Builder claiming dodgy variations

[Rockstar]

Hi all,

I've just been handed the final progress payment claim by my builder on our duplex project. He has scratched down a list of variations (extras) to the value of $5200 and asked to be paid the amount with the final drawdown.
We have progressed through the project with some give and take items - always verbally agreeing to accept the compromises without signing variations and with the understanding that we don't exceed the fixed contract price.

I am off to my solicitors tomorrow to weigh up my obligations. I feel that he has no legal right to suddenly hit me up with a list of variations at the final progress payment since we have not signed any variationd throughout the entire project.

Anyone else been in this position?

 

[poppy]

What were the extra costs for?

 

[Propertunity]

I've just been handed the final progress payment claim by my builder on our duplex project. He has scratched down a list of variations (extras) to the value of $5200 and asked to be paid the amount with the final drawdown.

Rockstar, in a previous life I sold IT systems to builders & subbies for 15+ years. This used to be the 'old' way of doing things. Hit the client with variations at the end of the contract. It was never a good idea because most of the works were complete and often a client had spent all their finance - so there was always a s&@t fight at the end to get variations paid.
More recently, head contractors have had contracts with their sub-contractors requiring them to do variations to the standard scope of works without a variation sign off - so that works were not delayed on the overall project. Again it was a fight at the end for the subbie to get paid.

A couple of things have happened here:
1. The builder is just trying to squeeze more margin out of the job
2. Subbies have hit the builder up for variations and now he is seeking to pass that onto you
3. You genuinely had variations and the builder is entitled to ask for payment for them

We have progressed through the project with some give and take items - always verbally agreeing to accept the compromises without signing variations and with the understanding that we don't exceed the fixed contract price.

You know what they say about verbal agreements not being worth the paper they're written on.
It will all come down to the contract that you have signed in the first instance. What does the contract say about variations: when they are to be done, when they are to be agreed or disputed, when they are to be paid for?

Having said all that:
1. $5.2K is not very much in the overall scheme of things whichever way it goes
2. Did the builder do up the invoice for variations or the Project Manager or the internal accountant? They may all have a different take on things.
3. You are in the box seat. The works are complete. He can fight you for the $'s. $5K is not worth fighting in the courts for - he may just drop it.
4. It might be an ambit claim - you have every right (probably, but see your contract) to dispute a variation and to have it justified to you
5. If your contract says that you have to sign off each variation as approved before you pay and that hasn't been done, then the builder has got not much chance

Let's know how you get on.

 

[Rockstar]

What were the extra costs for?

2.7k Extra for kitchens is the big one. I phoned the kitchen maker who acknowledged that the PC kitchen item quoted in the contract had been held to budget as discussed at the design stage. Builder argued that he had to make the pantries seperately but verbally told me at the time that he would cover the cost in the contract.

$910 for 2nd water connection. The contract stated "All plumbing connected to services at street" He obviously didn't check that the 2nd connection required an extra tap in point and has thrown the cost onto me.

1.6k Extra council fees - this was for the construction certificate at the beginning of the job which I thought he was obliged to pay - no mention in contract.

 

[Rockstar]

What does the contract say about variations: when they are to be done, when they are to be agreed or disputed, when they are to be paid for?

Having said all that:
1. $5.2K is not very much in the overall scheme of things whichever way it goes
2. Did the builder do up the invoice for variations or the Project Manager or the internal accountant? They may all have a different take on things.
3. You are in the box seat. The works are complete. He can fight you for the $'s. $5K is not worth fighting in the courts for - he may just drop it.
4. It might be an ambit claim - you have every right (probably, but see your contract) to dispute a variation and to have it justified to you
5. If your contract says that you have to sign off each variation as approved before you pay and that hasn't been done, then the builder has got not much chance

Let's know how you get on.

Hi Prop,

It's a standard NSW HIA building contract. There are 8 items.

The first states that a variation must be in writing signed by the builder and the owner. Either party may ask for a variation.

The 6th states that - the price of a variation is due and payable at the next progress payment after it is carried out unless a different time is agreed.

Like I said, there were no written variations throughout the job

2. Did the builder do up the invoice for variations or the Project Manager or the internal accountant? They may all have a different take on things.

