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  • Scott Williams

Navigating Progress Payments in Building Contracts: A Guide for First Home Buyers

Hello there,


Congratulations on taking the exciting step towards building your first home! The journey from an empty plot to a finished home is filled with anticipation, decision-making, and, inevitably, payments. One of the key aspects of building contracts you'll come across are 'Progress Payments'. Let's demystify this term and help you navigate it like a pro.


What are Progress Payments?

Progress payments are part payments made to a builder throughout the construction process. Instead of paying the total cost upfront, you pay in stages, correlating to specific milestones in the build. These payments typically cover the cost of labour, materials, and other expenses related to each stage of construction.


Why are Progress Payments Important?

Progress payments can be beneficial for both parties. For you, the buyer, they can help manage your cash flow and ensure that you're only paying for work that's been completed. For the builder, progress payments provide a steady income stream throughout the project.


Typical Stages for Progress Payments:

While the specifics can vary based on your contract, a typical progress payment schedule might look like this:

  1. Initial Deposit: Paid when you sign the contract, usually 5-10% of the total cost.

  2. Base Stage: Payment due when the base of the house has been laid.

  3. Frame Stage: Payment due when the frame has been built and approved by a surveyor.

  4. Lockup Stage: Payment due when the house is at lock-up stage, i.e., when all external walls, doors and windows are installed.

  5. Fixing Stage: Payment due when internal fixtures like kitchen cupboards and bathroom fittings are installed.

  6. Completion: The final payment, due when construction is completed, and the house is ready for handover.

Beware of Disproportionate Progress Payments:

It's important to note that if the progress payment schedule is too far outside industry standards (for example, if a builder asks for a large portion of the payment early in the construction process), banks may refuse to finance the build. Lenders typically release funds based on the value of the completed work at each stage, and disproportionate payments could be seen as a red flag.

Tips for Managing Progress Payments:

  1. Understand Your Contract: Make sure you're clear on when each payment is due and what work should be completed at that stage. The terms should be outlined in your building contract.

  2. Get Inspections: Consider having each stage inspected by a qualified professional before making a payment. They can ensure the work is completed to standard and meets the requirements of the contract.

  3. Seek Legal Advice: Contracts can be complex, and understanding the fine print is crucial. I strongly recommend getting legal advice to ensure you fully understand your obligations and rights.

Building your first home is a significant milestone, and understanding the process can make it less stressful and more enjoyable. Remember, knowledge is power, and being informed about progress payments can help ensure a smoother building process.


Stay tuned for more insights into property law, and don't hesitate to reach out if you need any assistance or have questions about your building contract.


Best,


Scott Williams

02 8605 8891

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