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COVID-19 and your Domestic Building Contract – What does this mean for you (Owner and Builder)?

COVID-19 and your Domestic Building Contract – What does this mean for you (Owner and Builder)?

COVID-19 and your Domestic Building Contract – What does this mean for you (Owner and Builder)? 2000 1333 Olivia Terziovski

The circumstances surrounding COVID-19 in Victoria is rapidly changing. However, as of 23 March 2020, and considering the way it may impact your build, it looks as though your construction project has not caught COVID-19 as yet.

In accordance with the “Advice to Victorians on Transmission Avoidance” released on 20 March 2020, “construction sites”  (where it is necessary for their normal operation) are deemed an “essential activity”. That is good news for Builders and Owners, who wish to continue with their build and get paid.

How can your Domestic Building Contract catch COVID-19?

It is most likely that your Domestic Building Contract has not considered the implications of COVID-19 within its special conditions. Therefore, you must look to what is “reasonable” under the circumstances. If you are a Builder or an Owner, you cannot simply disregard your obligations and liabilities pursuant to your Contract if it is unreasonable. Currently, there is nothing legislatively prohibiting builders from continuing with construction.

Extension of Time Claims/Delays

If you are a builder and you cannot proceed with building works, or your construction is delayed as a result of a manufacturer or subcontractor going into liquidation because of COVID-19,   then this may give rise to  a “reasonable delay” allowing for an extension of time claim. In order to protect your interest, it would be a good idea to supply the Owner/Developer with all evidence regarding this EOT claim, such as evidence as to the subcontractor being engaged, the date it was engaged, the date materials were ordered and evidence of the insolvency. In order to comply with your obligations pursuant to your Contract, it would also assist you to provide the owner/developer with your works schedule outlining how you intend to proceed with meeting the new completion date.

As an owner, if the builder requests an extension of time to the completion date whilst relying on circumstances coincidental of the COVID-19, you should always ask for evidence so that you may consider whether the request is made reasonably or otherwise. Alternatively, simply reject the claim and delay the decision to be dealt with at completion/handover.    If the Builder requests an extension of time claim as a result of financial difficulties during this time, it is best to discuss this directly with your Builder since you may be just delaying your project indefinitely and dealing with a substaintial breach of contract on behalf of the Builder. One way of tackling this issue is to request evidence from the Builder on how it intends to proceed with the build if you allow the delay, how many other projects the Builder has and how that effects your project, where your build is at, whether your Contract was front-loaded, and whether you will also experience financial difficulties as a result of the delay.

Variations

As a Builder, if you have paid for trades in advance or prior to completion of their works or partially supplied materials, and where that trade or supplier has gone into liquidation as a result of COVID-19, you cannot claim this loss to the Owner by variation or otherwise.  Understandably the risk of paying a trade upfront (whether it is for partially completed works or whether their works contains defects) is a risk to be borne by the Builder. It is in fact illegal to claim this as a variation. 

Depending on what type of Domestic Building Contract you have executed, you may wish to discuss with the Owner/Developer the option of varying your payment method or otherwise payment schedule during this time. An example for varying the payment method or schedule could involve smaller payment claims made more frequently for the balance of the construction (this decision, however, may not be in the hands of the Owner/Developer, and may be one for the financial provider to make). Prior to proceeding with this option, it is wise to obtain some advice from a Building and Construction Lawyer since altering the payment method without obtaining the required statutory waiver from the Owner may render the amendment to the Contract ineffective and in breach of the Act.

As an Owner if you are experiencing financial difficulties as a result of COVID-19, this may affect your capacity to pay the balance of the contract price. If you do not have capacity to pay the balance of the contract price, one way of battling this is by requesting Variations to the contract in order to reduce the balance payable (credits) to the Builder if possible ( as well as considering negotiating options with your Builder if it is also experiencing hardship).

What to do if you cannot or are unable proceed with the Project?

If you cannot proceed with the project whether you are an Owner or a Builder as a result of financial issues resulting from COVID-19,  or where you have explored all options (including negotiating alternatives), this would be considered “repudiation”  or a substaintial breach of Contract since you are not ready, willing or able, to comply with your obligations pursuant to the Contract. If this is the case, it is best to immediately contact a Building and Construction Lawyer to discuss your options prior to entering into any agreement with the other party, or otherwise disclosing your inability to comply with the terms of the Contract with the other party.   Openly admitting that you are unable to commence or complete or comply with your obligations pursuant to the Contract will expose you to liability (and provide the other party with evidence that could be used against you), and the other party may be in a position to sue you for breach regardless of COVID-19.  You may be able to avoid further expense and liquidation by seeking advice first.

What other options do you have?

If you think your build has been, or will be, affected by COVID-19, it is best to immediately contact a Building and Construction Lawyer prior to the problem occurring. It is most likely that your Lawyer will be able to advise you legally on how to deal with your obligations and liabilities pursuant to the Domestic Building Contract, prior the problem occurring.

Is the DBDRV a good idea at this time?

The Domestic Building Dispute Resolution of Victoria as of March 2020, whilst an important and helpful body, has been experiencing exceptional delays with a waiting period of a minimum of 3 months (allegedly). One would imagine that as a result of COVID-19, it would be inundated with an influx of applications delaying the period even further. In-person conciliations may be delayed or otherwise held via teleconference.  At this time, it would be prudent to only seek the services of the DBDRV once you have explored all options with your Lawyer and your Builder or Owner, since it will most likely result in a more time-efficient response. The DBDRV does not provide legal advice to you personally, and is there to assist the resolution of your grievance rather that advocate for you.

What do you do if your Builder becomes insolvent as a result of COVID-19?

If your Builder  becomes insolvent during construction (or even if your construction has been completed for some time), and if your building meets the requirements for a Domestic Building Insurance Policy (is three stories of less) then this will trigger your ability to make an insurance claim and access up to $300,000 from the insurer where Domestic Building Insurance has been applied for.

During this time, Boutique Lawyers is offering your first 2 consultations for free. Contact 1300556140 or mail@boutiquelawyers.com.au  to make an appointment with one of our Building and Construction Lawyers.

Please note that as a result of COVID-19, our lawyers will only be available for telephone consultations and are working offsite. We are operating as usual and are available during normal business hours for consultations. Liability limited by a scheme approved under Professional Standards Legislation

Olivia Terziovski

Olivia’s in-depth background in building and construction law puts her in a unique position to be able to help clients through building disputes, property and planning cases. She is dedicated to finding the best way to help clients, whether conventional or unconventional, and has been known to achieve outstanding results with little more than a phone call. Olivia’s passion is partly due to a love for law, but also based on a personal experience in a serious building dispute. Her dedication ensures that clients have all the information they need, not only to understand their situation and their options, but to chart a course forward.

All stories by: Olivia Terziovski

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