Helpful Hints

1. Thermal mass

Thermal mass is often talked about as vital for good passive-solar design.

Thermal mass in WA is easier to provide that you think, purely due to the materials we prefer to build with. The installation of concrete floors and brick walls provides the thermal mass of our buildings. We must make sure that it works for us, rather than against us.

Thermal mass can be used to trap, store and later use the collected thermal energy in the form of heat. The performance of thermal mass elements of a home can be enhanced through the choice of floor coverings, colouring and textures selected. A matt, dark-coloured floor tile laid on a concrete floor is more effective than a light coloured carpet that insulates the concrete slab from the heat. Same goes for a dark paint colour on an internal brick wall that faces a window collecting the warmth of the sun – it is far more effective than a light or reflective colour to maximise its thermal performance.

In winter, opening the blinds and curtains will allow the floor and walls of your home to absorb the radiant heat. As the outside temperatures fall at night, the thermal mass will release the stored thermal energy as heat counter-acting the cooling external conditions. Close the window treatments to keep the warmth in.

In summer the opposite is true. So how can thermal mass be a good thing in the summer? You do need to shade the heat from the thermal mass to keep your home cool. The thermal mass will still absorb the heat of the home during the day. At night ventilate the thermal mass so the heat is released to keep your home cool.

Passive-solar design is about making your home more comfortable and to reduce the amount of artificial heating and cooling required. Having done that, you as the occupier need to ensure that you know how to use your home’s features to maximise the efficiency of your home through the way you live.

So benefiting from thermal mass through passive solar design does require some action by the occupant.

2. Narrow lot development

The move toward urban consolidation and home owners subdividing their existing properties has meant that more new home buyers are building on small narrow blocks. There is also a general trend to build larger 2 storey homes on smaller land areas. Houses are getting bigger, but blocks are getting smaller.

There are a number of specific issues which you need to consider. Building costs per square metre may be higher due to the need for additional cavity walls. Building on smaller narrow lots usually involves the construction of more perimeter walls than internal walls which will lead to higher building costs. Site access could also be a problem for delivery and placement of building materials.

You must also consider new residential design codes. These cover things like:

  • Restrictions on the size of the garage to less than 50 per cent of block width. If the block is less than 12 metres wide, it will be impossible to erect a double garage;
  • A requirement for neighbour consultation. Neighbours are often required to sign off their approval on new buildings which involves zero-lot lines, setbacks and overlooking adjoining property issues; and
  • On sloping sites, restrictions on floor height.

Local governments can often impose their own restrictions on house size and design in order to preserve, as they see it, the amenity of the street or surrounding area.

You may also have particular design challenges depending on your lifestyle. Incorporating courtyards and outdoor living areas into smaller lots can be difficult.

You should also contact Master Builders members for advice and consider their experience in dealing with small, narrow sites. Use the adjacent Find a Master Builder search service.

3. Multi-storey homes

There are a number of specific construction issues with two storey homes.

Obviously the square metre cost and length of the construction period will be greater when a second storey is added. Costs for additional storeys often double due to the cost of scaffolding, the requirement for engineering certification of the suspended slab and the need for the slab to cure for some time after being laid.

Building multi-storey is becoming much more popular than in the past.  Homebuyers require a great deal of internal living space, but are increasing confined to building on smaller lots. The home is now much more a focus for activities such as home theatre viewing, entertaining in alfresco areas, or working in a home office. Buyers requirement for additional space can only be met by building an additional storey.

Two or three storey homes can also be subject to more stringent planning requirements. Issues such as privacy rights of existing neighbours or shadowing effects on adjoining properties and noise often cause rancour between adjoining property owners even before construction commences. Many local authorities require existing owners to “sign off” on building plans proposed by new developers as part of the building approval process.

Some other issues that you need to consider include what type of materials you will use for the second storey. Framed construction is becoming more popular, particular for additions and renovation activities. New water efficiency regulations impose additional requirements for homes with more than 2 bathrooms which would be commonplace in two-storey homes.

4. Financing your home

The first step is to do a budget.

You will need to sit down – in case any of the figures surprise you! From your seated position, work out your annual income and ALL your expenses. Check all your bills to work out the annual cost. If you are buying as a couple, do a combined budget. Allow for some inflation in costs and a contingency for unbudgeted expenses. Provide for maintenance costs, rates and bills at your new home too. You can find template budgets online, in various books and now-days on apps.

