Updates to SA Building Contract for New Homes

Is my contract still compliant and enforceable?

Yes. If you have signed the HIA SA Building Contract for New Homes dated October 2023, your contract remains compliant

What has changed in the Contract Schedule?

A number of changes have been made to improve the contract including:

Item 10 - Prime Cost Item and Provisional Sum Items and allowances

The contract now includes a Provisional Sum Item in the Building Schedule. Previously, the contract only included a schedule for Prime Cost Items.

• Prime Cost Items are fixtures and fittings that have not been selected by the owner at the time of entering into the contract. Examples include kitchen stoves, bathroom tiling, or water taps.
• Provisional Sum Items refer to the estimated cost of doing certain building works, e.g. earthworks. It is typically used where the builder is unable to provide a fixed or definite price. For example, this might be because there are unknown factors.

The “allowances” stated in the Contract Schedule are estimates only and are subject to change. However, it is important to ensure that the allowances are a reasonable estimate of the expected costs. The contract also accounts for a margin to be applied on the excess, if the actual costs exceed the allowance. The maximum margin permitted in South Australia is capped at 15%.

It is important to read Clause 6 of the contract in full (see below).

Item 11 – Excluded Items

Builders can now list any materials or works to be supplied or completed by the owner. Including these items in this section clearly identifies them as outside the builder’s scope of responsibility and helps prevent disputes later in the project. See further in Clause 18 of the contract.

Item 14 - Default interest rate

This allows builders to specify the interest rate that will apply if the owner is late in making payment. If this section is left blank it will default to the Supreme Court judgement interest rate.

Item 15 - Other contract documents

The contract now allows for builders to include any other documents with the intention that they will form part of the contract. The documents listed in this section will be in addition to the standard contract documents which includes any special conditions, general conditions, specifications and plans signed by both the owner and builder.

Item 17 - Date of contract

The date of contract is the date on which the last person signs the contract. This date has now been moved to the Building Schedule, whereas it was previously located on the signature page. The change ensures consistency in how it is referenced throughout the contract.

What has changed in the Building Contract conditions?

Clause 1 – Definitions

This Clause was previously called “special meanings”. The Clause provides definitions for certain words that are used under the contract. Specifically, any words that is in bold will have a defined meaning under this Clause. This Clause has been updated to include new definitions, for new defined words including:

• all weather access
• builder
• contract documents
• contract price
• date of contract
• owner
• restricted access.

Clause 2 – Builder's Obligation

This Clause expands upon the Builder's Obligations by requiring compliance with all applicable laws and statutory requirements, confirming that the works must be completed within the building period, or a reasonable time, and clarifies that if the builder intends to use any materials that are not new, this must be specifically disclosed and agreed through a Special Condition.

Clause 3 – Payment of the Contract Price

Clause 3.4 has been updated to specify that the builder cannot claim a progress claim until the works have been completed – this reflects the rules imposed by the relevant legislation. It is important that builders ensure that their administrative practices reflect this requirement.

A new Clause 3.5 permits the builder to reasonably ask that the owner provides evidence of their capacity to pay the balance of the contract price.

Clause 4 – Extra Cost

Clause 4 has been updated to specify that if extra costs are incurred, the builder will provide a written notice within 7 days of becoming aware of these additional costs and requiring that the owner pays the additional costs with the next progress claim.

Clause 6 – Prime Cost Items and Provisional Sum Items

Clause 6 has been rewritten and now sets out the process for:

• the selection of Prime Cost and Provisional Sum Items
• the allowance applied to each item referred to in Item 10 of the Schedule
• when adjustments to the contract price are due and payable.

Clause 9 – Possession of the Site

Clause 9 has been revised to clarify the terms that apply in the event of unlawful early possession by the owner and the actions available to the builder. These actions include treating the owner’s conduct as a repudiation of the contract, issuing a notice to remedy breach, or accepting the early possession as completion of the works as at the date possession was taken.

Clause 10 – Access to do the Work

Clause 10 has been updated requiring the owner to:

• provide ‘all weather access’. This is a defined term under the contract.
• arrange any necessary access from a neighbouring property.

If the builder incurs additional costs to gain access, the contract provides that these costs will be passed on to the owner as a variation. The owner's consent is required for this variation, but it must not be unreasonably withheld.

Clause 11 – Time for doing the Work and Delay Damages

If a finish date is specified in the contract, the builder may extend this date by issuing a written notice. The written notice must specify:

• the cause of the delay
• the extension of time
• the expected change to the finish date, and

must be provided to the owner as soon as the builder becomes aware of the cause and extent of the delay.

This new clause and the requirement to provide detailed written notice aligns with industry best practices.

New Clauses 11.6 to 11.8 set out the procedures to claim for delay damages. These are the increased costs that the builder may incur due to delays caused by the owner.

Clause 12 – Variations with the Owner’s Consent

To reflect common practice, variations can now be accepted by signing, approving or otherwise consenting to it within 5 days of the quote being provided. The owner must provide approval or consent in writing – this will assist in avoiding disputes later on.

Clause 15 – Variations to Comply with the Engineer’s Report

This Clause allows the builder to raise a variation because of the Engineer’s Construction Footing Report. Similarly to Clause 12, the owner can accept the variations by signing, approving or otherwise consenting to it. The contract may be terminated if the owner does not accept the quote provided to comply with the Engineer’s report within 7 days.

Previously, if the contract was ended under this Clause, the owner was only liable to pay the builder a maximum amount of $1,650 as payment for the cost of preparing plans, obtaining the Engineer’s Report, or conducting any wind assessment, contour plan, or site survey. This Clause has been removed, and the owner must pay the builder the builder’s actual costs.

Clause 18 – Work by the Owner and Excluded Items

New Clause 18.10 states that both the owner and the builder agree that any items listed in Item 11 are excluded from the builder’s scope of works and are not included in the contract price.

Clause 25 – Insurance

New Clause 25.6 provides that where the owner asks the builder to arrange an insurance policy that would ordinarily be the owner’s responsibility under Clause 25.5, the builder may recover the cost of the insurance premiums and associated levies from the owner.

Clause 27 – Suspension of Works

New Clause 27.4 clarifies any days which are subject to suspension of works do not form part of the building period. For example, if works are suspended on day 100 and recommence two weeks later, the Building Period resumes at day 101. This reduces the administrative burden on builders by removing the need to issue a separate notice for an extension of time when work is suspended. However, this does not limit the builder from claiming an extension of time due to delays arising from the suspension.

Clause 28 – Termination of Contract

Clause 28 sets out a new process for termination of contract. In the event of a breach, the Clause now requires that:

• the party in breach must be given a written breach notice that sets out details of the breach (and other details included at clause 28.4);
• the party in breach must be given 5 days to remedy the breach
• if the breach is remedied the contract cannot be terminated
• if the breach is not remedied, the contract can be ended by issuing further written notice.

As terminating a contract carries significant legal risk, it is essential to seek advice from a solicitor before taking steps to terminate the contract, ensuring that you are not in breach of the contract.

Clause 33 – Conciliation

This clause introduces a new requirement for the parties to first attempt to jointly appoint a mutually agreed conciliator to assist in resolving the dispute. If the parties cannot reach agreement on a conciliator, HIA may then assist by appointing one on behalf of the parties.

Clause 34 – Dispute Reference

HIA is no longer holding monies in trust on behalf of the dispute referee. Accordingly, HIA will only charge an appointment fee and assist in appointing a dispute referee on behalf of the parties to the contract. The parties shall pay the dispute referee’s fees directly or as otherwise directed by the dispute referee. The appointment fee is currently set at $200 and may be changed from time to time.

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.