Taking over incomplete building works
Building jobs can sometimes be left incomplete or unfinished. This can be the result of an unresolved dispute between the builder and the client, a mutual decision to part ways or the builder may have gone into administration or liquidation. While it may appear “easy” or low risk to finish a home or project that is already 80 or 90% complete, there are some risks you should be aware of. Being aware of these risks and taking appropriate protective measures before committing to this type of project will help make sure that both you and the client finish the job on a positive note.
Risks
The biggest risk in taking over another builder’s work is that you may be considered by the owner (and subsequent owners of the property) to have accepted responsibility for the entire job, including the works done by the previous builder. You may find yourself liable to rectify any defective work performed by the former builder.
Further, the base works completed by the former builder may be defective and/or not up to industry standards. This may impair the quality of your own work and require extra and extensive rectification work to be undertaken at your cost. A common example is where you are engaged by a homeowner to carry out painting work on walls built by the previous builder. It comes to light that the walls are defective, which leads to subsequent defects in your painting work, requiring extra time and money to repair.
How can I minimise these risks?
While no building project is completely free of risk, there are a number of steps you can take to assist with protecting yourself and your business before committing to take over incomplete building jobs:
1) Preliminaries
Ensure that the previous contract is at an end and that is client responsible for any legal or financial claims made by the former builder. Ask for something in writing to support this and insert it into the contract.
2)?Inspect for defects
Before signing a new contract or providing a quote for the job, arrange a time with the client for you (as well as a surveyor or engineer) to thoroughly inspect, examine, test and document the works. Where possible, take photos of the existing work to appendix to your building contract.
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You should also request that the client commission an independent building inspection of the works completed by the former builder, checking all the works including those that are ‘invisible’, e.g. waterproofing, damp proofing and termite barriers. They should also provide any certificates or proof of council inspections if these works have already been done.
3)?Proper contract administration
You should consider including a clause in the contract that excludes you from any responsibility or liability regarding the base works that were undertaken prior to you. Any already completed works should be listed as ‘excluded items’ under your contract (Schedule 3 of a standard HIA contract).
Ensure that you have a very clear scope of works included in the contract that describes exactly what works you will be undertaking to show where your works started and finish.
4)?Insurance
If the value of your contract is over $20,000, you will need to take out insurance under the Home Building Compensation Fund (HBCF and sometimes known as home owner’s warranty insurance). A common misconception is that your works can “fall under” the warranty insurance taken out the previous builder: this is not the case!
You should be wary of any request from the clients that you take our insurance for the whole project as it may be the case that the former builder did not have home owner’s warranty insurance or had an invalid policy of insurance. You should only be insuring the scope of works that you have been engaged to do or complete.
The above list is by no-means exhaustive and each job will need to be assessed individually to determine what protective measures should be in place.
For further assistance HIA has a team of Workplace Advisers who are available to assist members understanding their contractual rights and obligations. To speak with a HIA Workplace Adviser or for details on becoming a member call 1300 650 620.