By law, a builder must provide a written contract for residential building work if the contract price is over $5,000.
A smart builder however will draw up a contract for all their work, no matter how small, and will take these essential steps before issuing and signing a residential building contract.
Successful contracting is more than just dotting the i’s and cross the t’s. It’s about effective communication, making sure all parties understand each other’s rights and responsibilities of a project. Here’s what we recommend when it comes to preparing contracts, to even Small Builders clients who use our automated building software.
10 Easy Steps for Successful Contracting
- Review, Review, Review – No matter how busy you are don’t skim over a contract. This is a legally binding document. Dotting the i’s and crossing the t’s is important. Ensure names, dates and spellings are correct. It is also absolutely critical that your price breakdown correctly calculates but you should also ensure you can cash flow the price for each milestone. Remember, you may only be able to claim for Milestone payments under the new changes to Home Building Laws.
- Know Your Standards – Before signing or explaining a building contract make sure you understand and are up to date with Contract Standards for Commercial Building Contractors.
- Talk It Out – Make sure you talk the other party through the contract to ensure they understand the contract. Remember this just might be one of the biggest transactions of their life. Talk through the designs, the employment rates, the incremental. A lot of disagreements arise over provisional sum items and margin applicable to extra work so ensure you explain how your contract operates and what your client can expect from you.
- Get Ticked Off – The Federal Government has a number of checklists that must be completed such as those listed on the Consumer Building Guide. (If you are Small Builders client however just follow the prompts within the contract form).
- Be a Copy Cat – Print out two (2) copies of the contract, one for you the builder and one for the client/owner.
- Sign – Make sure both parties’ sign both the contracts – at the same time – together and even better, have someone witness the event.
- Initial – Make sure each page of each contract is initialed by both parties. This indicates everyone understands everything outlined.
- Make a Date – Ensure you date the contract and check that all the dates relating to the project time line are correct.
- One for You, One for Me – Each party needs to take away a physical copy of the contract on the day of signing.
- Virtual Trail – It is best practice for the builder to email a signed copy of the contract to the client. This captures the contract terms for time. For Small Builders clients, we recommend the copy be saved on the Small Builders portal.
Excellent paperwork and effective communication are the winning tools for success in contracting and business in general.