From this exercise, you will be able to see how much you can afford to spend on interest and any repayment costs. Remember that if this is your first home, you can get help with the First Home Owners Grant.

You will also need to do a stocktake of all your assets and liabilities.

Armed with this information, you can hop online and use online home loan calculators, such as the free one on the Bankwest website. This will allow you to work out how much money can be borrowed, what the repayments would be and to compare alternate home loans in the marketplace. A good example is the Keystart ‘Low Deposit’ home loan which is a variable interest rate loan which can be used by owner-occupiers to buy an established home or build a new house. It is available to both first and non-first home buyers and we lend across the State of Western Australia.

You will find a choice of fixed home loans and variable rate loans. Fixed loans give you certainty in your expenses over a period of 1 to 5 or sometimes up to 10 years. It removes the uncertainty of variable rates. But the downside is that fixed rates can lock you in if interest rates fall or your circumstances change.

Work out if you have enough funds for a deposit. Additional mortgage insurance costs can apply unless you have a 20% deposit. Check out the loans in the market though, you might qualify for low deposit loans from a financier, bank or Keystart.

If you want help with all of this, a banking, broker or financial specialist can assist you do the sums. Even better, they may be able to give you a pre-approval before you go shopping for a home.

You also need to be careful to allow for all costs when pricing your new home. This is not only the building price, but will sometimes need to also allow for finishings, fixtures and fittings and landscaping costs. Even with fixed price building contracts, you may have variations, extension of time costs and other adjustments. So allow for a contingency amount there too.

Stamp duty might also apply to land purchases or the total cost of an established home. This is a big cost you need to budget for.

Good luck with your new home purchase, it is a major investment so it is worth doing all the preparations above to be able to afford and enjoy your new home.

5. Deposits for plans

Under a Preparation of Plans Agreement or a Preliminary Work contract homebuyers sometimes pay a small deposit on signing these contracts, which does not commit either party to build the home. The agreement covers the builder’s costs of plans being drawn up, application fees, and the like.  Usually if the contract goes ahead, any deposit is taken into account in determining the final contract price.

An owner who pulls out of dealings with the builder at this stage  may find that the builder has incurred significantly more costs than the amount paid as a deposit. While there may be some refund due for indemnity insurance premiums, for example, these amounts may be less than the builder’s other costs in preparing the contract documents and drawings.

In other words, the builder may not be required to return the full deposit, or any amount, depending on the costs that have been incurred. If the owner wishes to dispute the situation, the Building Disputes Tribunal will not be appropriate since no home building work is involved.

On the other hand, if the owner has signed a building contract and then wishes to cancel, the situation may be more serious. In addition to any costs that have been incurred the builder may also be entitled to claim loss of profit for work that would have otherwise been completed under the contract.

It is vital that homebuyers read and understand the contract to be signed, in particular the obligations that may be incurred if the homebuyer has a change of mind. Remember also that cancelling a contract does not entitle the owner to take the building plans to another builder. Usually the plans are copyright and the use of them without permission by the author or originator is not permitted.

6. Aged residents and housing

Designing and building housing for older people is becoming very important as the Australian population ages. Each year one in three every older Australians will suffer a fall, with around 5 to 10 per cent of these falls causing an injury which requires medical attention.

Many of these falls around the home are preventable. Sensible designs and construction in new homes can minimise risk of falls by the elderly (or any age group for that matter).

Buyers, builders and tenants should do a risk assessment audit in home design by thinking about the following issues:

  • Using non-slip tiles rather than standard tiles, particularly in wet areas like bathrooms and laundries. Make sure that floor tiles are laid level.
  • Minimising the use of steps and stairs in and around the house and garden. If stairs are a requirement, ensure that the design minimises accidental tripping.
  • Ensuring that your lighting plan allows sufficient light, including in outside areas where steps are involved.
  • Shower hobs can be dangerous for elderly persons. Also make provision for a soap holder in the shower design.
  • Once construction concludes, be mindful of loose surfaces, cracked footpaths, loose pebbles and stones. Remove these dangerous items.
  • Inside the home make sure that floor coverings and rugs are secure, and that there are no loose electrical cords.
  • Handrails may be considered in suitable areas in and outside the home.

Potential safety problems can be avoided by proper planning and suitable design in your new home. Talk to your builder about tenants’ or your needs and incorporate these elements into your building specifications. It is often easier to do this during construction rather than retrofitting items once a building is complete.

