If you're building a new home under a fixed price contract,
you've probably been impressed with the style, finishes and
fixtures of a show home and think that this is exactly what you'll
get on completion. Building contracts often don't show detail
in relation to the quality and finish you will receive. This
can be a problem if you are expecting a show home quality
Fixed price contracts
The price of building your home usually appears as a fixed cost.
However, most contracts will make provision for price "adjustments"
and although some works are listed in the contract, not all of them
are included in the contract price.
Adjustments in the price can include aspects like extra work,
any increase in prices outlined in the contract and associated
costs. These costs fall back onto you. If you are building and have
a tight budget, this can become a real problem. Unforeseen
costs can wreak havoc on budgets and cause undue stress during your
Most contracts include all the construction aspects, materials
and fittings for the build that are assumed to be part of the build
price. A lot of the work undertaken by third parties, such as
retaining and geotechnical investigations, are not included in the
purchase price. Some figures quoted for certain works can also be
subject to variation.
Prime costs and provisional sums
A prime cost is the amount of money allocated for something that
is to be bought during the build. This is not usually an exact
figure as prices could change by the end of the build. The
allocation is usually a fair representation of the cost of the
item, but this amount can fluctuate to much higher amounts which
has potential to blow out your budget.
A provisional sum is a similar idea to the prime cost but it is
for certain aspects of the building works. A builder will give you
an estimate of how much it will cost to complete a part of the
works because it is almost impossible to give you an exact figure.
These amounts are also subject to fluctuation as the builder may
come across issues when completing certain aspects.
In most contracts, ceiling height is not something that is
specified. Most show homes have ceiling to floor heights of 3
metres to ensure the feeling of space. If there is nothing in the
contract confirming this height, the builder can lower this height
at their discretion and this will change the look and feel of the
room and the building.
In New Zealand, many builders are part of the Registered Master
Builders Association. Being a part of the association enables the
builder to transfer you a Master Build Guarantee of 10 years upon
completion of the work. Check to see whether your builder is a
Master Builder. If they're not, and there is a Master Build
Guarantee included in your contract, this should raise alarm
For help with contracts for new builds or general property
advice contact our team.