreeing verbally to an amount and then hitches are encountered.
We have found that these scenarios can be overcome if builders provide clients with a standard building contract such as those published by us, as we serve the building industry and consumer.
It is not uncommon for a property or home owner to verbally agree with a builder on what needs to be done and the fee this can work satisfactory as long as no problems are incurred.
Verbal contracts are not illegal – but they are virtually impossible to enforce when the performance criteria has not been stipulated. This results in disputes and legal battles, leading to further delays and costs.
Standard building agreements are drafted to balance the rights and obligations of the home owner or employer and the builder or contractor - no single party has an advantage or disadvantage over the other party.
Clauses describe the rights and/or obligations of the employer and the reciprocal obligations and rights of the builder - including a time limit in which to respond or execute defined tasks. Where obligations are not performed, provision is made to notify the other party of a potential breach of the agreement to be remedied within stated period of time failing which, in the extreme case, to terminate the agreement
The property owner must ensure that:
- Rezoning and or relaxation of building lines (if applicable) and similar statutory requirements are complied with
- Building plans, prepared by a registered professional architect or senior architectural technologist, are submitted to the local authority for approval in compliance with the National Building Regulations – and are approved before building work commences
- Tenders or quotations are solicited from competent contractors in the area using the building plans, detail drawings, a comprehensive specification and/or a bill of quantities prepared in accordance with the standard system of measurement published by the SA Association of Quantity Surveyors;
- After evaluation of the tenders, a contractor is appointed on the basis of competence to carry out the specified works at the lowest realistic price, using the JBCC Principal Building Agreement or, for very simple work of short duration, using the JBCC Minor Works Agreement
- A building permit must be applied for immediately from the local office of the Department of Labour after the builder has been appointed and the contract agreed
- The project must be registered with the National Home Builders Registration Council (NHBRC) before building work commences
The JBCC building agreements are drafted for use where the property owner appoints professional agents such as architects, engineers, quantity surveyor, etc. for the design of the works to be executed by an independent contractor. These contracts are not suitable where the employer appoints a contractor on a ‘design and build’ option.
JBCC agreements are drafted to allocate the risks associated with building work to the party best suited to manage such risk. The layout and wording of clauses may be used as a checklist required by either party where circumstances change – to manage the further execution or, if appropriate, to deal with disputes without resorting to legal counsel.
By following these steps, the questions posed at the beginning of this column can be resolved timeously and fairly – to the benefit of both parties.