19/09/2022·2 mins to read
Tips for choosing a builder for your home
Finding the right builder is crucial for any residential construction project - whether it is for a new build, a repair/renovation, or an extension of your existing home.
Choosing between potential builders can be challenging and stressful. To help, we have prepared a list of tips and key things to consider when deciding on a builder.
There is no one-size-fits-all approach when it comes to any building project, and you would be wise to seek specific legal advice before you sign on the dotted line. But we hope these tips will provide some helpful tools when it comes to deciding which builder to engage for your building project.
If you would like to discuss any of the below or if you have any queries about the construction process, please get in touch with one of our experts.
|Factors||What to do|
|The terms and conditions proposed for the build contract||The terms and conditions for residential building contracts vary significantly and can be quite favourable to the builder (some to quite an extreme extent). The reasonableness of the proposed terms and conditions should be a key consideration in the selection of your builder. You should ask questions, and negotiate with the builder if necessary. If the contract is provided on a “take it or leave it” basis, or the builder is otherwise reluctant to make fair concessions then that should be considered a red flag. Ideally, you want a builder who will work with you to identify solutions to possible risks of the build.|
Some builders will ask for a deposit, but you should not accept that unquestioningly. Before you sign a contract with a builder, you should find out:
As a general rule, the larger the deposit requested, the more alarm bells should ring.
|Who actually is the builder?||
There are many business structures that a builder can choose to operate under, ie a limited liability company, a sole trader, a franchise or a partnership. It is important to find out who the builder is so that you can properly check their background, and so that you know who you are dealing with in case something goes wrong.
If the builder operates as a company, you should find out who actually owns and governs the company by undertaking a company search (using the company name, the names of its directors and shareholders) on the Companies Register website.
If the builder operates as a franchisee, you should find out the nature of the franchise agreement and the extent of the involvement of the franchiser.
|Security interests registered against the builder||
A search of the Personal Property Securities Register (PPSR) may help you understand what security interests are registered against the builder and who their creditors are.
If only “second tier” funders (ie credit unions) are registered, you may want to enquire whether “first tier” funders (ie banks) have declined to provide funding and, if so, why. Being declined funding by a bank may be a red flag as to the builder's financial stability.
The costs involved with a PPSR search are minimal - $2.30 (GST inclusive).
|Banker reference||You can ask for the contact details of the builder’s banker or a letter from the bank confirming that it is not aware of any reasons as to why the builder could not undertake your building project.|
We recommend carrying out reference checks for the last three projects completed by the builder. If the builder will not provide references then that should be a significant concern.
Questions to ask the property owners may include:
Some referees may be happy to allow you to visit and view the completed works. If a site visit isn't an option, then you could drive past and look at the building from the street.
|Who will actually be on the tools?||
You should find out how much work the builder will be doing themselves? If somebody else is doing the work, who are they and what are their qualifications?
Checking the experience and qualifications of the builder is vital. Significant problems arise when builders are out of their depth or do not understand the various technical requirements. By contrast, an experienced builder with appropriate qualifications will bring knowledge about the building industry that will generally improve all aspects of your building experience.
You must use a licensed building practitioner (LBP) to design and carry out restricted building work. You can search the Public Register of LBPs online and check whether your builder is an LBP.
|The builder’s insurance cover||
If things go seriously wrong, it is likely to be the builder’s insurer (if they have one) rather than the builder who will be solving them. You should check the details of the builder’s insurance, including:
|Google and social media search||
You can find out a lot about a business by undertaking a Google and social media (including LinkedIn) search. Make sure you search the builder’s business name, the individuals involved, ie directors and shareholders, and any former company names.
Check the online reviews and ask for explanations of negative reviews.
If you are particularly concerned, you can check whether anybody has applied to liquidate the builder’s company or whether the builder has been made bankrupt by searching the Gazette Bankruptcy and Liquidation Notices.
You can also search the Insolvency Register for details of current (and recently discharged) bankruptcies, no asset procedures and Official Assignee administered liquidations.
Make sure you check:
Special thanks to Jennifer Liu and Sam Hider for their assistance in writing this article.