Director, Murray Thornhill, and Special Counsel, Daniel Morris in our Building & Construction and Dispute Resolution teams have outlined how home builders are looking to scrape back profits lost on growing labour and material costs by passing these costs on to buyers.
Increasingly across Western Australia, home builders are seeking to claw back profits lost on rising labour and material costs by passing those costs on to their customers. Some invite their customers to negotiate a genuine repricing; many, though, are seeking to impose unlawful price increases on their customers and incorrectly stating that their contracts entitle them to do so.
Home builders who try to impose price increases tend to rely on clauses that are common in home building contracts that allow home builders to pass on the cost of delayed planning approval, building permits, or some other precondition to the works commencing, such as finance approval. Often, however, the true cause of delay has nothing to do with the event that the builder is seeking to rely on, or if it does, it was within the builder’s control to prevent it. In such cases, the builder has no lawful right to change the contract price as they seek to do.
HHG Legal Group has been helping owners, many of whom were looking forward to building their very first home for new or young families, with this increasingly common problem. Almost invariably, it ends with the contract being terminated and the owners taking their business elsewhere, but with our help, this is achieved:
- Without any liability to the builder (in the short term); and
- With the owner having the right, if they so choose, to recover compensation from the builder, for any additional costs they may incur as a result of the builder not delivering on their contract.
This requires skill and care, as, if not handled correctly, homeowners may face the alternative scenarios of:
- Being bound under the contract to the builder’s imposed price increases;
- Having to pay all the costs that the builder has incurred up to the point of termination (which can amount to $20,000 or more);
- Having to compensate the builder for the loss of its opportunity to make a profit on the completed contract; or
- Waiting indefinitely for the builder to get started (in extreme cases, we have seen people being kept waiting for over four years).
In many instances, homeowners can lose their rights permanently if they don’t take action within 10 working days of the builder seeking to impose the price increase. Because of how the system presently operates with the involvement, in some cases, of government agencies such as the Building Commission and the State Administrative Tribunal, opinions presently differ about when it is appropriate to take the action that is subject to this 10-working-day time limit. This tends to add complexity, as well as urgency, to the process, which means that the only safe approach is to seek legal advice without delay.
If you require assistance in relation to any of the information provided above, HHG Legal Group’s lawyers can provide advice to you and your business to minimise your future risk. Contact us today by emailing Murray Thornhill on email@example.com or Daniel Morris on firstname.lastname@example.org or calling us on (08) 9322 1966.