12 February 2021
Be sure to take extra care when entering into contracts with owners who want to apply for the HomeBuilder grant to build a new home.
When building a new home, the grant only applies to a ‘comprehensive home building contract’ i.e. a contract between a builder and an owner where the builder undertakes to build a home from the start of building work to the point where the home is ready for occupation.
The construction commencement date under the grant is the date when excavation and site preparation works start. We have recently become aware of a member’s client having their grant application rejected because the owner engaged a separate contractor to carry out the site preparation earthworks and an electrician for the electrical works for the home. On that basis, the government determined that the contract with the builder was not a ‘comprehensive home building contract’ that covered all work from commencement on site through to occupation. In that particular case, the owner also agreed to build a retaining wall which was also not permitted by the grant conditions.
It’s important that members do not encourage or recommend to their clients to separate out contracts for whatever reason if they intend to apply for the HomeBuilder grant. The grant requires the builder to be engaged from site preparation right through to occupation by the homeowner with everything included in that contract. If a member assists a client to enter into a contract knowing that the client wants to apply for the grant and, as a result of the member’s recommendations and/or actions, the client becomes ineligible for the grant, the member exposes themselves to potential liability, in full or part, for the loss of the grant money to the client.
Similarly, take care that you can commit to the terms of your contract in light of the trade and material shortages and cost increases currently being experienced by the industry. A number of members have contacted us for advice regarding trade and material shortages – a lot of which were known prior to entering into the contract. If you enter into a contract to build a home by the date for practical completion, you are required to complete the build by that date. It is only in certain limited circumstances that you will be entitled to an extension of time to the Date for Practical Completion under the terms of your contract. This is also restricted by legislation in Schedule 1B of the Queensland Building and Construction Commission Act 1991. If the HomeBuilder grant also applies, the owner may become ineligible for the grant if you do not complete the build within the applicable timeframes.
Some members have attempted to include special conditions or provisional sums in their contracts to try to deal with the material shortages and cost increases, however, some have had those contracts rejected by banks. The vast majority of those provisions are also not legally enforceable because you are required by legislation to ensure that you have certainty in domestic building contracts with very few exceptions. It is important not to enter into contracts without a clear understanding of what you are agreeing to do under that contract and without ensuring that you can do what you are agreeing to do.
Got more questions? Members can contact the Members Legal team if they need further advice or read more about why you shouldn't cut corners with HomeBuilder contracts.