Understanding New Home Contract Variations

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Embarking on a construction project, whether building a new home or renovating an existing one, is an exciting journey full of possibilities. However, even the most meticulously planned projects can encounter unexpected circumstances that require changes to the original contract or plans – these changes require a post-contract variation (commonly referred to as “variations”) in the construction industry.

Variations can arise from a multitude of reasons, such as design modifications, unforeseen site conditions, material availability issues, or even a change of heart regarding particular finishes or styles. While variations are a normal part of the construction process, they can have significant implications on the project timeline, budget, and overall outcome if not managed properly.

Understanding what variations are, when they might be necessary, and how to navigate the process of requesting and approving them is crucial for homeowners. Failure to handle variations effectively can lead to unbudgeted expenses, delays, and potential disputes with builders – situations that no homeowner wants to find themselves in.

What is a Post-Contract Variation?

A post-contract variation is a legally binding document that facilitates changes to an existing construction contract. It serves as an amendment or extension to the original agreement, allowing for modifications to the scope of work, materials, or other aspects of the project. Key points about post-contract variations include:

• They are necessary legal instruments required to make changes to the terms and conditions outlined in the originally signed contract.
• When signed by both parties (the homeowner and the builder), variations become an integral part of the contract, effectively updating and superseding the previous terms.
• Variations have the ability to alter the outcome of the contracted works by adding, removing, or modifying various elements, such as materials, finishes, designs, or construction methods.
• These documents provide a formal and documented way to incorporate new items or remove existing items from the contract, ensuring that both parties are aware of and agree to the changes.

When are Variations Needed & Why They are Sometimes Necessary

Variations can be necessary for a variety of reasons throughout the course of a construction project.

Some common scenarios where variations may be required include:

Fixing provisional sums: The original contract may have included provisional sums (estimated costs) for certain items or materials. A variation is needed to replace these provisional sums with fixed, final pricing once actual costs are known.

Adding additional work: If the homeowner requests extra work or features beyond the initial scope of the contract, a variation is necessary to incorporate these changes and outline the associated costs.

Removing work: Conversely, if the homeowner decides to omit certain elements from the original contract, a variation can be used to remove those items and adjust the overall cost accordingly.

Extending the construction timeline: If unforeseen circumstances or delays arise, a variation may be required to extend the project’s completion date, ensuring the builder is not held liable for potential penalties or compensation payments.

Material substitutions: In cases where specified materials become unavailable or need to be substituted, a variation can document the alternative options and obtain the homeowner’s approval for the change.

It’s important to note that variations can be initiated by either the homeowner or the builder when circumstances necessitate changes to the original contract terms however, the homeowner and builder must both sign the document before it becomes a legally binding document.

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When Builders Can Initiate Variations

While variations are often initiated by homeowners, there are specific scenarios where builders are entitled to request variations to the contract, as outlined in most state and territory building regulations.

These scenarios typically include:

1. Following written directions from building authorities: If a building surveyor, inspector, or other authorized person acting under written law provides lawful written directions that necessitate changes to the original contract, the builder can initiate a variation.
2. Unforeseen circumstances: In situations where circumstances arise that could not have been reasonably foreseen by the builder at the time of entering into the contract, the builder is generally permitted to request a variation.

It’s important to note that in most jurisdictions, builders cannot initiate variations solely due to increases in labour or material costs. The QBCC Act requires that QBCC licenced builders and contractors must present the variation to the client in writing and the client must agree in writing before the builder or contractor can commence work on the variation associated work.

The Builders Formal Process For Providing Their Variations

When these circumstances occur, the builder must follow a formal process to notify the homeowner and establish their entitlement to a variation.

This process typically involves:

1. Inform the client: Providing a written statement within a specified timeframe (e.g., 10 working days) of receiving directions, becoming aware of unforeseen circumstances, or when they should have reasonably been aware of such circumstances. This statement must explain the reason for the variation, the associated cost, and include any relevant directions from building authorities.
2. Time for review, response & dispute: Allowing the homeowner a designated period (e.g., 10 working days) after receiving the statement to dispute directly with the builder or object to the proposed variation, often by lodging a complaint with the relevant building authority or consumer protection agency.

