What are Variations
Variations are changes and alterations to the build, from what’s originally written in the plans and specifications.
These include, but are not limited to, alterations as to:
- quality of work
- scope and sequence of work
Variations Clause under the Contract
Under the 2020 edition of the Victorian New Homes Contract Plain English contract for domestic new homes, Variations are covered by Section D During Work, which could be any of the following:
- Clause 21 Variations to Statutory Laws
- Clause 22 Variations to State or Commonwealth Tax Laws
- Clause 23 Requested Variations
- Clause 24 Effect of Variations
Of the above, the most common source of dispute is Requested Variations.
Who may ask for Variations
Either the Owner (the person commissioning the building work a.k.a. the home owner) or the Builder may ask for the building works to be varied.
For example, the owner may ask the builder to change the position of bathroom installations to accommodate the inclusion of a bathtub, which wasn’t in the plans.
Or, the builder may request for a change in materials used because of supply issues.
Either way, variations request need to comply with certain formalities in order to be deemed valid.
How to make a valid Variations Request
To be valid, the request must be:
- in writing
- sets out the reason for variations
- sets out the details for variations
The builder may carry out the variation requested for by the owner, if he believes that the variation:
- will not require a variation to any permit
- will not cause any delay
- will not add more than 2% to the Contract Price
On the other hand, if the builder requests the variation, he must give a signed notice which includes, apart from the reasons and the details:
- what effect the variation will have on the building works
- if the variation will result in any delays
- the builder’s estimate of such delays the cost of variation and the effect it will have on the amount payable by the owner
Variations as a source of dispute
Variations affect cost and time of completion, hence they frequently ripen into a dispute.
Specifically, disputes usually arise from:
- valuing the variation (since variations always affect the contract price)
- the question of whether the works constitute a variation at all
- variations unilaterally made by the builder, which the owner may not have agreed to because of cost or other reasons
In the event that variations lead to a building dispute, you have options on how to go about sorting out your matter.
Dispute Settlement Options
1. Termination of Contract
If the nature of variations is “variations to statutory laws,” where the cost of variations is greater than 15%, either party may bring an end to the contract. Your HIA contract should have the procedure on how to go about terminating the contract.
Otherwise, your contract contains a clause on “Disputes, Conciliation and Tribunal,” which you may resort to.
If you’re using the 2020 version of the HIA contract, Clause 49 Disputes sets out the following guidelines:
a. If you have a dispute you should first discuss the matter with the other party.
b. Parties must meet as soon as possible and try to resolve the matter through discussions.
c. If either the Owner or the Builder refers a domestic building work dispute to the chief dispute resolution officer under Part 4 of the Domestic Building Contracts Act 1995 – they must within 5 days, give a copy of the referral to the other party.
d. If you have a domestic building work dispute, you may refer the dispute to a chief dispute resolution officer of the DBDRV (Domestic Building Dispute Resolution Victoria).
e. A referral should be:
- in writing
- signed by the referring party/representative
- identify relevant domestic building contract
- specify particulars
If the dispute still isn’t resolved at the DBDRV level, your next option is to lodge an action with the VCAT (Victorian Civil and Administrative Tribunal);
a. A certificate of conciliation required to bring proceeding in VCAT to resolve domestic building work dispute.
b. A party to a domestic building work dispute must not make an application to VCAT in relation to the dispute unless the chief dispute resolution officer has issued a certificate of conciliation to the party certifying that the dispute— (a) was not suitable for conciliation; or (b) was not resolved by conciliation.
At the VCAT, your matter will undergo directions hearings, which may include an order to undergo ADR (alternative dispute resolution) like conciliation, mediation, and the like. At the final hearing, you will know how your matter is resolved.
If your matter remains unresolved at the VCAT, or if you’re unsatisfied with the tribunal’s decision, you may then lodge a complaint in court.
How we can help
Construction Lawyer Melbourne can do a thorough thorough review of your contract, and advise you on how to negotiate your contract to minimise risks associated with disputes arising from variations. Additionally, if you are in the middle of a domestic building dispute, Construction Lawyer Melbourne can help you with the required paperwork, and provide legal advice and representation.