If you are waiting on a new home build to be completed and keep seeing your completion dates getting pushed back further and further you’re not alone. Australia wide building projects are being delayed or even terminated due to building materials being reallocated, the supply being unable to meet demand or detained shipments thanks to global delivery issues. Add to that a shortage of skilled workers and an abundance of sick leave, it's a recipe for frustration and dead ends.

This headache is affecting everyone. The domino effect is putting pressure on building companies who are begging clients to wait out the issues or even pay more to cover the spike in their costs, causing many to have to fold and shut shop for good, placing even greater pressure on the remaining companies to pick up their slack.

While they wait, those who had plans of moving into their new homes are withholding their property sale - taking a risk on the ever-changing property market - remaining in rentals, currently in high demand with increasing prices, or stuck without accommodation living with friends, relatives or whatever they can make do with.

It feels like your hands are tied and you are left at the mercy of unprecedented worldwide events. So what can you do about it?

This blog will give you some direction on how to cope with delays, building disputes, price increases and insolvent builders.

The Reasons Behind Building Project Delays

Most of us have put COVID-19 behind us, but that doesn't prevent it from impacting our lives and causing stress even on the ‘normal’ side of the pandemic. 

Another huge impacting factor is the shift in a global need for newly built housing and quality building materials that pushed demand well beyond what suppliers and tradespeople could handle, right when operations were forced to slow down or stop. 

More recently political disputes and natural disasters like floods and bushfires have further impacted an already weakening supply chain.

Even now, far down the track we continue to see increasing build timeframes and steep prices across the industry for new home builds and renovations.

There are simply too few quality materials and skilled tradies to complete the high number of building projects on the go.

As well as causing delays, fewer resources means prices are pushed up. Builders need to pass on the higher costs to their customers in order to see the materials arrive at the build site as well as to attract qualified tradies to the job.

Projects are delayed due to not having the materials needed, not having the workers to install the materials that are there or not being able to meet the rapidly changing price demands.

A study by ABS in March 2022 found that housing construction materials had increased by 15.4% Australia-wide. A cost that builders can’t afford to shoulder alone.

How to cope with building delays

If your builder or tradesperson needs to ask for an extension of time, make sure they tell you:

• The reasons for the change
• The new estimated competition date
• Any impacts this will have on materials
• Any additional costs that might incur due to extra labour

As well as the build side of things you need to be flexible around your current living arrangements and have some different options in place to help reduce worry and stress. If you are not able to extend your lease or remain in your home, think about what alternative accommodation can you find and explore the pathways financially and practically in advance so you can make an informed decision if the need arises.

Always check your contract against the relevant clauses regarding time delays and seek help if you feel you have a right to claim damages.

If you are still looking to build

If you are looking to build or renovate you’ll most likely be wary and wanting to cover your bases. This is a smart move because the issues the industry is facing are not going to evaporate overnight. You can still go ahead with a contract, just make sure you have what you need in writing to protect you.

Get the conversation started and be open about the difficulties early in. That includes a discussion with your tradesperson or builder around your timeframe and budget. Ask them about possible circumstances that may cause project delays and agree to be flexible within reason.

Make sure you have ways to keep the conversation going. The last thing you want is silence. Talk about the best ways for communication to happen between you - phone, texts, or emails—as well as the best times to call. If a builder is on site, they might not be able to take your all, but it might not be that they are ignoring you. Most builders don’t have reception staff, so they handle all calls personally, meaning you might not be able to talk every time you dial their number.

Put in contract clauses in your favour

Make sure you have a conveyancer look over the offered contract to make sure you have the flexibility you need if things don’t go according to plan. They can also help you put in additional clauses to help get you unstuck if needed. 

Some additional clauses might include:

• Time limit for construction 
• Procedures to be followed in case of delay
• Any payments you may receive for damages or a contract breach

Your conveyancer will be able to discuss these additions with the building lawyers to come to a suitable agreement or make recommendations if the builder won’t agree to your terms.

