BUILDING CONTRACT JARGON PART ONE

A residential building contract is probably one of the biggest contracts a person will enter into during their lifetime. So what is the common building contract jargon used?

WHAT ARE THESE TERMS?

In this article the Style Plus team looks at specific renovation or new build building contract jargon which is at best confusing or misinterpreted when reviewing the building contract:

• PC Sum
• Provisional Sum
• Variations
• Minor Variations

Design & Build Builders

WHAT ARE PC SUMS?

PC Sum or otherwise referred to as Prime Cost Sum refers to a set budget allocated for an item or set of items that need to be purchased for your building or renovation project. Taps are a great example – if you haven’t specified a particular brand, model and style of taps, or if it’s impossible to get an idea of the price for what you want, then your builder is likely to allocate a certain amount of dollars for taps rather than specifying exact costs.

Contractors are obliged to make reasonable representations in terms of what PC items will cost – and include a separate schedule in the contract that outlines how many of a particular item will be purchased, what they’ll cost the contractor.

At Style Plus, if nothing’s been specified, we will often set a fairly modest budget for these items. The prime cost budget that’s allocated will normally be enough for fairly midrange fittings.

WHAT ARE PROVISIONAL SUMS?

The term ‘provisional sum’ refers to an estimate in your builder’s contract for what it’ll cost to do a particular part of your building or renovation. Provisional sums are estimates that are provided where the builder can’t give an exact figure for the work required, even after having made reasonable enquiries into what it’ll actually cost.
One example might be for excavation. In some cases, it may be difficult to know exactly what’s under the ground, and therefore difficult to pinpoint the cost and effort required. The difference in this particular example could be a matter of many thousands of dollars either way – particularly if it requires, for example, revisions to the kind of foundation slab you need to build.
In reality, provisional sums aren’t always easy to plan for, in that the actual scope of work’s often inherently unknowable. At Style Plus we discuss with the client about the inclusion of provisional sums in their contract, and make sure that the client has a very clear picture of all of the potential costs, risks and possible outcomes associated with any provisional sums – as well as what your options are to help reduce uncertainty.

WHAT CONSTITUTES A VARIATION?

This is a frequently asked question. During building you might change your mind about something. This might be at the suggestion of your builder or something you thought about later, for example, you might decide to install soundproofing between the bottom and second floor, or change the position of an internal wall.
Talk to your designer, project manager or builder to help decide if the variation is really necessary and how much it will cost. It could require a new or amended building consent. Or it could turn out that it can’t be done anyway – it may be too far into the building process to start moving walls or inserting soundproofing products between floors. But you won’t know unless you ask.

Be aware that changing your mind is likely to cost you money – ask for at least an estimate in writing of the cost before you agree to the variation.

WHAT IS A MINOR VARIATION?

In 2009, the Building (Minor Variation) Regulations were created to provide BCAs (Building Consent Authorities i.e. Auckland Council) with guidance on how to deal with these minor variations. It also defined minor variations as being a minor modification, addition, or variation to a building consent that does not deviate significantly from the plans and specifications to which the building consent relates.

Examples of Minor Variations are:

• Substituting comparable products such as substituting one internal lining for similar internal lining.
• Minor wall bracing changes.
• Minor construction changes such as changing framing method used around a window.
• Changing a room layout such as moving position of fixtures in a bathroom.

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Whilst all information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact on the accuracy of the information. The information may change without notice and Style Plus is not in any way liable for the accuracy of any information printed and stored or in any way interpreted and used by a user.