No Variations

3. You are in the box seat. The works are complete. He can fight you for the $'s. $5K is not worth fighting in the courts for - he may just drop it.

Do I own the property once the final progress payment is deposited into his account???

4. It might be an ambit claim - you have every right (probably, but see your contract) to dispute a variation and to have it justified to you

His justification was disputed by me

5. If your contract says that you have to sign off each variation as approved before you pay and that hasn't been done, then the builder has got not much chance

This is what I am hoping. He has threatened to lock the place up until he receives the 5.2k but I want to find out if the place is legally handed over once the final progress payment is made. ie: do we own it and is he able to enter the property after this final drawdown of the fixed price?
The thing is - I have all the keys so he can't lock me out unless he changes the locks.

 

[Propertunity]

The first states that a variation must be in writing signed by the builder and the owner. Either party may ask for a variation.
The 6th states that - the price of a variation is due and payable at the next progress payment after it is carried out unless a different time is agreed.

On these 2 points alone then, he has no grounds to claim varies at the end of the job.

Do I own the property once the final progress payment is deposited into his account???

This is an interesting point but the builder has put some stuff (the building) on YOUR land.

This is what I am hoping. He has threatened to lock the place up until he receives the 5.2k but I want to find out if the place is legally handed over once the final progress payment is made. ie: do we own it and is he able to enter the property after this final drawdown of the fixed price?
The thing is - I have all the keys so he can't lock me out unless he changes the locks.

You look to be in the box seat from where I can see things. If it came to it, I think you can deny the builder access onto your land.
Ultimately these things are just points of law. It is unfortunate that the relationship has come to this. Also I'm thinking you will want to have the builder honor his warranty period (7 years I think) and fix stuff that cracks or breaks etc.
I think your legal guy tomorrow will be able to clarify things for you.

I am also thinking there is a part of the HIA contract you signed that lays out what to do in the case of a dispute. There is something like the equivalent of a building ombudsman (although that's not what its called). Found it: Home Building Advocacy Service
http://www.fairtrading.nsw.gov.au/T...d_renovating/Resolving_building_disputes.html

All the best with it.

 

[Sheryn]

Hi Rockstar


I had to sign a variation to contract for each variation and was billed at each stage for the variations.

If the contract was not signed and faxed back to builder then variation did not occur.

Problem with a lot of builders is they aren't business people (managers) and don't get their variations signed as they should.

I have probably signed about 8K of variations for the duplex.

 

[Rockstar]

It is unfortunate that the relationship has come to this.
All the best with it.

Yes I agree though I feel we can come to an agreement when I know where I stand legally with the claim.

Thanks for your support.

 

[Rockstar]

Hi Rockstar

Problem with a lot of builders is they aren't business people (managers) and don't get their variations signed as they should.

Yeah Sheryn,

This guy can build a decent house but definitely lacks business and organisational skills. Will let you know how things pan out.

 

[GIDDO]

Tough position for you, especially at this already stressful period.

Sounds like this builder is one of the old school, who like to do things verbally, then forget what they promised when they get extra bills from their subbies.I have dealt with these type of builders before and it is very frustrating cos you wonder why they bothered to sign a contract in the first place. These are the "handshake" guys.

This breed of builder often believe they are doing the right thing by having a "trust relationship" with you, the owner. So they start out with the best of intentions and develop a cordial relationship with you. Then verbal assurances get made and both parties are happy with this. Of course when the bills come in he feels differently.
Many older anglo men operate this way and genuinely start out feeling it is the moral way to operate.

They come undone at the end of course cos written contracts always beat the handshake.
Then they feel insulted and get shirty, not admitting it is their own modus operandi that caused the problem. Really annoying.

What to do?? I reckon the best way is to go back to the "trust" way, and talk to him about what was promised.
If he then reneges on his verbal assurances, and also doesn't want to follow the contract either, he's a shonk, or maybe just is an ostrich and just wants to recoup losses and move on.

Can you get an appointment to see your solicitor quickly??

 

[Rockstar]

Going to solicitor now Giddo.

You have pretty well summed it up in a nutshell. There are outcomes that have been favourable for both of us during the project which have saved money and time for each party. ie: if we had strictly adhered to the contract it would have cost both of us at least another 5 - 10k I rekon hence the constant on site bargaining throughout to help each other save time and money.

