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The role of the QS in Construction Claims

and some of the warning signs of a dodgy house builder

The role of the QS in the home building industry is typically viewed as no more than an expensive fee charged to the owner in your loan application. This indeed can be a hinderance, but it astonishes me how often I hear of a similar version of the same story (my builder hasn’t done this properly, my builder has gone broke, my builder left with his / my materials, my builder isn’t showing up, my builder has stopped work, I have a variation for over $X,000 for something they found in the ground). Depending on the types of stories you are hearing from your builder (they may be entirely truthful and valid points of view, but more on that later), thousands or tens of thousands may be left on the table by a hesitation to engage a professional who can recommend steps forward and negotiate directly with the builder, backed by a knowledge of trade rates and industry standards. In this article I will explain the various scenarios and when a QS can step in.

My builder hasn’t done this properly

All builders across Australia are regulated by the BCA, state and territory fair trading organisations, and the consumer law and they are not immune to legal action. As many of us know from first hand experience, in a lawsuit no one wins except the lawyers. The first point of call for this scenario is to speak to your designers, whether they be a civil or structural engineer or the architect. They are all very highly trained and have designed the building literally from the ground up. The Building Industry Security of Payment Act contains a provision for valuation according to the estimated cost of rectifying the defect. If your builder is still not playing ball after your designer has raised issues with a builder, then it may be worth engaging a QS.

My builder has gone insolvent / into administration / liquidation / broke

It can be a shock to hear this after you have invested a lot of money already to make sure the project goes according to the schedule. Unfortunately if you hear this news, chances are the builder’s subcontractors are owed money. Subcontractors are legally able to exercise an equitable lien over unfixed plant and equipment (think appliances, air conditioners, lighting, flooring and tiling) that they have not been paid for, and they often will exercise that right and occasionally exercise more than their rights, taking tools and equipment from the builder themselves.

Step one whenever you hear this news is to secure the site by means of physical attendance, security guards, locks or bollards or temporary fencing / signage and notices of suspension / termination issued to the builder. This exercise of possession demonstrates your claim to the materials and equipment on site you have paid for. The next step is to speak to the builder and in the event they are uncontactable, lodge a claim against the builder’s Home Building Compensation Fund insurance.

One of the signs that your builder is trading while insolvent is if they raise a lot of claims (often unsubstantiated) for variations. Entitlement to variations is covered by your contract with the builder, and the variations themselves may be assessed according to a contractual hierarchy, paying regard to a schedule of rates, bill of quantities, trade breakdown, quotes or by fair and reasonable value. A QS can investigate the fine lines of the contract and the various drawings, and provide a quantity takeoff and cost estimate for a variation or collection of variations, taking into account any credits that could or should have been provided for changes to the design that should lead to a lesser contract price.

My builder left with his / my materials

As explained above, anyone who provides construction related goods or services may exercise this right, but there are limitations. The plant and equipment needs to be unfixed. There is a lot of debate in the law regarding what is fixed and unfixed, with dilemmas including artwork nailed to a wall, blinds hung on a window, or shelving screwed in etc. The important thing to note is that a lien needs to be for a due and payable progress payment and notice should be filed. If your construction contract contains no provision for payment of materials offsite then there is no obligation for you to pay for them, and a QS may according to the bill of quantities, trade breakdown, quote or schedule of rates, determine a value of money to withhold. Unfortunately if this is the case you should contact a Quantity Surveyor to prepare a progress payment assessment to substantiate your claim to the money withheld. Without a valid payment schedule issued to the contractor, under the Security of Payments Act, you are liable for their full invoiced amount.

My builder isn’t showing up / my builder has stopped work

Unless your builder is working on hourly rates or on a cost plus contract, you are entitled to receive the work as specified by the program in the tender or contract, including any allowances for inclement weather. Unfortunately many construction contracts neglect to specify any time for completion and owners or the owner’s bank should have engaged a QS earlier on. Before a contract is signed they can verify that they have sighted all relevant insurances, that the contract price is relevant to the value of work and that the trade breakdown is not front-end-loaded. Front end loading is a term that refers to builders proposing trades or progress payments disproportionately skewed to the earlier works of the building project (demolition, excavation, concrete etc). If your contract unfortunately is front-end-loaded there is not a lot of incentive for the builder to come back, but a claim against the home building compensation fund may encourage the builder to finish on the basis that their reputation is threatened.

I have a variation for something they found in the ground / wall / sky

Fortunately most contracts have a fair and reasonable variations clause. This clause may be substantiated by a QS that is qualified to negotiate the pricing, but before making that instruction, the architect may be able to determine whether the builder is entitled to a variation claim under the contract in the first place. Sometimes the changes such as going from one material selection to another may not be substantial, or may be negligible or in the worst case negative (i.e. you chose a cheaper material but the builder is charging more). We can investigate our extensive cost database and where required obtain market pricing externally (quotes) to determine whether your builder’s claims are fair and reasonable.

 

 

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Hi,
I'm Jack Meller

I have been in the construction industry since I was 18 years old and have consulted on projects in every imaginable sector across the globe. 

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