The HIA Contract

The HIA (Housing Industry Association) is a leading industry body in the Australian residential building sector. The HIA offers a variety of model contracts, including the commonly-used HIA Standard Form of Contract for Housing and Residential Works. This contract regulates the relationship between the builder and the homeowner, outlining their rights, obligations, and liabilities. Before signing the contract, it is crucial for homeowners to understand the terms and clauses of the contract before signing it, as it will regulate the construction process and the parties’ rights and obligations throughout the project. One of the most critical clauses for homeowners to understand is Clause 21, which sets out the requirements for Practical Completion of the work. This clause is fundamental to determining when the builder has completed the work and when the homeowner must pay the final progress claim. Understanding this clause is crucial to managing the risks and ensuring a successful project outcome.

Progress Payments

In an HIA building contract, progress payments are typically made at specified stages of the construction process. These stages are outlined in the contract, and the builder is entitled to receive payment once each stage is complete.

The contract will also specify the amount to be paid at each stage, and the payment schedule. It is important to note that progress payments should only be made for work that has been completed to a satisfactory standard.

Homeowners should ensure that they have a clear understanding of the payment schedule and the work that needs to be completed at each stage before signing the contract. If there are any disputes over progress payments, it is important to seek legal advice to ensure that your rights are protected.

Practical Completion

Practical Completion is a crucial stage of any construction project. It is the point at which the work is considered to be substantially complete, and the owner can take possession of the property. Practical Completion is the stage at which the building work is completed, except for any minor defects or omissions, which will not materially affect the use of the building or structure for its intended purpose.

Handover

After Practical Completion, the builder will arrange for the handover of the property to the homeowner. This stage marks the official end of the construction process and the beginning of the occupancy by the homeowner. The handover process is usually conducted in the presence of the homeowner or their representative. During this inspection, the homeowner will be provided the keys, certificates, warranty documentation and other documents by the builder pertaining to the building works to the owner. The homeowner should review the document carefully and ensure that it accurately reflects the condition of the property. Any discrepancies should be reported to the builder immediately. 

Disputes and Resolutions

Even with the most carefully planned and well-executed construction projects, disputes can still arise between homeowners and builders. If a dispute arises, the first step should be to refer to the contract and attempt to resolve the matter through negotiation or alternative dispute resolution methods, such as mediation or arbitration. If these methods fail, the matter may be taken to the NCAT and then to court, if the matter remains unresolved. 

It is important to seek legal advice before taking any formal action. In cases where a dispute arises over the quality of the work, it is often necessary to engage the services of an independent expert to evaluate the work and provide an opinion. This expert can help to identify defects or issues with the work and provide recommendations for how to address them. Ultimately, the best way to avoid disputes is to have a clear and comprehensive contract in place, maintain open communication throughout the project, and work with reputable and experienced builders.

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Conclusion

In conclusion, understanding progress payments is crucial to ensure that the construction project runs smoothly, and to avoid disputes between homeowners and builders. The HIA Contract outlines the payment schedule for a construction project, with progress payments made at different stages of the project. 

Practical Completion is a critical stage where the homeowner must ensure that the work is substantially complete – this means that the works are complete (except for minor omissions and defects) and the works can be used for their “usual purpose.”  Simply put, a homeowner must not issue or sign a “Certificate of Practical Completion” when the home is not livable.  

Handover follows Practical Completion, where the builder hands over the keys, warranty documentations, certificates, and control of the property to the homeowner. It is important for homeowners to seek legal advice and understand their contractual and legal rights in the event of any disputes or issues with the builder. By understanding the process and potential issues that may arise, homeowners can better manage their expectations and ensure a successful construction project.