Additionally, open communication and obtaining the homeowner’s written agreement, when possible, can help avoid potential disputes arising from builder-initiated variations.

It’s crucial to familiarize yourself with the specific building regulations and processes in your state or territory, as the exact timeframes and procedures may vary slightly across different jurisdictions.

Potential Pitfalls and Risks of Variations

While variations are a common aspect of construction projects, they can also present potential risks if not handled correctly.

Some pitfalls and risks associated with variations include:

Lack of documentation: Verbal agreements or undocumented changes can lead to disputes and misunderstandings between the homeowner and the builder. It is crucial to ensure that all variations are properly documented and signed by both parties to avoid potential conflicts.

Cost overruns: Variations can sometimes result in unexpected additional costs, especially if they were not adequately discussed and agreed upon in advance. Clear communication and detailed pricing information are essential to prevent budget overruns.

Timeline delays: Depending on the nature and extent of the variations, they can potentially cause delays in the project’s completion, potentially leading to financial penalties for the builder if construction timelines are not adjusted accordingly.

Disputes over scope: Disagreements can arise regarding whether a particular change constitutes a variation or falls within the original scope of work. Clear contract language and detailed documentation can help mitigate such disputes.

Unauthorized work: In some cases, builders may attempt to charge for additional work or changes that were not formally requested or approved by the homeowner through a variation. It is essential to review and approve all variations before any associated work commences.

It is crucial to approach variations with diligence and ensure that all changes are thoroughly documented, agreed upon by both parties, and incorporated into the contract through a formal variation process. This mitigates potential risks, maintains transparency, and helps to avoid costly disputes or misunderstandings throughout the construction project.

A Cautionary Tale: Unauthorized Work and Invoices

One personal experience highlights the importance of properly documenting and approving variations. In a recent renovation project, everything seemed to be progressing smoothly with the builder, with only one instance where an additional cost was verbally discussed and agreed upon. All progress stage claims were paid on time and when due however, towards the end of the project, the builder sent through an unexpected invoice for extra charges.

Upon closer inspection, some of the items on the invoice were already covered in the original contract, while others were for additional work the builder had taken upon themselves to complete without prior discussion or approval.

Just a few of the items that were noted on this invoice included:

• Relocating a floor waste (without prior discussion)
• Additional wall stud framing timbers (noted as included in the contract)
• Plastering and sanding of additional walls (without prior discussion)
• An additional $480 fee above the contracted $450 fee to install a 300mm wider vanity
• >$5000 fee to provide a different waterproofing product (waterproofing fully included in the contract)
• A $45 fee to add some items to the skip even though we were verbally told it was ok

Thanks to a solid understanding of construction processes and contracts, a firm stance was taken.

The builder was firmly informed that payment would only be made for items discussed and approved in advance. Additionally, a post-contract variation would be required before any payment, ensuring the contract accurately reflected the authorized changes. For instance, regarding the waterproofing, only the cost difference between the original and new product would be paid, not the full cost of both.

Initially totalling over $8000, this invoice was scrutinized, and the builder was advised that credits for items already covered in the original contract would be necessary. Ultimately, after rejecting unauthorized charges and only accepting previously agreed-upon work, the post-contract variation amounted to approximately $2000, which the builder accepted.

This experience serves as a cautionary tale, emphasizing the importance of clear communication, documentation, and adherence to the agreed-upon contract terms. Builders cannot assume homeowners will pay for any additional work or changes without formal approval through a legally binding variation.

How to Request a Variation from Your Builder

Requesting a variation from your builder is a formal process that requires clear communication and documentation.