 

[Rockstar]

Ok here is the story.

My solicitor says, "Before we start, is this the project that xxxxx is building for you"? Haha what do you know we have the same firm as our lawyers. They can't get involved
Problem with a small community. He told me that it's so tough on him sometimes when there are disputes between different friends of his and he has to act on behalf of one against the other.

Despite this he did give me some great advice even though he could not get too involved in the nitty gritty.
From the circumstances I could honestly explain to him, he feels that I am in the box seat, despite these HIA contracts being heavily weighed in the builders favour, and he (xxxxx) would need to chase me for the money - but would have a hard time winning any claim.

He suggested I send xxxxx a letter stating that the final progress payment has been made and that I require all keys and remotes to be handed over.

He recommended any mediation to be done by Dept. Fair Trading and to contact them for advice if needed.

He also said that verbal agreements during the contract period are also binding but I am not sure how this could be proven unless the conversation was witnessed?

So I will talk with Mrs R later about our tactics for sorting this out.

 

[Sheryn]

LOts of the master builders from our generation stil work on a handshake

Rockstar

I have just received my "Practical completion" paperwork from the builder.

I was issued with 5 variations totalling $6428.00 during the build which I signed and one verbal variation which I agreed too.

The verbal one was about the rocks out the front of the duplex (you and Mrs R saw those big ones!!) anyway they could not load the rocks onto the truck to take away so they buried them, then the builder rang me to explain and ask for variation of $120.00 for rock removal so I said yes as not worth arguing about and I was uncontactable when the subcontractor was there plus it is mentioned in my contract.

What I did argue about was the back patio steps (will put this in my thread later).

Lets talk about our kitchen on the last build with the same builder, my husband and his twin brother decided to increase the length of the kitchen wall and make the fridge opening wider and get a 450 wide broom cupboard installed and overhead cupboards over the fridge.

The variation was;
Alterations to kitchen to provide overhead and broom cupboard to refridgerator space
Over head 485
Broom 495
Builder's margin 98
GST 108
Total 1186

So in all honesty if the builder built you 2 x pantry's his cost is probably double the amount above.

In our latest duplex we changed a cupboard in the vanity to a second set of drawers in both units and that cost us $396.00.

Samantha changed the handles in her unit and that cost us an extra $297.00

The problem with some builders' is they work in the business physically doing the work and not on the business or managing the business eg. ringing up for quotes, receiving faxes and typing up variances and this causes problems, conflict, frustration and unhappiness.

With our builder we do not get access to the site - what I mean is we do not have a key, we can go in if open (subcontractors working on site) and have a look BUT at no stage do we get a key until I have paid the last payment.

I have been notified that handover will be on March 17th or 18th after they have received that last payment.

We can arrange to pick up a key for the day if we want to check something but it is call in and pick up key and return that evening.

One day I was up there and wanted the tiler to leave building open so my daughter could have a look after she finished work ( I was going to stay and wait for her) the tiler had to ring the building supervisor to ask permission.

Anyway I will give you a ring next week or you can call me for a chat beforehand. I went to a Dept. of Fair Trading seminar last year and on the feedback /comments sheet I said builders need compulsory training in variances eg give them a copy of a variance form.


Cheers
Sheryn

 

[reeco]

As a subforman ive worked with ALOT of different builders. So many it hurts

GIDDO got everything perfect, down to the "trust" way of the business. If you approach him with the good knowledge you now have, from that trust angle...im positive it will be good outcome. The confidence of being right will shine in the conversation you would have. And the trust way angle would really benefit

Especially if its in a non confronting and very easy going enviroment like a pub

Use the sandwich technique if you can. Be warm and compliment - be serious with your points - then be warm and compliment again.

Works on the missus every time im put on the couch

Hope it all goes all well

 

[regrow]

Rockstar

Sounds like you are in the box seat as suggested earlier.

Remember that you will still require the builder to come and repair any faults etc in the future so you want to keep him happy or he can make things hard for you. Unless you trust the guys to do work without you being there, you will be required to be there while they do the repairs. And they might need to return on numerous days to finish.

