Commencement of building works under HIA Contracts

It is vital to ensure that commencement occurs according to the contract to avoid potential disputes around the building period, practical completion, and late completion damages. 

What is commencement? 

Commencement is defined in HIA contracts as being: 

• when the builder commences physical construction on site of the footing, slab, or drainage system, or
• where the works do not include construction of a footing, slab or drainage system, when work to change an on-site fixed structure has physically commenced.

The Anticipated Start Date

Under HIA contracts, the builder is required to specify an Anticipated Start Date (ASD). The ASD is an estimate of when the builder expects to commence work on site. It is important to note that the ASD should be a specific, identifiable date (e.g. “30 June 20XX” or “100 days from contract signing”).

It is important that the ASD is not linked to a future event. For example, builders sometimes nominate “30 days after council approval” or “100 days from land registration”. In most cases, the timing of these events is uncertain or subject to delay.

Importantly, linking the ASD to such events may limit the builder’s ability to rely on its contractual rights if works do not commence. This is because those rights are triggered by the ASD being reached. If the ASD is tied to an event that has not yet occurred, the trigger point may never arise, even if the project is significantly delayed.

Setting the anticipated start date

When determining an ASD, builders should consider all relevant information available at the time of signing the contract. Relevant factors include:

• Land registration dates: for example, if the developer or client advises of a land registration date 6 months from the date of the contract this would be an appropriate starting point to determine the ASD.
• Utility connections: when connections such as water, sewerage and gas are expected to made and whether this affects the builder’s ability to commence works onsite.
• Approval timeframes: the likely timing for obtaining necessary building and/or planning approvals, having regard to the local council’s usual processing times.
• Pre-construction works: whether demolition or site clearing must occur before construction can commence and how long the builder needs to carry this work out.
• Programming and resourcing: the availability of staff, trades, and subcontractors, and how the proposed job fits within the builder's wider project schedule.
• Lead times for key materials: Due to currently supply issues, materials may still have extended delivery times that need to be factored in.
• Cash flow: this may be more relevant depending on the size of the business however, the builder's ability to fund an amount of builds at once may be relevant in scheduling jobs.

When must the builder commence works?

Commencement must take place on or before the later of: 

• the ASD; or
• 20 working days after the requirements of the commencement clause have been satisfied.

These requirements largely relate to essential preconditions for construction. Under QC1, QC2 and QC3 contracts, they include:

• The owner providing evidence of their title to the land;
• the owner must provide the builder evidence of their capacity to pay the contract price;
• if required, the owner must establish a security account;
• the owner must provide the builder possession of the site;
• where a lending body is named in the contract, the owner must provide the builder a notice from the lending body that construction works may commence; and
• the builder receives all permissions, consents, and approvals required from the relevant authority.

What if the owner does not satisfy all the essential requirements by the anticipated start date?

Except where delays relate to building or planning approvals, if the owner does not meet the commencement requirements, the builder may:

• end the contract; or
• allow additional time for the owner to satisfy the requirements. If the delay exceeds four weeks, the builder may also increase the contract prince in accordance with the “Delay Damages” clause. 

If the delay is due to building or planning approvals the options available to the parties will depend on who was responsible for obtaining those approvals (these options are outlined in Clause 2).

What happens after commencement?  

Once commencement occurs, this will trigger the beginning of the building period and the builder must complete the contracted works within this time period. It is also a contractual and legislative requirement that the builder provides the owner with a Commencement Notice within 10 working days of commencement occurring. This notice must be in writing and state, the actual date of commencement on the site, and the date for practical completion. HIA has a Notice of Commencement available through Contracts Online. 

The building period in the contract can be used to work out the date for practical completion. It is important to note that the date for practical completion provided in the commencement notice is subject to change in accordance with the contract for example, due to extension of time claims. However, if the builder does not reach practical completion within the nominated building period, they may be liable to pay the owner late completion damages.

The above is intended to provide general information in summary form. The content does not constitute specific advice and should not be relied upon as such. Formal advice should be sought by members and customers with respect to particular matters before taking action.