7. Accessible Design

Designing and building accessible homes is the way of the future. Due to Australia’s ageing population, the number of families with small children and the number of people with temporary and permanent disability.

Incorporating accessible design at the planning and design stage can save thousands in retrofitting down the track.

The State Government has partnered with the WA building industry to develop the Liveable Homes initiative to provide the tools and resources required to build accessible homes without compromising on style.

Modern interior design already lends itself to accessibility with open-plan living, spacious kitchens, wide entry doors and slung bathroom basins.

Incorporating accessible design features in new homes, such as wider doorways, level entrances and reinforced bathroom walls, make homes more adaptable and give people greater independence as the years go by.

A range of support materials is available at www.liveablehomes.net.au to help builders, designers, architects and home-owners incorporate accessible (or universal) design into their homes.

Fact sheets provide detailed technical specifications and perspectives for each Liveable Homes guideline, and CAD and jpeg images are free to download and use.

Examples of house plans for a range of block sizes and shapes—using all essential and some desirable Liveable Homes criteria—have been developed by WA builders and are available as PDFs and in CAD format.

A photo gallery highlights houses built using Liveable Homes guidelines and checklists are on hand to provide a quick overview of essential and desirable criteria.

8. First Homebuyers & Building

First homebuyers usually comprise around twenty per cent of the new home market. This means that of the 20,000 new dwellings constructed each year, around 4,000 will be built by new homebuyers.

Master Builders’ advice to homebuyers who are going through the building process for the first time is as follows:

  • Make sure that when you are obtaining quotes for your new home that you are comparing “apples with apples”. In other words look at the plans and specifications carefully and make sure that the prices you obtain are comparable in terms of what is included;

 

  • Do not choose a builder purely on price. You should also consider the builder’s track record. Talking to previous clients can provide valuable feedback on past performance. Assess your ability to be able to work with the builder. Good communication skills are vital;

 

  • Make sure that you have a contingency sum in your building budget. There may be variations to the original plans and drawings that you may wish to make during construction. Alternatively unexpected expenses like site costs may be higher than the provisional estimate in your building contract;

 

  • Check carefully what the building contract covers, because some contracts do not allow for floor coverings, driveways, landscaping or other fixtures that you may want;

 

  • Decide whether you wish to build with a large project builder or a smaller builder. Both have advantages and disadvantages. Large builders have the “economies of scale” resulting in lower costs, while smaller builders can be more flexible and directly supervise the building work;

 

  • Do not sign a building contract or preliminary agreement without reading and clearly understanding your rights and obligations;

 

  • Keep an accurate diary of negotiations and discussions with sales staff and construction supervisors. Do not rely on verbal representations or undertakings by sales staff. A written record of these undertakings should be included in the contract document, and/or maintained during the construction period;

 

  • Use only a builder who is registered and consider using a Master Builder member who has access to the latest information on regulatory changes and training programs;

 

  • Any variations should be documented and signed. Do not rely on a handshake or a “she’ll be right”; and

 

  • If there is anything that you are not happy with, talk to your builder first. Small problems can be easily sorted out, but could escalate if they are allowed to fester.
9. First Homebuyers & Incentives

There is a lot of assistance available to first home buyers from Governments. It is worth spending some time to carefully investigate the rebates and assistance available to you.

First Home Owner Grant
The WA Government’s First Home Owner Grant currently offers $15,000 to first home owners who purchase or build a new home (from 1 January 2017 for 12 months), and $3,000 for established homes. The grant is not a loan, and it doesn’t need to be repaid. Home buyers can use their grant to cover the deposit and loan fees in WA, provided they meet the criteria.

This grant is capped to properties with a total value, including the land of $750,000 or less. If the home is located north of the 26th parallel, the cap increases to $1,000,000 or less.

Home Buyers Assistance Account
This account provides a grant of up to $2000 for the incidental expenses of first home buyers when they purchase an established or partially built home through a licensed real estate agent for the purchase price of $400,000 or less. The grant can be used for mortgage registration fees, solicitor and/or conveyancing fees, valuation fees, inspection fees, establishment fees, mortgage insurance premiums and lending institution fees associated with lodging the application.

Stamp duty reductions or exemptions
When a home buyer is eligible for the First Home Owner Grant, a concessional rate of transfer duty may apply. Properties under $430,000 are completely exempt, and a reduced rate applies for properties of up to $530,000 for house and land. If land only is bought, first home owners are totally exempt for land purchased up to $300,000, and a reduced rate applies for land purchased for between $300,000 and $400,000.

