The state government, in its absolute wisdom, introduced the Domestic Building Dispute Resolution Board in April, 2017.

The idea is that consumers, including developers under Domestic Building Contracts, who have a dispute with their builder can take it to the wonderful folk at the Board and have it resolved.

The reality is sadly different.

If you can’t resolve a dispute that relates to a Domestic Building Contract you are required to approach the Board for resolution before you can initiate legal proceedings in VCAT.  There are a number of issues with this:

  • The Board will take at least 9 months and possibly more than 12 to complete the process;
  • Mediation is a process where the Board brings the parties together and encourages them to be reasonable to reach an agreement.  The difficultly is that reasonable people would have, in my view, resolved the issue before getting to the Board and after a 12 month delay are much more likely to be entrenched in their position and less likely to be reasonable;
  • The Board cannot force a resolution – and if you don’t reach agreement, and after a suitable wait, you get a certificate that gives you permission to issue proceedings in VCAT.

Proceedings in VCAT will generally take a further 6-9 months minimum as well.

Clearly this is a totally unacceptable time frame to resolve most building disputes.

As a property developer, I think you need to be aware that trying to enforce a contract is less viable – if it ever really was a viable option given the costs, delays and unpredictability of the court system.

Issues to consider in light of recent contract disputes include:

  • Making sure that the building contract does not require you to pay progress payments to the builder that are more than your bank is prepared to fund – which is often on some sort of cost to complete basis.
  • Ensuring that, even if monthly progress claims are agreed, the last 10% of the contract price will only be paid on completion.
  • Including a provision that the builder cannot suspend work where there is a genuine dispute about a variation or claimed payment.
  • Seeking a personal guarantee from the builder – in case of termination or late completion.

If you are contemplating signing a building contract I believe you need to prepare for the worst case scenario – in the hope that it doesn’t arise.

At Lewis O’Brien and Associates we regularly work through building contracts with our clients and can help draft the clauses required to make sure that the contracts work (and are compatible with off the plan contracts and loan documents) and that you have some protection if the builder doesn’t deliver.  Please let us know if we can help you.