Client requests to suspend building work
May 07, 2020
The COVID-19 pandemic has caused some clients to consider suspending or terminating building contracts. This may happen because of financial pressures due to the client losing their job, being stood down or being concerned that they may lose their job. A client may also simply decide that they are not willing to spend the money at this time.
Whatever the reason, once the contract is signed the client usually needs to negotiate with the builder if they wish to suspend or terminate the contract. The exceptions to this rule include the cooling off period and the builder themselves being in breach of the contract. Builders who receive a request from a client to suspend or terminate should negotiate with the client. In practice it can be difficult to force a client to continue with a contract, especially if there are legitimate financial reasons for the client wanting to take this action.
Suspending the work
If a suspension is discussed and agreed to, it is important to consider:
- how long this would be for- any suspension should be for a limited time (a month or so),
- any financial impacts the suspension might have on the cost of construction and how that might be recovered – if there will be increased costs, this should be discussed and agreed to in writing, and
- the building period and the need to ensure that any agreement makes clear that the suspension stops the building period from running.
Suspension and safety
If considering a suspension of the building contract, Work Health and Safety needs to be taken into account as well as other risks. Whilst works may not be proceeding, the contract is still on foot and the builder would still be responsible for the site and the works.
If the client and builder agree to terminate the contract then it is vital that this agreement be documented. The price to be paid to the builder or the refund of any part of the deposit needs to be included in this agreement. The builder should notify the relevant principal certifying authority- council or certifier, as well as their broker for warranty insurance that the contract has been terminated.
In the event that an agreement cannot be reached and the client refuses to allow the builder to continue building work then the builder should get further advice.
The HIA COVID-19 site has a number of resources about managing your business, including contracts, during this difficult time.
Members are welcome to call a HIA Workplace Adviser on 1300 650 620.