Keystart Home Loan
The Keystart Home Loan is a low deposit loan for homes under $480,000. Home buyers may be eligible if they have an income under $95,000 a year, or if they are a couple with a combined income under $115,000. See Keystart for more information.

SharedStart Home Loan
With a fixed SharedStart loan, you receive finance from Keystart to purchase a percentage of the property from the Department of Housing. The Department will retain its share, up to 30%, in the property permanently and you can at any time sell your share of the property back to the Department.

GoodStart Loan
This loan is available for current Department of Housing tenants, which is another shared ownership arrangement.

Other Support
There is other financial support available through the Department of Housing, such as Disability Home Loans for people with disabilities, and Aboriginal Home Loans.

Even if you can access any of these government savings and grants, you must still carefully budget to see if you can afford your new home on your income, while allowing for unexpected expenses.
First home buyers should take advantage of all the opportunities out there to get assistance to buy or build their new homes, and take care to read the fine print to budget carefully for the largest single investment generally made in a lifetime.

10. Choosing a Builder

The choice of a builder will be influenced by the size and type of project.

If it is a new house, do you choose a project home or a custom builder? A remodelling project (ie. renovations, alterations and additions) for instance, usually requires a different level of experience and expertise to blend the old with the new.

Residential builders in WA are required to be registered. So whether you choose a project home builder or you are referred to a builder by friends, you must ensure the name of that builder is associated with a current registration and endorsed for the work you intend to have undertaken. If there is no licence, then immediately scratch the name from the list.

Below is a general checklist which you can use as part of your selection process. The most important thing to remember is to ask questions at any stage, particularly if you are unsure about any decisions or changes.

  • Be precise about the project details and your expectations of the builder. Ensure you have detailed plans and specifications;
  • Obtain information from your local council about zoning regulations, requirements and building approvals. Your Council website can be found at www.walga.asn.au/about_lg/council_websites;
  • Only deal with a builder who is licensed http://www.buildingcommission.wa.gov.au/;
  • Look to see if your builder is a member of the Master Builders Association and also to see whether they have won any Master Builders awards for the quality of their building work or customer service;
  • Decide whether you wish to build with a large project builder or a smaller builder. Both have advantages and disadvantages. Large builders have the “economies of scale” resulting in lower costs, while smaller builders can be more flexible and directly supervise the building work;
  • Make sure you have plans and specifications for builders to quote on, if the builder doesn’t draw the plans for you. Or choose a designer first.
  • Familiarise yourself with the fundamental legal obligations and jargon, to feel comfortable openly talking with your builder;
  • Do not sign a building contract or preliminary agreement without reading and clearly understanding your rights and obligations;
  • Select only three or four builders to quote on your project;
  • In comparing building prices or quotations, make sure that you are comparing “apples with apples”. Building prices can vary due to different types and grades of materials specified, or because of certain exclusions or inclusions in the price;
  • WA has mandatory home warranty insurance for works over $20,000
  • Any concerns you have should be raised with the builder immediately;
  • Try to be contactable at all times, thereby allowing your builder to discuss any issues and make a quick decision;
  • Any variations, extra work or omissions should be made in writing and signed by you and the builder. Expect requests for extra work to be an additional charge;
  • WA has stringent safety laws, so expect the builder to make regular site visits; and
  • Ask about the accessibility of the builder during construction – if a problem arises, can you contact the builder at short notice? How regularly will the builder or supervisor update you on the work programme?

BUILDING PRODUCTS AND SERVICES

Show More

FAQS

What is the difference between a project builder and custom builder?

Project builders (also known as display home builders) have standardised pre-designed house plans that you choose from. Project builders offer house and land packages where they build their plans on a lot of land, usually in a development area, or house only packages where they build their plan on land you have previously purchased.

The builder usually has strict requirements on the types of blocks they build on. They also rarely allow changes to the plans, and if so can only be minor, and are charged to you at increased prices.

The minimum price project builders advertise their display home is only for the very basic “shell” of the house and does not include driveways, carports, landscaping, air-conditioning and sometimes flooring and painting. Most display homes you see in a display village will be at the highest end of their price range and have all the additional upgrades which can be misleading.

Although they may only provide you with a basic package, there is a lot of competition for companies to win your contract, and so they are likely to provide great inclusions and incentives so it pays to shop around.