Why not suggest to meet him half way and pay $2600 just to keep him happy. $2600 is nothing if you keep looking at the big picture.

Regards

Regrow

 

[Spectre]

just some food for thought

Whats the solicitor costs going to be (I realise its not going to be $5k but they'll sting you for something)

Say you dont pay him, then something breaks on the house - maybe not initially but a few years from now, how fast do you think he's going to want to come back and repair it?

And also - if its a small town - say you go to get some tradies in to do some work in the future - word gets out you didnt pay a builder part of his due the tradies might be less inclined to work for you

Time that you spend fighting the invoice - could you earn more than that if you didnt.

I'd ask him to do a walk through on the building and show you the higher invoices versus what you have evidenced. Somewhere the truth will come out

 

[Rockstar]

Thanks for the suggestions guys,

All of your different points of view have also run through my head. I am happy to pay for some of the extras but not all. And I am disappointed in the way he just sprung the invoice on me at the end without any warning. That has left a lingering lack of respect for him which is influencing my decision in how to approach the situation.

To just pay him out would be the gullible approach and would not be good for either party. Me feeling resentful and him feeling he was justified in asking for more.

To give him nothing would be the "F.YOU you don't deserve it and can't legally have it" approach and would be unforgiving on my part.

So it looks like middle path. Offer him in writing a smaller sum of money and point out my disappointment that he had broken a verbal agreement to keep to the fixed contract figure. Also point out that legally he cannot claim the money because final payment has been made and we have no signed variations to prove the extras are owing.

No matter what happens I can't see us having much to do with each other anymore. It's a pity because he was wanting me to do some specialised landscaping on his own home that he has just moved into. He actually told me a couple of weeks ago that if there were a few small extras he could just get me do pay them out with some bartering for landscaping. When I spoke with him 2 days ago he rekons his wife was dead against this happening and she wanted the cash instead.

 

[sparky23]

I would probably aim for the halfway mark aswell, the other point I thought of was its all very well having the keys but do you have the paperwork - important stuff such as Occupation certificate? Maybe he could play hardball with things like that if things got nasty.

Or you could pay him the lot and then charge an arm and a leg for the work he wants you to do!

 

[Rockstar]

Hi Guys,

Have just drafted this letter to the builder. Suggestions appreciated. Will show Mrs R when she gets home from work before signing and sending.

Dear xxxxx,

We have been advised by St George Bank that $23,989.50 was paid into your account on Thursday 5th March. Please find enclosed a cheque for $10.50 which is the balance owing on the contract price. We now request that all keys and garage remote controls be handed over by the end of this week.

We note your belated request for a payment for extras. As there have been no signed variations during the contract period we have received advice that we are not liable for any extra payments to you.
It has been our verbal agreement and understanding throughout the project that the concessions in variations we have made in your favour (listed below) were done so on the provision that we do not exceed the contract price. These concessions were always made in good faith and we are disappointed that you are requesting more money at the end of the contract period after trusting you to remain committed to this agreement.

Concessions

Kitchen PC's Carpet and Tiles (see table)

Total Savings under allowance $3120

Other significant cost saving items.

Shortening of distance to meter box Unit 1
Replacement of Blackbutt stairs open stringer with closed pine stairs
Solar hot water used instead of heat pump
Replacement of Bi fold laundry doors to vinyl sliders
Replacement of stainless steel balustrade with Gyprock and pine slatting
Replacement of Hardwood handrails with pine.

All of the above concessions were made, in good faith, to your advantage in order to help reduce your costs.




Regardless of our legal position to refuse any extra payment I was always committed to compensate you for the extra drum of paint and the labour costs of applying it to one bedroom and toilet area. I am also willing to pay for the fitting of the dishwashers. Please invoice me for these items.

Looking forward to finalising the hand over.

Regards, xxxxxxx

 

[Propertunity]

Suggest you change: "I was always committed to compensate you for the extra drum of paint and the labour costs of applying it to one bedroom and toilet area. I am also willing to pay for the fitting of the dishwashers. Please invoice me for these items."
to ".............Please credit note me for the non-approved variations and instead invoice me for these items which I agreed to"

and suggest you do not put "kisses" on the sign off.

"Regards, xxxxxxx"