If you’re about to undertake a renovation on an investment property, here’s how to make sure you’re not being ripped off.
Blogger: Luke Carroll, EC Credit Control & Tradebusters Academy Expert
As a home owner and property investor, there are some key areas to check when using a tradie for construction work on your property. The Home Building Act 1989 is the law designed to protect you as the home owner and regulates residential building work in New South Wales. This covers construction work on single dwellings, villas, houses and units.
1. If you are having construction work done where the cost of the materials and labour is valued at more than $1,000 (incl GST), you need to engage a licensed contractor. By law, all builders and tradies must be licensed for the type of residential work they perform where the cost of the job is above $1,000 (in some specialist trades, such as electrical and plumbing they are required to be licensed regardless of the amount). You should always confirm the licence details of your tradie by going to the Fair Trading website (www.fairtrading.nsw.gov.au) or calling them on 13 32 20 to do a licence check. Think of the contractor’s licence as the equivalent of quality assurance label on a consumer product. There is usually a very good reason why a tradie is unlicensed (common examples include a history of poor or faulty workmanship and no formal qualifications, to name just two). By using an unlicensed tradie you run the risk of any warranties being voided and work performed being either substandard or illegal, which can result in additional cost for the work to be rectified. By looking to cut corners and save a few dollars upfront by using an unlicensed tradie, you run the risk of substantially more cost being incurred down the track.
2. A written contract is required to be provided by your tradie for residential building work valued over $1,000 (incl GST). For smaller jobs valued under $5,000, the information required is quite basic. However, for jobs valued over $5,000 the information required is far more extensive and designed to outline the rights and responsibilities of both parties to the contract. Some of the main areas to be included are an accurate description of the works to be carried out (if it’s not accurate, don’t sign the contract!) and the contract price clearly detailed or an explanation provided for why it cannot be (once again, if this is not provided don’t sign the contract). A tradie is also required to provide you with a copy of the Consumer Building Guide for contracts worth more than $5,000. This covers all essential areas for residential building work.
3. Key benefits of having a legitimate contract in place include clear details on what happens in the event of a dispute and how variations (which can be common) are to be addressed. This reduces the risk of any grey areas arising as to what was and wasn’t covered in the original contract. Bottom line, without a contract in place that details both parties obligations there is an increased risk of disputes arising, which is in no one’s interest. So be wary of a tradie who does not provide you with a clearly detailed and professionally written contract. The last thing you want is to get chased by the debt collector claiming you owe a tradie money because of “additional” work which could and should have been clarified before the job began.
4. Your tradie may also ask for a deposit to be paid prior to work starting. The rules around deposits are simple. For a job under $20,000 the maximum deposit allowable is 10%, for jobs above $20,000 the deposit allowable is 5% (although this is likely to change soon). If a tradie asks for a higher deposit or full payment upfront, be wary. This is illegal and you should refuse.
5. Home warranty insurance. This is a requirement by law for all jobs above $20,000 and is designed to allow you to make a claim for a loss due to defective or incomplete work in the event your tradie suffers insolvency, death or disappears. Be aware that not all tradies are licensed for this type of work, so once again – check this before commencing. If not, good old “Murphy’s Law” may happen at some point in the future when you need to make a claim.
By knowing these basic rights you ensure your project has the best chance of running smoothly, without the risk of being caught out and costing yourself financially.