NSW Fair Trading is urging consumers to do their homework before signing a residential home-building contract, following complaints about builders demanding thousands of dollars in unexpected additional payments.

“We are hearing from consumers who thought they had entered into a ‘fixed price’ contract with a builder, only to find this wasn’t the case, and this scenario is causing them extreme emotional and financial stress,” NSW Fair Trading Commission Rod Stowe said.

“Some builders are applying penalty costs for delayed commencement of construction work, even if the delays were outside the consumer’s control. They are also demanding payment for things thought to be covered by the contract, such as site clearance, structural steel beams, and council fees and charges.”

Fair Trading has also received complaints from consumers who were expecting a specific final-payment amount, only to find it was higher than expected, and sometimes a substantial proportion of the total contract price.

“Furthermore, if the consumer does not pay the increased final payment the builder refuses to hand over the keys, essentially holding the customer to ransom,” Mr Stowe said.

“In some instances, a builder will offer the consumer a reduction in the final payment if they agree to sign a deed of release, preventing them from making adverse comments and indemnifying the builder from any further claims.”

Consumers have also complained about having to pay a non-refundable fee of up to $15,000 to enter into a pre-tender agreement with a builder.

“Before signing anything, consumers should seek independent legal advice to ensure they fully understand the terms of a pre-tender agreement, and any special conditions attached to their building contract, and how these factors could affect their final payment,” Mr Stowe said.

“This may cost you more up front, but it could save you tens of thousands of dollars in the long run, and protect your biggest financial investment.”

NSW Fair Trading recommends the use of its plain English home building contracts, which can be downloaded for free from the Fair Trading web site: fairtrading.nsw.gov.au.