Advantages of a Project Builder

  • Have a bigger buying power as most project builders construct high volumes of homes, they buy in bulk and so can help to negotiate better prices for materials to reduce you costs
  • Many companies offer house and land packages.
  • Great for first home buyers or if you don’t want to design your own home.
  • Can get some great savings with inclusions and upgrades from competing companies.

Disadvantages of a Project Builder

  • Restricted in the choice of fixtures and fittings as they have limited options due to the high volume of houses built.
  • Can only make minor changes to the plans which can incur very high costs which are handed on to you.
  • Project builders are only contracted to build the design, meaning all pre-construction is at the cost of you, including demolition, earthworks, tree removing or putting in retaining walls.

Custom Builders

Building with a custom builder means you have greater flexibility in your design. They create a unique home that is customised to suit your needs and budget.

You can use an external architect to design up your floor plans and then approach a custom builder to build the house, or the custom builder will engage an architect and engineer to help in the planning and building stage.

Advantages of a Custom Builder

  • One-off design specifically for your needs and budget
  • Greater involvement and control over the design of your home to suit your needs, along with flexibility of finishes and fittings.
  • You work with the same builder the whole way through, from demolition and earthworks to lock up and completion, meaning you have a closer working relationship.
  • The builder will take into consideration your particular block, slope, views or any bushfire regulations
  • Custom builders will usually get multiple quotes from various sub-contractors to ensure the cost of the trades is the best possible

Disadvantages of a Custom Builder

  • The overall costs associated with a custom home may be greater than a project builder depending on the quality products, features and design layout chosen.
  • Typically custom homes will take longer to build due to the complex design, skills required and the choice of materials
  • You will have to pay for an architect to design your house if your builder is not also an architect.

A few tips if choosing a project builder:

  1. It pays to shop around – do your research and a product price comparison (on the same product) as you may get a much cheaper price from one builder then the next.
  2. Ensure all items agreed on are included in the contract and you know what it is you are paying for. It’s also recommended you know what is required at lock up for your home to have council compliance (many items not included in the original package).

Overall, whether you decide to choose a project or custom builder, it’s important you create a budget and stick to it!

What do I look for when viewing display homes?

Visiting display homes can be a very exciting time and is a great way to help in the decision process of what you want your home to look and feel like.

It’s important to keep in mind that display homes are to show the best work a builder can do, and so will often include all the additional upgrades and be fully furnished by professionals. This can be quite misleading as usually the advertised starting price is just for the basic “shell” of the house and does not include driveways, carports, landscaping, air-conditioning and sometimes flooring and painting.

With the sales reps present and a lot of information thrown your way, it’s important to look out for a few key things:

  • Ensure you have spoken with your financier and know how much you can borrow before you visit a display home. Once you know your price range, only visit display homes within that range so you don’t fall in love with some feature outside your budget.
  • Consider design factors that relate to the way you live in your home, age of the occupants, how many children (current or future), if you like to entertain etc
  • How many bedrooms and baths are required for you now and in the future?
  • What kind of space/s do you want for entertaining, and relaxation?
  • How much storage do you need is essential? Look for places where you can easily add storage to what is already included in the design.
  • If you already own a block, ask yourself how the home will be orientated on the block and any adjacent properties.
    • What will you views look like
    • How will you take advantage of the natural light
    • Will the bedrooms be oriented to mitigate street noise
    • Will it leave you enough outdoor space for a garden, hobbies etc
  • Once you’re happy with the house structure, ask about the upgrades available and the prices involved
  • Keep a record of each home you visit – what you liked and disliked, take photos, measure the rooms and see how the rooms make you feel. The process can be quite overwhelming so it’s good to be able to go back to a reference.
  • Although it can be hard, try to keep emotions in check and base your decisions on your needs.
What should I do when looking for a builder?

Residential builders in WA are required to be registered. You must ensure the name of that builder is associated with a current registration and endorsed for the work you intend to have undertaken. If there is no licence, then immediately scratch the name from the list.

Below is a general checklist which you can use as part of your selection process. The most important thing to remember is to ask questions at any stage, particularly if you are unsure about any decisions or changes.

