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Building Dispute - Contract Price Increases and Prime Cost Variations

November 18, 2010

We've been dealing with some very nice people that signed with a project builder using a rather messy 2007 Housing Industry Association contract.

The demolition people have only just submitted the application to demolish and that will take until early December to approve.

The building licence was not obtained within the 45 day period, due to some delays by the owners, so the builder has exercised its right to increase the costs by up to 5% without the owners having an automatic right to terminate.

Although the contract suggests that they can terminate, there is some doubt and they do not wish to take the risk.

The owners want to challenge the increase, which is 6 times the CPI increase during the relevant period of time. Despite request, the builder has not provided any proper evidence that there has been any such increase. Unfortunately, this requires an application to be made to the Building Disputes Tribunal.

The builder has told them that if they choose tiles that cost less than the prime cost specified in the contract, they will not get a refund, which is wrong, and does not auger well.

They are about to do their pre-start selections and are worried that the prices will all go up during that process, e.g. when they want more than one power point in the lounge room.

The owners are concerned about the builder increasing costs generally and are considering engaging a building inspector to oversee the project.

Hopefully, the builder will seek a total increase of more than 5% of the contract price which will automatically allow the owners to terminate the contract.


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