Get Insurance

If your building work is valued at $20,000 or more, ask your builder about Home Building Compensation Cover. This insurance can help you recover funds if your builder abandons your project or becomes insolvent.

Always work with licenced professionals

All professional building and builders need to comply with state and territory regulations for qualifications and licences. As well as asking for proof of qualifications and certificates, you can also look them up online. For NSW, use the NSW Fair Trading online tool.

As well as the right qualifications, make sure they have professional indemnity insurance. This is a requirement for anyone working on your build site or renovation.

If your project is underway

You want to know how your building project is going and what the updates are, even if it’s bad news.

There are two ways to help with this. Firstly be upfront about asking for information, secondly, be accepting of whatever the news may be. If a builder knows they will cop abuse or frustration they are going to put off telling you the status of your build which won’t help the situation and may even make things worse.

Opening a channel of effective communication is a big help because it allows discussions on alternative materials, products, or project changes that can help overcome the issues and get you into your home faster. While these changes might help complete your build on time, just be aware that they may also come with increased costs or decreased quality, so make this a detailed discussion to cover all the angles.

If your builder is unable to meet the deadline set out in your contract and you do not agree to extend the timeframes, you may be able to seek damages, depending on what was outlined in your contract.

Can I terminate my building contract?

As tempting as it may be to pull the plug, it’s usually not an easy option to take. The circumstances for legally terminating your building contract are very limited. It’s best to do everything you can to resolve issues rather than pull the plug. In most cases, the current building issues are to do with ongoing external circumstances and not negligence or lack of compliance on the builder’s part, so it will take patience and flexibility to see your build through.

It is essential that you understand your rights and statutory warranties before you make any solid decisions or put a termination in writing.

Keep in mind that your termination might be a breach of contract that the builder can take legal action on. If so, it’s possible that they will be awarded payment to cover their expenses and any damages they may incur as a result of your withdrawal.

If a contract termination is necessary, proceed with caution and always contact a legal professional, such as a conveyancer, to make sure you follow the right steps.

How to handle increased building prices

Rapid and essential changes in price are a relatively new experience for builders. Your builder has a very limited range for price changes. Even then, it is usually due to a change in your building request that leads to different metals or material volumes, rather than supplier changes or delivery no-shows. Unfortunately, the current situation with supply and workforce shortages means that building materials can be simply out of reach. Builders are scrambling to find alternatives, many of which have drastically increased in cost since the last time they were purchased.

If you have been asked to pay more for your building, check what is outlined in your contract to see if there are any additional clauses that give your builder the right to allow this.

If you are building a new home or have extensive renovations that mean your build value totals more than $20,000, it is very unlikely that your builder is able to increase their prices.

If your contract does have clauses that allow prices to increase, opening negotiations can soften the blow, but only do so after getting professional legal advice or talking to your conveyancer.

When to pay a builder or tradesperson

A difficult factor for building delays is progress payments. Even if your build is not going to plan, you are still legally required to follow the progress payment agreed on in your contract. 

There are different payment agreements, so make sure you understand which yours is and also be sure what point of progress your builder is up to.

As invoiced

The “as invoiced” payment clause means you need to pay for any materials or labour the builder has covered - that will stand even if the builder has paid for materials that the supplier hasn’t been able to deliver. You can ask for proof (such as the invoice copy) to show that the money has changed hands or that the labor has been paid for.

Only after the work completed

The “only after work has been completed” means you won't be legally obligated to pay for work that was scheduled but is not yet evident.

While it might feel nice to get a "win" or have some control over the situation, the reality is you are legally bound to make the payments and your property completion simply cannot progress without your financial input.

As well as breaching your contract, you are only going to further delay any possible progress and resolution. The builder will simply be able to claim the expenses from you legally, so it's best to grease the wheels and make your payments as per your contract.

