NEWS

James & Susie's fixed price builder

Issues with 'Fixed Price' Contracts

By Rachel Lee

 

James and Susie:

James and Susie wanted to start a family and needed the extra space. They decided to upgrade the “first home” they had owned for 10 years. After months of viewing multiple properties online and attending various open homes they worried whether they would ever find the right home.

After viewing a recently completed show home they decided to look into building a new home. 
They found the ideal site in a newly formed subdivision up the coast and submitted an offer through the agent. The offer was conditional on a due diligence investigation which would allow them to undertake a thorough check on the site. They were so excited when their offer was accepted.

James and Susie began looking for a builder to build their dream home. They had no idea of the likely costs or what was involved so needed to go over everything before they committed to the site purchase. They spoke with a builder recommended by a friend of a friend and were satisfied that they could build what they wanted on the site.

They approved a draft concept for a house and decided to secure the site before they missed out. They confirmed that the section agreement was unconditional and paid the deposit. The new certificate of title was expected to be out in the next couple of months so they needed to finalise their plans with the builder. The builder gave them a rough idea of what the build would cost and they were happy that it would all come within their budget. James and Susie were anxious that the build commence as soon as possible and were frustrated by the delays in obtaining building consents. They really felt that their builder was not giving sufficient attention to their project.

Consent finally issued and work commenced. After they had paid several progress payments for the build the builder told them that there was a problem with the formation of the drive and an engineer’s report was required. James and Susie thought they had a fixed price contract but learned that the cost of any engineer’s report was excluded and their price increased accordingly.

The builder subsequently told them that substantially greater earth works were required for the driveway as a consequence of the engineer’s report. The cost of the earth works would increase their contract price by $30,000. The $6,000 for earth works provided for in the contract was a “PC Sum” and they were responsible for the additional cost.

They learned the hard way that “fixed price” does not necessarily mean “fixed price” in this context.


My contact details:

Rachel Lee

rachel@dhlawyers.co.nz

Direct dial: 09 915 4387

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