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To attend to these preliminary items, a builder may have to spend substantial amounts of time and money. This is often at significant out-of-pocket expense in a situation where the owner may later withdraw interest from the project because of, for example, a change of heart.
To safeguard against the risk of not getting paid for the “preliminary” work done, it is recommended that you first enter into a separate written agreement with the owner. This is often in the form of a preliminary agreement.
The purpose of a preliminary agreement is to be a service agreement of a commercial nature.
Preliminary agreements are not residential building works and should not be referred to or mentioned in your scope of works under the residential building contract.
A written preliminary agreement can be used to set out:
Consider the following when using preliminary agreements:
You can offer a credit from the contract price (of a future residential contract) for any amount paid under the preliminary agreement to entice the homeowner to appoint you as their builder.
HIA always advises its members to enter into formal written contracts before any construction works commence. HIA have preliminary agreements available for purchase that set out all of these terms for you.