Here are the recommended steps to follow:

1. Initiate the conversation: Reach out to your builder and discuss the work you want to be completed through a variation. Treat this initial discussion similar to how you would approach getting a quote for a new project.
2. Follow up in writing: After the verbal discussion, it’s crucial to follow up with an email or written communication to ensure both parties are on the same page regarding the requested changes. Misunderstandings can arise from verbal conversations alone.
3. Obtain a quote: The builder will evaluate the requested work and provide you with a quote or estimate for the variation.
4. Review and approve the quote: Carefully review the quote and, if you agree with the terms and pricing, notify the builder of your acceptance.
5. Request a post-contract variation: Once the quote is accepted, formally ask the builder to provide a post-contract variation document. This document will outline the agreed-upon changes and incorporate them into your original contract.
6. Do not accept invoices: Avoid allowing the builder to send an invoice for the variation work. Instead, insist that the changes be documented through a formal post-contract variation first.
7. Uphold contract terms: Do not feel pressured to make upfront payments or sign documents presented by the builder that go against the terms of your original contract. Your primary concern should be ensuring the variation is properly documented and incorporated into the contract.

What a Variation Should Look Like

Ensuring accurate variation drafting is crucial to avoid misunderstandings and potential disputes.

A well-drafted variation should include the following elements:

1. Additions:
   • Your builder should use clear language like “Supply and install…” or “Provide…” at the beginning of each variation item.
   • Specify the quantity and fixed price for the added item or work.
   • Provide as much detail as possible to eliminate ambiguity.
2. Omissions or deletions:
   • Your builder should use the phrase “Credit to delete item…” when removing an item from the original contract.
   • Reference the specific item number or description from the original contract to clarify which item is being deleted.
3. Variation details:
   • The variation document must be easy to read and understand.
   • It should provide a clear description of the requested variation.
   • The date when the variation was requested should be stated.
   • If the variation will cause a delay in the work, the builder should provide a reasonable estimate of the expected delay period. The builder may also adjust the completion date nominated in the contract if necessary.
   • The document should state the change in the contract price due to the variation or outline the method for calculating the price change.
   • If the variation results in a price change, it should specify when any additional payment is due or when a credit will be applied.
4. Sample data or attachments:
   • Request that the builder includes relevant supporting materials, such as product specifications, diagrams, or drawings, to ensure a comprehensive understanding of the variation.

Clear communication and solid, irrefutable documentation is the key to maintaining a good relationship with your builder, and a good relationship with your builder is key to an enjoyable experience throughout your construction journey.

Tips on Reviewing and Approving Variation Drafts

When reviewing variation drafts from your builder, it’s essential to exercise due diligence:

1. Carefully review each item: Thoroughly understand every item listed in the variation draft to ensure accuracy and alignment with your expectations.
2. Ask questions: If you are unsure about any item or language used in the variation, do not hesitate to ask the builder or their team for clarification before signing.
3. Scrutinize for errors: Be aware that mistakes can occur, especially when builders juggle multiple projects simultaneously. Double-check for any incorrect items or pricing before approving the variation.
4. Seek professional guidance: If you feel overwhelmed or uncertain about the variation draft, consider consulting a professional for guidance.

Strategies to Minimize the Need for Variations

While variations are common in construction projects, there are strategies you can employ to minimize their necessity:

1. Thorough planning: Invest more time and effort into the planning stages of your project before engaging a builder. The more thorough and educated you are about the project requirements, the more comprehensive your original contract can be, reducing the need for subsequent variations.
2. Contingency planning: Anticipate potential changes or unforeseen circumstances and incorporate contingency plans or allowances into your initial contract & budget. This proactive approach can mitigate the need for or impact of variations down the line.
3. Detailed specifications: Provide detailed specifications, including brand names, models, quantities, and quality standards, for all materials, finishes, and products you want to be used in your project. Clear specifications minimize the chances of misunderstandings or deviations from your expectations.
4. Consult professionals: Consider engaging professionals, such as architects, project managers or us here at Foresight Home Planning, to assist with the planning and contract development phases. Their expertise can help identify potential areas for variations and incorporate preventive measures into the initial contract.

While variations may be unavoidable in some cases, diligent planning and clear communication can significantly reduce the need for costly and time-consuming changes during the construction process.

