Construction Due Diligence for Homeowners

Before selecting the builder who can make your dream home into a reality, do construction due diligence first.

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Building a house is considered to be an investment. Homeowners spend a huge amount of money that they will ever spend in their life for a house. So, it is a heartbreaking moment to see a homeowner lose money or not have their expectations met because of a building dispute. To avoid this, one must select their builder and practice due diligence

Purpose of Due Diligence

Due diligence is the investigation process that a builder should undergo before signing a construction contract. This is done by looking at relevant documents and talking people to verify your sources.

It is good for a homeowner to carry out due diligence. It gives you the assurance that you can trust your builder in building your house. Since if they are law-abiding builders, their can give you warranties and insurance for their work. Thus prevents you from being in situations that can lead to a building dispute, making the construction process stress-free.

Six Steps in Conducting Due Diligence

In conducting due diligence, here is the process that you would need to follow:

1. Gather Information

Ask your builder or look for relevant information on your builder such as their licence and if they have any building limitations. Also check if they are registered to pay taxes, if they can get you building insurance, and etc.

To check, NSW Office of Fair Trading has a complete checklist on which things you should watch out including:

Their Australian Securities and Investments Commission (ASIC) registration extract;
Their Goods and Services Tax (GST) registration;
Their ability to get insurance under the Home Building Compensation Fund or HBCF (for contract above $20,000);
Their working relationship with other builders and contractors;
Their past building projects; and
Their pending building disputes posted in Fair Trading, if any.

2. Check for Reviews from other people.

Look for client reviews online or their personal accounts to see what people are saying about them. A bad review about a builder is warning sign for you to not sign a building contract anymore.

3. Use other sources of information.

Use other means to validate your findings. For example, ask people who have transacted with the builder. They can give you insights whether if they have any good or bad experience working with your builder.

4. Check if they can comply with the Home Building Act.

The Home Building Act protects your rights as homeowner and can help you get compensated for poor construction work. So, it is important to check your contract for any questionable provisions before signing anything.

5. Make a Due diligence Report.

Compile your findings in a report to organize your gathered data. This is not required, but it would help you in making sense of your data and make better business decisions. You can pattern your report to the checklist questions or at your own style.

6. Consult your construction lawyer.

If you don’t understand something and would need help in doing your report, it would be best to consult a construction lawyer. They can also help you determine things in your contract that can lead to a dispute. They can advice you not only about the contract but also on what your next legal steps should be.

Duration of Investigation

Investigating on your builder would only take up a few hours of your time. But, it will depend on how rigorous your investigation is. If you have difficulties or if you are still unsatisfied with your own investigation, then a construction lawyer can help you in carrying out due diligence.

After Due Diligence

After carrying out due diligence, you can now make your decision. If you find out that the builder is someone trusted, continue and sign the contract. But if they are dodgy, then find another builder. Make sure to think twice before signing because you are about to spend a huge amount of money. Ensure that your investment will count in the long run.

Due Diligence in Construction Contracts Assistance

At Contracts Specialist, we can make you building investments count. We can assist you in construction due diligence matters, so we can carry it out with ease. Also, we can review your contract, so you can avoid future disputes that could happen during construction.

If you want to seek immediate legal assistance, call now.

You can be confident that you are getting the right legal advice.

Contracts Specialist is a Sydney-based construction law firm that deals with Building Disputes, Construction Contracts, Debt Recovery, and Security of Payment. With Contracts Specialist, you are ensured that you are in good hands.