WHEN ARE THE PROGRESS PAYMENTS DUE FOR MY NEW HOME?
Progress payments; their amounts and when they are due.
Waltzing up to the counter to pay for your milk and eggs is quite a different story of how you pay for your new home. In fact, the only similarity is that some money changes hands – beyond that, everything’s different.
The first thing we want to say is that all builders are bound by law on how they collect money from the customer. There’s an act called the Building Contracts Act 1995, and it spells out things pretty clearly on what a builder can and can’t do with progress payments.
Ok, so we’ve said it now – progress payments. That’s how you pay for your new home. Also known as staged payments or progress claims. You pay for it as the build progresses. Or another way of saying this is that you pay for it in stages, and these align (typically) with the stages of construction such as frame and fitout.
Here’s what you’d normally see for the various stages (this is for a complete new home build, it differs a bit for contracts like only building to lockup stage, or renovations for under $20k) –
Deposit – 5%
Base or footings stage – 10%
Frame stage – 15%
Lockup stage – 35%
Fitout stage – 25%
Balance on completion or handover – 10%
The amounts shown above are the maximum allowed under the law, so if any builder is asking for more that this, you need to ask if they have any dispensation that allows them to do so.
A couple of comments – sometimes the definition of each stage can be subject to different interpretations by different people, but once again, the act is fairly explicit on what makes up the completion of each stage, so you generally won’t have a problem.
And why does the industry work like this? and how did they come up with the percentages?
It’s straightforward really – a home is a big ticket item and it’s unreasonable to expect builders to buy the materials for your new home, and expend their time on it for month after month without getting some cash to enable them to pay for the materials and earn a living.
And the percentages generally reflect 2 things – the first is the cost of the materials and labour to that point, and the other one is the materials and deposits on materials for future stages. The percentages are all worked to make sure the builder’s covered, but also that the home buyer is not paying more than they have to.
One last thing – the progress payment amounts are always shown accurately in the contract you sign, but these can vary when the time comes for payment if there have been contract variations or if there’s an allowance or prime cost amount that’s applicable to that payment stage.
Of course, your bank will be all over this. They understand how the building contracts act applies more than most people do. So never fear, if you’re getting a loan, paying for the home in stages will be fine.
So paying those eggs is a piece of cake.
Keen to find out more?
Reach out to us. We’re here to help.