NSW – How planning laws can affect your contract…

When negotiating your contract, you need to give consideration to planning laws.

Who is the person responsible for planning and building approvals?

It is recommended that your contract includes a provision that enables you to appoint the owner as the person responsible for planning and building approvals. While the builder may be eligible to submit the development application or apply for a complying development certificate with the consent of the owner, the Environmental Planning and Assessment Act 1979 provides that only the owner of the land can appoint the principalcertifying authority (i.e. private certifier or council) for a development. Similarly, only the owner of the land will be eligible to make an application for a construction certificate or occupation certificate. Accordingly, the owner’s obligations to comply with these requirements should be set out in your contract.

Who is responsible for paying for paying levies and contributions?

When undertaking works requiring some form of building approval, there are a number of fees that may need to be paid. These commonly include:

• Local government infrastructure contributions and state government infrastructure contributions;
• Miscellaneous fees associated with obtaining a construction certificate and/or occupation certificate;
• Fees associated with engaging accredited or council certifiers;
• Bonds for roads, driveways, footpaths, protections of trees (these will generally be refundable provided no damage is incurred) or any other bonds required before or during the building process;
• Water authority developer fees, contract administration fees and recycled water charges where applicable;
• Fees associated with obtaining a strata certificate;
• Fees associated with the registration of the land with the Land Titles Office.

When using HIA’s NSW Residential Building Contract(s) for New Dwellings, Renovations and Additions, and Works on a Cost Plus basis, you are able to nominate the person to obtain and pay for all planning and building approvals (see Schedule 1 of the contract). If you do not nominate anyone, the builder is deemed to be the person responsible. We strongly recommended that you nominate the owner.

Even where you are the person responsible for making the development application, you should include the following special condition to better clarify the owner’s responsibilities:

Special Condition 1 - Planning approvals, fees and charges

1.1  Notwithstanding Clause 7, the owner must:

1. obtain and pay for the construction certificate;
2. submit any applicable bonds such as those required for the protection of roads, footpaths, driveways, trees and the like;
3. appoint the principal certifying authority and pay any costs associated with such appointment;
4. pay any costs associated with complying with the conditions of development consent where required prior to the commencement of the building works;
5. and, where requested by the builder, provide written proof that these obligations have been satisfied within the initial period or such longer period as agreed in writing between the builder and the owner.

1.2  If the owner fails to satisfy all of the above within the initial period the owner will be in substantial breach of contract and the builder may end this contract, by giving the owner a written notice to that effect, at any time prior to commencing the building works.

1.3  If the builder so ends this contract, the owner must pay the builder the price of the works carried out to the date that this contract is ended. The price includes the builder’s margin applied to the costs incurred by the builder which costs include the cost of materials on site or already ordered from suppliers that are non-returnable.

1.4  If the owner breaches this contract, nothing in this Clause prejudices the right of the builder to recover damages or exercise any other right or remedy.

1.5  Notwithstanding Clause 7, the owner is responsible for the payment of any and all fees, charges, taxes, costs and levies associated with:

1. inspections conducted by the principal certifying authority or its agents, employees and invitees;
2. registrations relating to the title of the land;
3. infrastructure contributions;
4. planning and building approvals for the building works;
5. complying with the conditions of the development consent.

What about the occupation certificate?

The HIA contract provides that the builder is not required to obtain any certificate of occupancy or final inspection certificate relating to the building works (changing this provision is not recommended).

Use a preliminary agreement if you are dealing with the owner at the DA stage?

If the owner is in the early stages of submitting plans into council or has engaged you to assist in the preparation and/or lodgement of plans, you may want to consider entering into a HIA ‘Preliminary Agreement’. This agreement allows you to charge for non building preparatory work such as drafting plans, lodging plans with council and arranging insurances. This contract acts as a stand alone contract so the owner will be obliged to pay you the agreed price for this work. If you decide to proceed with a building contract after development approval and the scope of work is clear, you can offer a credit from the contract price for any amount paid under the preliminary agreement to entice the home owner to appoint you as their builder.

Entering into a building contract before you have approved plans is not recommended. There is a possibility that the plans could change and building laws require that you comply with the terms of any development consent.

For more information, contact an HIA workplace adviser on 1800 650 620

_{DISCLAIMER - The above is intended to provide general information in summary form. The contents do not constitute specific advice and should not be relied upon as such. Formal specific advice should be sought by members with respect to particular matters before taking action.}