Why Variations Can Be Expensive

Variations can often come with a higher price tag than the original contracted work, and there are a few reasons behind this:

1. Competitive pricing: When builders initially bid for a project, they typically offer competitive pricing to win the contract. This means their profit margins on the original scope of work may be tighter. However, when variations arise, builders have the opportunity to apply higher margins, as the homeowner is now committed to working with them.
2. Lack of competition: Once a contract is signed, the homeowner is effectively tied to that builder for the duration of the project. If additional work or variations are required, the builder has no direct competition for those extra items, allowing them to charge higher prices.
3. Overhead and administrative costs: Variations involve additional administrative work, such as drafting quotes, coordinating with suppliers and subcontractors, and managing the site logistics. Builders need to account for these overhead costs, which can contribute to higher variation pricing.
4. Profit margins: While the original contract may have been priced competitively to secure the job, variations allow builders to potentially increase their profit margins. This is an industry practice that helps builders stay afloat in a highly competitive and challenging environment where insolvencies are not uncommon.

It’s important to understand that while variation pricing may seem expensive, it reflects the additional work, coordination, and resources required by the builder’s team to accommodate the changes. Pushing back too hard on pricing could potentially jeopardize the financial viability of the project for the builder, which is in no one’s best interest.

That being said, homeowners can still raise questions and negotiate variation pricing if they feel it is unreasonable. However, it’s crucial to maintain a professional and cooperative relationship with the builder, recognizing that variations represent additional costs beyond just the materials and labour involved.

Embracing Variations with Foresight

The Key to Your Dream Home

As a Carpenter by trade, turned new home estimator and the founder of Foresight Home Planning, I’ve witnessed firsthand the challenges homeowners face when embarking on the journey of building their dream homes. While variations are an inherent part of the construction process, understanding their nuances and navigating them effectively can make all the difference in ensuring a smooth and successful project completion.

Throughout my career, I’ve gained invaluable experience in navigating the complexities of both new home builds and renovations. It’s this experience that has shaped the philosophy behind Foresight Home Planning – to guide homeowners through the intricate planning process, minimizing variations and costly surprises along the way.

In this comprehensive guide, we’ve explored the intricacies of post-contract variations, from their definition and necessity to the potential pitfalls and strategies for minimizing their impact. We’ve also delved into the proper procedures for requesting and documenting variations, emphasizing the importance of clear communication and a strong professional relationship with your builder.

However, the true key to minimizing variations lies in meticulous planning and preparation – a principle that lies at the core of Foresight Home Planning’s services. Our team specializes in guiding homeowners through the complexities of planning their new homes, helping them thoroughly understand their project requirements, anticipate potential challenges, and incorporate contingency plans into their initial contracts.

By leveraging our expertise, you can significantly reduce the need for variations and ensure that your project stays on track, both in terms of timeline and budget. We believe that embracing variations with foresight and enlisting the help of professionals can transform what may seem like a daunting process into a seamless and rewarding experience.

At Foresight Home Planning, we understand that building your dream home is a significant investment, both financially and emotionally. That’s why we’re dedicated to providing you with the tools, knowledge, and support necessary to navigate the complexities of construction with confidence, minimizing stress and maximizing the chances of achieving your vision exactly as you’ve envisioned it.

So, as you embark on this exciting journey, remember that variations are not obstacles but rather opportunities to refine and perfect your dream. Approach them with openness, diligence, and the support of our experienced team at Foresight Home Planning, and you’ll be well-equipped to turn your aspirations into a reality that exceeds your expectations.

**Disclaimer: The information provided in this article is based on publicly available information. While we strive to ensure the accuracy of this content, Foresight Home Planning Pty Ltd does not guarantee the completeness or reliability of the information. This article is intended for entertainment purposes only and does not constitute professional advice. Foresight Home Planning does not accept liability for any loss, expenses or damage incurred as a result of reliance on the information contained herein. Readers are advised to conduct their own research and seek professional advice before making any decisions related to property purchases, contracts with builders or investments.

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