  • Approach a builder knowing exactly what you are looking for and your budget;
  • Visit display homes beforehand to know what you like;
  • Obtain information from your local council about zoning regulations, requirements and building approvals.
  • Only deal with a builder who is licensed. You can download a current list of registered builders from the Building Commission’s website;
  • Look to see if your builder is a member of the Master Builders Association and also to see whether they have won any Master Builders awards for the quality of their building work or customer service;
  • Familiarise yourself with the fundamental legal obligations and jargon, to feel comfortable openly talking with your builder;
  • Do not sign a building contract or preliminary agreement without reading and clearly understanding your rights and obligations;
  • Ensure you know what inclusions you need to have for your house to be approved by council as some things are not included in the initial quote;
  • Select only three or four builders to get quotes from, and in comparing building prices or quotations, make sure that you are comparing “apples with apples”;
  • WA has mandatory home warranty insurance for works over $20,000
  • Ask about the accessibility of the builder during construction – how regularly will the builder or supervisor update you on the work programme?

At the end of the day it’s about which builder you feel the most comfortable and confident with so you can build a good working relationship which is vital for when such a large investment is being made.

What assistance is there for first home buyers?

There is a lot of assistance available to first home buyers from Governments. It is worth spending some time to carefully investigate the rebates and assistance available to you.

First Home Owner Grant

The WA Government’s First Home Owner Grant currently offers $3,000 to first home owners for established homes. The grant is not a loan, and it doesn’t need to be repaid. Home buyers can use their grant to cover the deposit and loan fees in WA, provided they meet the criteria.

Home Buyers Assistance Account

This account provides a grant of up to $2,000 for the incidental expenses of first home buyers when they purchase an established or partially built home through a licensed real estate agent for the purchase price of $400,000 or less. The grant can be used for mortgage registration fees, solicitor and/or conveyancing fees, valuation fees, inspection fees, establishment fees, mortgage insurance premiums and lending institution fees associated with lodging the application.

Stamp duty reductions or exemptions

When a home buyer is eligible for the First Home Owner Grant, a concessional rate of transfer duty may apply. Properties under $430,000 are completely exempt, and a reduced rate applies for properties of up to $530,000 for house and land. If land only is bought, first home owners are totally exempt for land purchased up to $300,000, and a reduced rate applies for land purchased for between $300,000 and $400,000.

KeyStart Home Loan

The KeyStart Home Loan is a low deposit loan for homes under $480,000. Home buyers may be eligible if they have an income under $95,000 a year, or if they are a couple with a combined income under $115,000.

 SharedStart Home Loan

With a fixed SharedStart loan, you receive finance from Keystart to purchase a percentage of the property from the Department of Housing. The Department will retain its share, up to 30%, in the property permanently and you can at any time sell your share of the property back to the Department.

GoodStart Loan

This loan is available for current Department of Housing tenants, which is another shared ownership arrangement.

 Even if you can access any of these government savings and grants, you must still carefully budget to see if you can afford your new home on your income, while allowing for unexpected expenses.

First home buyers should take advantage of all the opportunities out there to get assistance to buy or build their new homes, and take care to read the fine print to budget carefully for the largest single investment generally made in a lifetime.

What is practical completion?

Practical completion is a term that is misunderstood by many home buyers. Generally it means the point where all building work is complete or all but completed, in accordance with the contract, and the house is reasonably fit for occupation.

A building contract usually defines practical completion being when all works are completed, except for any defects or omissions which do not prevent the home from being used for its intended purpose. In other words, if the unfinished items prevent the home from being “lived in” then practical completion could be deemed not to have occurred.

Usually there will be a practical completion inspection and the building supervisor and client will agree on a list of items that need to be attended to.

There is usually a short gap in time to the handover, commonly 10-14 working days, although two weeks is the standard timeframe to key handover. This may be extended if there are a lot of practical completion items still to be addressed.

The builder has a contractual obligation to repair minor defects, but this may not necessarily happen before handover, although most builders would attempt to do so. Many items are attended to in, or at the end of, the defects liability period (usually a period of four to six months after practical completion for many residential contracts, and sometimes called the maintenance period).

Practical completion is an important stage of the building process but buyers must understand that not every last detail will necessarily be completed at that time. In short, at practical completion, the builder is paid in full, there is a short gap of time, and the owner takes occupancy – then the defects liability period starts. The Building Commission or the courts will act if the builder does not meet the defects liability obligations.

What are the benefits of buying a display home as an investment property?

Investment in a builder’s display home may be a sound decision depending on your circumstances. Many builders sell and rent back their display homes to recover some of the capital construction costs. Usually a display home will have a limited life until a new development area is built out, so the lease back option can be attractive to a builder who can maintain a presence in the area without having the financial burden of the construction cost.

