What are five things a Body Corporate should know when entering into a Build Contract?
Contact our Gold Coast Lawyers team for more information here Body Corporate Enquiries.
Good morning. Cameron Marshall is my name, I work at OMB Solicitors as a Senior Associate in the Litigation Department. Today, I want to talk about five things from a body corporate’s perspective when entering into a contract for building work to be carried out at a body corporate’s building.
It’s very important when a body corporate is looking to engage a contractor in doing some work is to understand how a contract works. You should see a solicitor, of course, but some basic things that you need to make sure that are covered, I will go through now, they’re pretty simple.
The first one’s the parties, now, the main thing is you need to know who you are contracting with and in Queensland, whether they’re licensed to carry out the work. I’ve seen a lot of cases where builders have engaged in work in contracts, but they haven’t got the appropriate work to carry out such work.
This is very important when you’ve got multi-high rises because only an open builder can carry out such works and a lot of contractors out there may not have that qualifications. If you engage a contractor that doesn’t have the right licence, that could have problems with insurance, et cetera, down the track.
Next thing you need to understand when you’re looking at a contract is what work are you asking to get done? It needs to be set out in the contract clearly so that both you as the committee understand what work your builder is to carry out, and so he understands what is to be carried out, so it should be in fairly simple English, attached as a scope of works to the contract so the parties are aware of what’s going on.
The third thing is insurance, very important for an embodied corporate committee to ensure that insurance is in place. So you ensure that the builder has the appropriate insurances. Naturally, the body corporate will have its own insurance, but you need to make sure that the bill is also appropriately covered.
Now, you’ll need to make sure that they’ve got public liability insurance for both personal injury and property damage, work cover insurance to make sure all their workers are covered, and that should also extend to any subcontractors that they have and the final one is the works insurance.
Now, that affects if there’s any damage to the actual physical works getting carried out whilst the contract is in place.So that’s important that those things are in the contract, a lot of the time they’re not.
The next thing that needs to be covered is payment; when is the body corporate committee supposed to pay the builder? Is it upon demand? Is it upon a certification being provided by the project manager saying that all the work is being carried out in accordance with the contract? Either way, the body corporate committee needs to know when they’re supposed to pay.
So when it comes time to pay, they know that they’re not getting hoodwinked or short sold on work that hasn’t been completed, that will be very important when you report back to your body corporate members, no doubt at the conclusion of the work or if things go over budget.
So there five things that are quite easy to make sure that are in the contract when you’re entering into that stage. But importantly, you should always see a solicitor because they are very complicated documents and also the works can be quite expensive and will hopefully last a long time if they are done correctly and the body corporate is covered appropriately.
The last point that I want to go through is the issue of retention money. Retention monies are monies that are held back from the builder or the contractor to cover any building defects or problems that might arise after the work is being carried out.
Now, this can be done in a number of ways, it can be cash retention from each of the payments that are due to the builder. So the builder would give you an invoice and you would pay less than a certain amount of retention monies which are held back.
Another way is by way of bank guarantee. Either way, I would advise that the body corporate committee should ensure that there is some retention money scheme in the contract, a lot of the time there’s not.
It just provides that extra safety, if there are defects that need to be fixed, at least the body corporate has recourse to some amount of money from retention monies to fix those defects if the builder is not willing to.