Dealing with delays in Australian Capital Territory

The HomeBuilder grant has exceeded all expectations. HIA is aware that this increase in building activity is leading to delays in both the supply of labour and materials.

When should I consider delays?

There will be three stages during a residential building project when you might need to consider how to respond to delays:

1. Before signing the building contract
2. After signing the contract but before commencing building work
3. After building work has commenced

Each stage will present different challenges and, if you do not factor in or respond to delays, you may be liable to compensate your client.

Stage 1. Before signing the building contract

Get the building period right

Ensure you have adequate time under your building period for the completion of the building project. This may mean that you need to:

• Reconsider your usual build times to factor in the current climate.
• Be prepared to explain to your clients why construction may take longer than usual.
• Factor in all foreseeable delays such as annual shut down periods and known delays in the delivery of building materials.
• Be aware of liquidated damages.
  Most contracts provide for a homeowner to be compensated if there are unjustifiable delays during the project.
  Under the contract you and your client can agree to this amount.
  If you do not, a default amount may apply OR if no amount is specified and there is a dispute, a court or tribunal may determine the appropriate amount.

Consider your current workload

While the current level of interest and activity is appealing, and you don’t want to ‘miss out’ on work, making sure you can deliver on what you commit to should be a priority.

This is particularly important given the current requirements regarding commencement timeframes under the HomeBuilder grant.

When assessing your current workload and future commitments you should consider:

• Any limits on your warranty insurance that may impact on the amount of work you can contract for. Investigating this before signing contracts is strongly recommended.
• The availability of subcontractors.
• Predicted delays in the supply of building materials that may impact your local suppliers.

Stage 2. After signing but before commencing building work

Once you have signed the contract you have entered into a legally binding agreement.

Any changes must be made strictly in accordance with the contract.

When should you commence building work?

Under the New Dwellings contract you must commence building work within 15 working days of the owner providing all of the essential information listed in clause 4 of the contract.

The owner has 30 working days after the contract is signed to provide this essential information. Essential information includes, for example  evidence of ownership such as certificate of title to the site and the necessary building permits and planning approvals. 

If an owner or builder (depending on who is responsible for building and planning approvals) does not fulfil their obligations, then either may end the contract by written agreement or by sending the other a written notice by certified mail or personal service under clause 25.7(c) of the contract.

Under the Alterations and Additions contract you must commence building work within 15 working days of the owner providing all of the essential information listed in clause 4 of the contract.

The owner has 90 working days after the contract is signed to provide this essential information.

If an owner does not fulfil their obligations within 90 days, clause 4.2 of the Alterations and Additions contract provides that a builder may give the owner written notice to end the contract.

If the builder ends the contract, this would allow the builder to retain the deposit or an amount calculated in accordance with clause 25.8, whichever is the greater.  

In addition, either party may also end the contract by written agreement or by sending the other a written notice by certified mail or personal service under clause 25.7(c) of the contract.

Stage 3. After building work has commenced

Delays during construction can be frustrating and cause tension. 

They can also lead to disputes.

Being aware of your rights and obligations regarding extensions of time is critical.

3 ways to manage delays during the building work

1. Monitor the progress of the construction work and track it against contracted timeframes.
2. Communicate any delays or disruptions to the owner as soon as possible.
3. Seek an extension of time as soon as you become aware that a delay will impact construction timeframes.

How to claim an extension of time

An extension of time may be available if the delay is:

• caused by something beyond the builder’s control, and
• was not reasonably foreseeable at the time the builder entered into the contract.

There is a non-exhaustive list of what may constitute an extension of time under ACT HIA contracts.

To claim an extension of time you must:

• Provide the owner with a written notice for an extension of time detailing:
  • The cause of the delay; and
  • The extension of time.
•  Ensure that the notice is provided to the owner within 5 working days of when you became aware of both the cause and the extent of the delay.

If you do not claim the extension of time in accordance with the contract, you may be unable to rely on it.

Generally you cannot claim an extension of time for delays you cause or a delay that was reasonably foreseeable at the time the contract was signed.

The Homeowner is unhappy about an extension of time – what should you do?

HIA contracts require the homeowner to not unreasonably refuse to approve an extension of time.

If the homeowner disagrees with the extension of time, you have 2 options:

• Provide evidence to support your claim.
  Economic information or correspondence from suppliers may help convince a client that the delay was not foreseeable at the time of signing the contract.
• Refer to the dispute resolution clause.
  If you and the owner disagree, you should follow the process set out in the dispute resolution clause of the contract

HIA has extension of time documents available through HIA contracts online.

To find out more, contact HIA's Contracts and Compliance team

Email us