When is final payment due?
If your contract is a contract to build a new home or to renovate, alter, extend or repair a home to a stage suitable for occupation, you can not ask for the final payment until the practical completion stage has been reached. This occurs when:
- all work has been completed in accordance with the contract, including the plans and specifications;
- either with no omissions or defects, or with only minor omissions or minor defects; and
- if there are minor defects or minor omissions, the contractor must provide the owner with a signed 'defects document' (ideally compiled by the owner, or their representative, and the contractor at the handover inspection) which lists the agreed minor defects and minor omissions and indicates when the builder will attend to these matters, and also lists the minor defects and minor omissions which the owner believes exist but the contractor disputes - see section 67 of the DBC Act; and
- the work complies with all relevant statutory requirements, including the Building Code of Australia; and
- the home is also reasonably suitable for habitation
For smaller jobs, you can not ask for final payment until all work has been completed in accordance with the contract, including plans and specifications, and complies with the relevant statutory requirements.
You should give your client reasonable notice (roughly two to three weeks) of when you anticipate hand over taking place.
Pre-handover Inspection
It is recommended that you arrange an on-site inspection with the client perhaps a week before the date nominated for handover. This gives you a final opportunity to address any remaining issues prior to handover.
On Handover Day
You should ensure that you give the owner copies of any outstanding documentation such as:
- certificates of inspection
- product warranties for appliances installed and
- reports, notices or other documentation issued by service providers (e.g electricity, gas, telephone, water or sewerage).
In addition to these legislative requirements, some contractors (e.g the BSA Major Works Contract) require the builder to provide the home owner with all certificates of inspection (including, where appropriate, the 'Final' certificate) prior to receiving the final payment. You should always check the practical completion requirements under the contract.
Most standard contracts will include a defects document as one of the associated forms. It is recommended that you complete this with the owner during handover inspection. The defects document must:
- List the minor defects and minor omissions that both the you and home owner agree to;
- State when you will attend to those matters;
- Separately list minor defects or minor omissions that only the home owner believes exist; and
- Be signed by the home owner and yourself (or if you have signed it you need to make reasonable efforts to have the owner sign it).
Fixing items listed on the defects document
You are required to correct any minor defects or minor omissions which are discovered at handover within six months after completion of the work (your obligations under BSA's Rectification of Building Work policy). Any minor defects or minor omissions discovered after (but within six months of handover) should be referred to you by the owner, in writing, to be rectified within a reasonable timeframe. You should keep copies of all correspondence for your records.
For further information on customer complaints and how to deal with them - click here
