b'Types of Building ContractsAs the initial stages of the design are finalised, a budget is locked in and youve selected a builder, you will need to sign a residential building contract. This is another crucial step of the process, and its important to be aware of builders using a custom-made contract. Housing industry bodies, including the Master Builders and Housing Industry Association (HIA), have standard contracts for their members to use that protect both the builder and the homeowner. These documents have been drafted by lawyers and updated over many years in accordance with legislation changes and are your best option when signing a residential building contract. The two common contract types are a Fixed Price Contract and a Cost Plus Contract.Fixed Price Contract Cost Plus ContractThis option is for clients wanting a quote from a builderThis is a flexible contract that can be set up in a variety of where the payment doesnt depend on resources used orways. This type of contract can receive poor press when time. You must make sure everything has been includeddishonest builders supply an unrealistic budget and/or or at least ensure theres a provisional sum provided forcharge retail rates for supplied items. In good hands, this unknown items. Finance companies prefer this type ofis a very flexible and workable way to build. Most finance contract if the client is financed and knows the price.companies will not finance on this type of contract.Complications arise if the client wants to make changes mid-process, as this incurs variations to the price and results in administration costs. Cost Plus a Set Margin on all Expenses Project ManagementYou will receive an invoice from the builder generallyThis is when the builder has a fixed price for his services, every fortnight for the cost of all materials and labour.which generally include all supervision, organising trades A margin is then added which ranges between 10 to 20and materials, administration and overheads attributable per cent depending on size and what is included. Theto the construction. margin charged will be less than a fixed- price contract. The reason for this is the builder has good cash flowYour builder will need to do an accurate estimation of being paid every fortnight and, here is the big one, thecosts and supply you with updated figures along the builder is not responsible for the end price.way so you have a clear indication of how the budget is progressing. We find many clients, when presented For this type of contract to work well, you will be inwith options of upgrades and the difference between the regular close contact with the builder and he will needoptions, inevitably upgrade and go over budget. This is your constant feedback. Some clients love being involvedfine as long as you are made aware when expected costs at this level, however, if you dont we recommend notfor that item or trade have been exceeded. Your builder selecting this type of contract. should provide all supporting invoices so you should be paying trade prices (i.e. what the builder gets it for).Page 6 of 8'