The benefits to you can be that the annual return on investment you earn from the rent paid by the builder over the lease back period may be higher than market rates. You may also benefit from any capital appreciation over this time.

Your asset will be extremely well maintained during the rent back period as it is in the interests of the builder to present the home beautifully as a showcase to the public of his building skills. The quality of brickwork, plastering and tiling in the display home may also be above average because of the builder’s desire to demonstrate his workmanship quality and capability.

Investment in a builder’s display home is all inclusive. Elements in a display home that would not normally be included in the standard building contract, eg. established gardens, paving, fittings (and sometimes furniture) are included in the changeover price. This may mean that the builder’s asking price is higher than his standard products. There may also be some taxation advantages associated with your investment.

One important consideration is what you will do once the rent back period expires. Rental income from the builder will need to be replaced by perhaps a not so reliable, or maintenance conscious tenant. Is the area a growth area where there is likely to be a number of tenants? What are the prospects for capital gain on your property?

These questions may be less relevant if you choose to live in the home, and not necessarily maximise your return on investment.

You should read the legal documentation and the conditions of the sale and leaseback arrangements carefully and seek advice before committing to a purchase.

What is home indemnity insurance?

Home indemnity insurance protects you against financial loss for faulty, unsatisfactory or incomplete building work and loss of deposit should the builder die, disappears or becomes insolvent. The insurance policy must cover the residential building work during the construction period and for six years from the date of practical completion.

Currently all residential building work valued over $20,000 must be covered by a policy of home indemnity insurance except when carrying out ‘associated work’ only ie. installing a swimming pool, kitchen cabinetry or landscaping.

It is compulsory for builders to take out a home indemnity insurance policy before accepting any payment or obtaining a building licence from the local government. The home owner must also be given a copy of the insurance certificate.

It is the builders’ responsibility to take out home indemnity insurance; however the insurance cost will be paid for by you, so ensure it is in the contract before signing. Home indemnity insurance needs to be purchased before commencing any re residential building work, asking you to pay a deposit or asking you to pay any other money under a residential building contract.

The builder is also required to give you a copy of the certificate of insurance which summarises the main requirements.

 The policy will be in your (owner) name, so should you sell the property within the six year insurance period, the benefit of the policy will pass to the subsequent owner.

If home indemnity insurance cannot be obtained, it is recommended that you find another builder who can to ensure you are covered.

Click here for more information.

Should I have a building inspection before buying?

Under the Builders Registration Act, a builder is legally responsible for all faulty and defective work for a period of six years after practical completion. Whether or not you engage a private building inspector will not affect the builder’s obligation for the integrity of your home.

However, many owners do seek assistance from a private consultant if they do not feel qualified or confident in their ability to deal with the builder or his construction supervisor at handover.

If you decide to engage a private inspector, as a matter of courtesy you should advise the builder of your intentions. It is important also that you instruct the inspector appropriately. What you do not require is a list of minor defects e.g. chipped paint, cracked tiles etc which are perfectly obvious for all to see. Builders and clients are often annoyed by voluminous inspection reports which identify imperfections like these which would be rectified in the normal course of events anyway.

Your instructions to an inspector should be to verify the integrity of major building elements. For example, the inspector should climb into the roof space to see if the roof structure is correctly installed. Checking that windows are correctly fitted and sealed is another important item.

Sometimes it is the things that are unseen that are most important. An experienced building inspector can usually assess integrity of the footings and slab by visual examination.

Before engaging a building consultant you should ask for a sample copy of a previous building report.  Are the defects described specifically?  Comments such as “non-compliant with building code” are vague and unsatisfactory as they give the builder no clue as to what specific section of the code has not been met and what needs to be remedied.

Private inspectors do not require registration in Western Australia, so it is important to check their experience and credentials before engaging them.  The quality of some building consultants has been heavily criticised by the Building Disputes Tribunal so it is important to choose wisely. There are a number of precautionary steps that you can take to ensure that you are getting value for money.

Tips:

  • Check with the Builders’ Registration Board to confirm their registration number;
  • Contact the Master Builders Association for members who are building inspectors. You can use Master Builders’ free Find a Member service to find an inspector;
  • Obtain a list of previous clients and obtain their feedback; and
  • Confirm an agreed price before agreeing to an inspection.

Processing.....

loading