Just make sure the payments are requested and legally part of your contract obligation. Any additional payments you make on a voluntary basis may not be recoverable if your building fails to progress.

What to do if your builder becomes insolvent

If your builder is unable to pay their debts and continue operations, they may become legally insolvent or just disappear, leaving your building work incomplete. There are options for recovery of your costs under the Home Building Compensation (HBC) scheme.

This can also be an issue with a completed build if there are severe defects that the builder is obligated to repair but is financially unable to do so.

Reasons for incomplete builds or repairs can come from a number of circumstances including:

• Revoked or suspended licence
• Unannounced abandonment of projects
• Ongoing court appeals
• Owner has died

If you are in a situation where work is not progressing and you are not able to get in touch with your builder, contact the HBC scheme insurer in writing immediately - timing is really critical in these claims.

6 Steps to Resolving Building Disputes

It’s important to know how to handle disputes well. Your response and involvement can make all the difference to how smoothly issues are overcome and how well progress is made through disruption.

Positivity and straightforward communication are the best foundations to lay to resolve any issues that may come up during the build. 

The worst-case scenario is that you are not on speaking terms with your builder or tradesperson. If there is no communication, you can't know what to expect or make negotiations or find resolutions. 

Here are the best steps to follow in order to resolve building work issues, either during a building project or if you find serious faults with your home after completion. Before each of the steps, you are encouraged to talk to your conveyancer or conveyancing solicitor about where you stand and what your legal rights are.

#1. Talk it Over

As soon as you become aware of a problem or have any doubts, talk to your builder. It could be a simple misunderstanding that is easy and quick to resolve by starting a conversation about it. If the issue is more complex, an open discussion starts the pathway for faster resolution and better negotiations for terms in your favour.

#2. Put it in Writing

In order to make your builder conversations binding, put them in writing. Outline what was agreed on, when the agreement was made, and when the completion date was set. Make sure the builder gets a copy (via email or registered post) and agrees that it is correct, then put your own copy on a secure file.

#3. Contact Fair Trading

If the terms set in your contract and agreed on are not met and there is no positive communication or resolution pathways offered, you can move your complaint to Fair Trading. Each state is different. In NSW, you will be contacting NSW Fair Trading. Have all the paperwork ready to make it easy for them to assess your request, including invoices, receipts, and emails, as well as your building contract.

Fair Trading’s aim is not to provide compensation but to get a resolution going. Just keep in mind that if you are the one failing to communicate, meet agreements, or find resolutions, your builder can request Fair Trading to step in and find a middle ground as well.

#4. Notify the Home Building Compensation provider

If Fair Trading is not able to get both parties to agree to a suitable resolution, then you can move to notify the appropriate Home Building Compensation Fund. They will be responsible for assessing compensation due to damage or failed work completion. This is something that needs to be completed promptly, so don’t delay in making your issue known to them in writing.

#5. Get a Professional Building Inspection

As part of the Fair Trading resolution process a Building Inspector is usually required to provide an unbiased assessment of major defects for the project in question. Minor defects will be assessed through the Issue Resolution and Advisory Services team. Usually, both you and the builder will be required to attend and look over the specific problems you have lodged on-site. They will provide an assessment of how critical the issue is as well as recommend resolutions.

#6. Go through Building Dispute Intervention

If there is no progress after following steps 1-5 through assurance schemes like statutory warranties, it’s time to refer your issue to the Building Commissioner. They can push the investigation through to the next phase through building dispute intervention.

Keeping a cool head and staying professional isn’t as easy as it sounds when your dream home is in the firing line. Remember that this is a professional investment and you need to approach it with a business frame of mind if you want the business side of things (building, shipping and supplies) to stay strong. Before you get fired up, pick up the phone with the best conveyancer in NSW and discuss your issues and concerns with them. They will be the best people to provide legal advice on how you should proceed based on your contract and building agreement.