In the majority of home building contracts across the country, there is a liquidated damages clause. 

The clause allows that if the builder doesn’t complete the home within the allotted time in the contract, the client will be able to claim a daily rate every day past the specific PC data. 

The amount varies, but it is intended to cover the out-of-pocket expenses of the client because of that delay, which is primarily the interest on the land and building the clients are paying monthly. 

For HIA Contracts, the standard amount is $50 per day, or $350 / week. This appears to be the industry standard across the volume building space. 

Extensions of time allow builders to ensure that they are not liable for delays which are out of their control. 

Gallery Homes have recently come to market with Gallery Guarantees, which include a guarantee of 28 days to site, and an 18 week build time for low-set homes. This is followed by a 6 week tenanting guarantee for investor clients. 

Gallery Group National Business Development Manager – Alexandra Stuart-Robertson said that Gallery decided to back their guarantees with genuine LDs if they aren’t delivered

“We allow $50/day in LDs for not starting onsite within 28days from land settlement. We then allow $150/day in LD’s under our 18 week build guarantee.”

Ms Stuart-Robinson said that the payments need to reflect a fair interest cost on the land and build for the clients,

“We have calculated that the interest on a mortgage circa $750k would be closer to $600/ week.”

She recognises that builders need to take responsibility for their schedules and deliver on time.

“It functions as financial guarantee to the client, otherwise it’s just words. Any builder can promise the world, but we have put the financial burden on us, and it becomes a meaningful transaction. 

She says it was a decision made by the entire team.

“The whole team went through and took responsibility for it. Now, if we do have to pay LDs, we sit down with everyone, and we look at where it went wrong and how we can improve. 

It means that we keep the client front of mind to alleviate their stress points, and we can keep ourselves accountable”. 

Hat’s off to Gallery for putting their money on the table and backing their contract guarantees with real value. 

What is clear is that the typical $50 / day no longer covers much of a client’s cost base when a build timeframe has blown out, and builders that can back their promised delivery time should consider raising their LDs to make it more realistic. 

It’s certainly one powerful point of difference.

Author: Peter Love

Pete was the General Manager of one of Australia’s largest home builders for six years, before starting his own business as a buyers’ advocate, building over 200 homes in five years across South East Queensland and working with over 20 builders to deliver them. Across this time he has seen most facets of the industry, the good, the bad, and the beautiful.