Builders: Getting your Extensions of Time “Right”

In any domestic construction contract, whether it is a lump sum building contract or a cost plus contract, builders are required to complete their building projects within an agreed time frame. 

The standard form contracts used by members of the Master Builders Association of Western Australia (MBA) and the Housing Industry Association (HIA) all include time frames within which builders must complete the works. 

It is important that builders meet agreed practical completion dates so that owners can plan accordingly. For example, if an owner must rent somewhere for the duration of the build, the owner needs to know when they can expect to exit their lease and move into their newly built home. Owners may also have obligations to their lenders. Finance facilities are made available for defined periods and delays can put that finance at risk. 

Builders, too, have an interest in timely completion. Builders who extensively delay the completion of a project risk causing an owner’s bank to withdraw the construction finance facility that the owner relies on to pay the builder to complete the project. Additionally, a builder’s quotes may become stale if material or labour costs increase during the project, and this could detrimentally affect a builder’s profits where the contract is a fixed-price contract.

The common denominator between both the MBA and the HIA contract is that there must be a circumstance, objectively viewed, that prevents the builder from completing the works within the agreed period. In both the MBA and HIA contracts, the builder is required to give written notice to the owner. 

In most HIA contracts, Clause 20 provides that any notice must be in writing, signed by the builder, and either delivered by hand, sent by post, or emailed to the address stated in the schedule. Depending on the contract, there may be specific time limits for making claims. Some older versions of the HIA contract require notice to be given “upon the happening of the event”. Other versions allow the builder to notify the owner “no later than the date of practical completion”. 

The requirement that a builder notify the owner “no later than the date of practical completion” was analysed in Burnett v BGC Construction Pty Ltd, complaint No. 016264, in the former Building Disputes Tribunal (now Building and Energy, DEMIRS). In that case, the Tribunal held that a builder must notify the owner of a delay within a reasonable time, but in any event before the date of practical completion. Clause 20 in the contract in that case gave the owner 10 working days to make a selection of alternative materials, and the Tribunal found that timeframe a good guide for what is “reasonable.” Where a builder fails to notify the owner within a reasonable time of their claim for extension of time, the builder waives their right to claim an extension. The Tribunal found that a builder cannot wait until the project is complete and then issue multiple extensions of time.

In most MBA contracts, “notice” requirements are usually outlined in clause 30, and similarly require delivery by hand, post, or email to the address listed in the contract particulars. The main difference is that the HIA contract requires the notice to be signed, whereas the MBA contract does not have the signature requirement. 

A common mistake made by builders is that their extension of time notices frequently do not explain the cause and extent of the delay in enough detail. For an extension of time notice to be defensible, there must be a clear link between the reason for the delay and the number of days claimed. Vague or generic statements are often challenged and overturned in legal proceedings. 

In Kulowall Construction Pty Ltd [2023] WASAT 29 (Kulowall) at paragraph 30, the State Administrative Tribunal (Tribunal) held that a valid extension of time notice must be supported by “adequate evidence of the cause and extent of the delay.” Further, at paragraph 35, the Tribunal held that “it is however incumbent on the builder who seeks an extension of time to provide to the owners and to the Tribunal cogent evidence of the link between the general state of the building industry and actual delays that affect the dwelling, the subject of the proceeding. The builder cannot rely on the general situation of the building industry without addressing the specifics of how the contractual relationship between the builder and the client is affected by those circumstances.” 

Too often, builders send generic emails with no substantiating evidence. Where builders fail to link the cause and extent of the delay to specific impacts on the contract, their extension of time claims may be invalid. This exposes builders to liability from owners who are adversely affected by the delay.

To avoid liability, builders should seek proper legal advice on how to formulate extension of time notices. We argue that Kulowall gives rise to an implied term requiring the builder to provide the owner with contemporaneous evidence justifying the delay. When claiming an extension of time, a builder should do more than just state the cause and number of days. They should identify the specific contractual clause they rely on, explain what happened, and provide particulars. 

For example, if the builder relies on inclement weather, they should identify which days they were off site, produce diary records or other documents as proof that the works could not be carried out on that day, and include text messages with contractors about cancelled work. If the builder relies on unavailability of suppliers or labour, they should state when contact was made with the supplier or contractor (as the case may be), when the supplier or labourer confirmed they were unavailable, and when supply is expected.

If a builder fails to make a valid claim for extension of time, the builder may be liable to the owner for the owner’s loss and damage. Owners frequently suffer loss and damage as a result of a builder’s delay in completing the works, including the owner’s rent and accommodation costs during the delay period, utilities, council rates paid by the owner during the delay period, interest unnecessarily paid by the owner on their mortgage, reports by building inspectors, and the owner’s loss of amenity, distress and inconvenience caused by reason of the builder’s delay in completing the works. 

Builders can avoid these risks by submitting valid claims for extension of time in accordance with the contract. Builders often focus on the job site and overlook the contract. But missing the detail can cost time and money. 

A proper system for handling extensions of time helps manage risk and keeps your business on track and minimises risk. We help builders prepare defensible claims for extension of time. If you run a busy construction business, make sure you understand the risks associated with extensions of time. Talk to Vogt Legal before claiming your next extension of time. We offer a free initial 15-minute consultation to new potential clients.