Get it in writing

Always get a written contract, describing the work to be done, what it will cost and how payments will be made. Never agree to anything before you have it in writing.

There are three main ways to engage the services of a builder; full contract, labour only or managed contract. It is important to understand the differences so you know what a builder is quoting on.

Full contract

When you engage a builder under a full contract, the builder quotes for a package which includes:

• Supplying all the materials.
• Hiring subcontractors such as the plumber, electrician, interior decorator etc.
• Getting consents.
• Liaison with the architect/designer.
• Arranging inspections by the council inspector.
• Managing the whole building phase.

The builder is known as the main contractor under this type of contract and is responsible for the quality of work of his own staff and the subcontractors. The builder is also responsible for health and safety on the building site.

You will have to work in with the builder at various stages, for example, when it is time to select the appliances, light fittings or floor coverings. You need to be ready with those decisions to avoid holding the builder or subcontractors up, as the delay will cost you money.

Labour-only contract

When the builder works for you on a labour-only contract you manage the whole process and the builder is only responsible for building. People take this option in the belief that they will have better control over the building process or because they want to save money.  With this type of contract you either pay your builder by the hour, by the week, or a set price. Paying a set price will be incentive for the builder to work steadily to finish the job in a reasonable timeframe as the job would have been priced on a set number of hours.

The drawbacks of the labour-only contract are:

1. You become the main contractor which means you are responsible for the work meeting Building Code requirements and for any defects in construction. Just how much you are responsible for the builder's work would depend on the facts in each case.
2. The responsibility for coordinating the whole project, i.e. making sure everything happens when it should, rests with you. It will probably take a huge amount of your time and energy to hire contractors, buy materials and manage the project, and at times it could be inconvenient to you, your family and your employer.
3. You are responsible for health and safety on the building site.

For everyone's protection, make sure the duties of each party are very clearly spelt out in the building contract.

Managed labour-only contract

Another option is the managed labour-only contract. This is part-way between a full contract and a labour-only contract. Under this arrangement the builder manages the day-to-day building and you are responsible for pricing the job, getting the quotes and organising the materials and subcontractors. The builder may do some of this, depending what you've agreed in the contract. People choose this option to save money by doing some of the work themselves, but it can be a huge time commitment.

If you choose this sort of contract, you need to be confident that the communication between you and the builder and lines of responsibility are very clearly defined. Otherwise the job could stall if you are each waiting on the other. For example, you each thought the other was ordering the bricks and none turn up.

Making it clear

It is crucial that you and the builders who are tendering for your project are very clear about what sort of contract you want.

Most builders will probably fit in with the type of service you ask for but you'll probably find that most have a preference, i.e. some may prefer not to work under anything but a full contract so they can keep control over the project. This could rule someone off your shortlist.

Your Responsibilities:

• Decide what's to be done
• Choose materials and products as required
• Select the builder or design firm
• Ensure the contract describes the job completely and correctly
• Provide workers with the necessary space, access and utilities
• Inform the builder about deficiencies or mistakes as soon as possible
• Pay for the job once it has been done to your satisfaction

Your Builder's Responsibilities:

• Be experienced and licensed (if required)
• Perform work as contracted, unless changes are authorised in writing
• Maintain appropriate insurance to cover the project
• Hire skilled workers
• Pay workers, suppliers and subcontractors (depending on contract type)
• Oversee the quality of work

In the Real World

No matter how well you plan your project, changes will probably be necessary. These can result in increased costs and delays. To protect yourself and your contractor, changes should be made only through a written variation detailing what's involved and the associated cost differences.

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  Step 7 Forget the mess