Preparation of plans agreements
Once the plans for your house have been drawn up for the block you have bought, you can enter into a contract with your preferred builder to undertake preparatory work only.
This agreement is generally not a contract to build - but you should check that this is the case!
The purpose of undertaking preparatory work is to give you a good idea about the basic costs of building your house. However, it is not a final cost, as some actual costs may only become apparent once the surveys are completed and engineering details are known. You should discuss this matter with your builder.
The written agreement should also set out the type of preparatory work that will be done for you, for example:
- general inspection of the block to note any special requirements that need to be taken into consideration;
- consideration of the site conditions and the likely costs of preparing the foundation;
- preparation of any special structural engineering details; and
- preparation of detailed drawings and specifications.
The fee for undertaking the preparatory work should be included in the agreement, but there may be provision for this fee to be varied for difficult or unusual sites. The fee for undertaking the preparatory work for a Preparation of Plans Agreement is normally not refundable. However, some builders may agree to deduct the fee you have paid them for the deposit payable, if you later agree to sign a building contract with that builder.
Make sure you read the Preparation of Plans Agreement carefully and get independent legal advice before you sign.
It should be noted that the Preparation of Plans Agreement does not generally give you copyright over the plans.
Beware of any forms that commit you to signing a building contract with the builder at a later stage.
It should also be noted that some Preparation of Plans Agreements allow the builder to make applications for a local authority building licence and for Water Corporation approval. Consider before signing whether you want to incur the expense of such approvals at this stage, or delete this clause and check that these tasks form part of the building contract.
A costly change of mind
After getting a number of quotes to build a home in Yanchep, Kathy and Chen signed a Preparation of Plans agreement with one of the builders who had supplied a quote. The agreement required the builder to carry out a site inspection and survey, soil test, drawings and details of building methods to be used to construct the home.
Kathy and Chen paid $2500 for the Preparation of Plans agreement. After they paid the money, the couple began to have second thoughts about whether they could afford to build a home. They finally decided to sell their block in Yanchep and buy an established home instead. They told the builder they wanted to cancel the Preparation of Plans agreement and asked for their money back.
By the time Kathy and Chen had told the builder they had changed their mind, the builder had completed most of the work. The builder refused to give Kathy and Chen their money back.
The Preparation of Plans agreement, that Kathy and Chen signed, authorised the builder to carry out the inspections and to investigate the scope of work to be carried out if they built a home. There was no cooling off period in the contract.
The couple received the information they paid for under the Preparation of Plans agreement and the builder retained the full payment.
Kathy and Chen realised that they should only have signed the Preparation of Plans agreement when they were certain that they would build.