This article is about how Queensland bodies corporate and owners can reduce risk when engaging building contractors, focusing on due diligence, contracts, payments, and compliance to avoid costly disputes.
Engaging a contractor
Unfortunately, it is a common occurrence for a client to come to us about a dodgy contractor.
Typically, we see problems arise where a client engages an unlicensed, unqualified, or dishonest contractor that fails to carry out the work promised or the completed work turns out to be defective or incomplete.
It is important to note that if you deal with an unlicensed contractor, the Queensland Building and Construction Commission (QBCC) will not necessarily assist in getting your money back.1 Instead, you’ll likely have to seek recovery via an action in the Queensland Civil and Administrative Tribunal (QCAT).
In construction, prevention is always better than cure. It is far easier to prevent problems from occurring in the first place than to try to resolve them after they arise. The QBCC regularly warns the public to avoid the ‘wrong’ types of contractors, including those that have a history of ripping people off.2
We appreciate that you may not know what to look out for when engaging a contractor to carry out renovation work, particularly if you are doing so as a committee member on a large scale project for a body corporate.
To help out, we have compiled some essential information for consumers to consider before signing on the dotted line.
Do your research
Every ‘principal’ should research at least the basic information about their intended contractor, whether that contractor is a company or an individual.
You should always check a contractor’s:
- ABN and/or ACN;
- QBCC Licence No.;
- insurance details; and
- business address and contact information.
You can check whether a contractor has an active licence with the QBCC via their online directory.3 A search will also give you a licensee’s complete history including a record of any past breaches/fines issued within the last 10 years.
Make sure you check the Licensee details match those of the ABN or ACN supplied. It is not uncommon for tradies to use a different trading name to advertise their business or even, in the worst cases, to use fake or stolen licence numbers.
Ask your friends, family or associates for referrals. The QBCC also has a register for QBCC licensed contractors that you can search in your local area.4
1 In some cases the QBCC may seek compensation on behalf of a consumer if the contractor is prosecuted. 2 See for example, this article on the QBCC’s website. 3 Access the directory here. 4 Search the register here.
Check various sources for genuine reviews or ask the contractor for a contact on a recent project for you to seek an independent review. You should not automatically trust ‘online’ reviews, such as on Google, social media or testimonials on the contractor’s website, as the information can be overexaggerated or even fake5.
Ideally, you want to obtain more than one quote for comparison. Sometimes it’s statutorily mandated that you do. It’s best to undertake the above preliminary research before going through the trouble of obtaining a quote. Why? Because there is almost always a reason that a quote looks too good to be true! The preliminary research is not hard to do, and it should be a significant red flag if a contractor withholds or is hesitant to provide such information.
Quotation
It is important that you obtain a detailed quotation that is appropriate for your needs. A quotation usually forms part of the contract and should include:
- full name of the contractor, address, and ABN/ACN;
- QBCC licence no.;
- the scope of work or at least a description of work; and
- itemised amounts (whether fixed or estimated) for:
- deposit;
- labour;
- materials; and
- GST.
You should be wary of any contractor that demands payment of a large deposit and you should never agree to a deposit of more than 20% of the contract price.
Disputes commonly arise in such circumstances where contractors are paid a large deposit, only to disappear before carrying out any substantial work or repeatedly delay carrying out any work. Large deposits are often a symptom of the contractor having significant cash flow or debt problems.
The maximum amount of deposit allowed depends on the value of the works. You should seek legal advice if you are unsure about what amount of deposit is appropriate.
Get a contract in writing
You should always ensure that a written contract is in place before any amount is paid to a contractor, even if they have supplied you with a quotation with standard ‘terms and conditions’.
It is an offence under the Queensland Building and Construction Commission Act 1991 (QBCC Act) for a contractor to carry out or undertake to carry out building work without a written contract.
5 For HIMYM fans, just remember the ‘Lorenzo Von Matterhorn’ – https://how-i-met-your-mother.fandom.com/wiki/Lorenzo_Von_Matterhorn
There are also other statutory requirements with respect to contracts for domestic building work and commercial building work (for example, in the case of renovations to common property) so it is essential that a written agreement is on hand for you to be able to seek independent legal advice.
Payment terms
The contract should clearly set out when payments are due. Payments under the contract should fall due on the (proven) completion of relevant stages of work (Progress Payments).
Generally, Progress Payments should not be payable in advance.
We recommend that you do not pay the full amount of the contract before verifying that the work is complete and to the required standard.
Execution
The contract must be signed by both parties. If a body corporate is involved, the body corporate must be named as a party to the contract and the contract must be executed in the name of the body corporate by its authorised representatives (for example, the chairperson and secretary, and not by the caretaker).
We always recommend that you seek legal advice on the contract before signing, particularly if the value of the contract is significant. An average lawyer can help you understand what is in the contract, while a great lawyer will help you understand what is not, and what you should do about that.
Bugden Allen is well placed to assist in the review of any contract for building work, whether the project is large or small.
Written by:Anna Park Bugden Allen E: Anna@bagl.com.au P: 07 3905 9260
Reviewed by:Michael Kleinschmidt Bugden Allen E: michael.kleinschmidt@bagl.com.au P: 07 5406 1280
This post appears in Strata News #776.
Have a question or something to add to the article? Leave a comment below.
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This article has been republished with permission from the author and first appeared on the Bugden Allen< website.
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