Turn-key
Simplify your build with a complete package of home and land with a developer.
Understanding building contract options
Building or renovating your home is exciting, but the range of options can be daunting. Talk to us about your finances and which option/s will work for you.
Power tip: talk to your lawyer before you sign
Get some advice to be sure everything’s in order before you commit to your build. Your lawyer can identify your obligations and risks, and point out situations where you might end up paying more than you expect. We can check that your financing is in place, and will work with the terms of the contract.
Three types of building contracts
Fixed price
You engage a builder to construct your home at an agreed cost.
Labour only
You engage a builder to construct your home at an hourly rate.
Turn-key contracts
Turn-key contracts normally form part of a sales and purchase agreement. They're used when you've bought a home off the plans, and will take possession of your new property once it's complete and ready to move in.
You normally pay an initial deposit, with the remainder due when you take legal possession of the finished house.
The turn-key contract sets out the full cost of the land and the build, and usually includes a timeframe for completion.
Fixed price contracts
You and the builder agree on the total cost of building your home, based on your plans and your site.
The contract specifies any work which is excluded or may be subject to cost variations, so it’s important you allow for these in your budget.
Fixed price contracts for building or renovating usually set out a schedule of progress payments, which you pay when your project reaches certain milestones. Common milestones are when you give the go ahead for the project, when earth works are complete, when framing is up, when the roof is on and of course when the project is complete.
A fixed price contract gives you more certainty with costs than a labour-only contract and reduces the risk of cost over-runs.
Labour only contracts
Labour only contracts are usually open-ended. Your builder simply charges you for all labour and materials, and bills you regularly until the project is complete.
It's a very simple approach, but it could leave you with cost over-runs if anything unexpected happens. It could also mean you pay more if your house takes longer than expected to build or if costs increase during construction.
Before you sign a building contract
Do your homework on the builder or building company
Make sure you engage a reputable builder. If possible, talk to the owners of previous projects and ask how they found the process. Check the building company with the Companies Office to see if it has been placed into receivership. Finally, ensure your builder has all the appropriate insurance in place, like public liability.
Check the details of your contract
Your building contract lists out obligations for you as well as the builder. Get some advice to be sure everything’s in order before you commit to your build. Your lawyer can identify your obligations and risks, and point out situations where you might end up paying more than you expect. We can check that your financing is in place, and will work with the terms of the contract.
Your contract should include:
- The commencement and completion date
- The agreed costs, exclusions and variations
- When you need to make payments to the builder – these are usually successful completion of specific stages in the building process
Talk to ASB
Be sure your finances are all lined up before you commit to building your home. You also need to make sure the timing of payments will work with your loan agreement. We can help with all of those details.
Apply for an ASB home loan
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