A preliminary agreement is often used to obtain early documentation such as soil reports, surveys, concept plans, architectural plans, finishes and selections for the construction or renovation of a home.
These plans, reports and documents are then submitted to the council to obtain permits for your project.
Sometimes the document is called a pre-construction contract, preparatory work agreement, quote, order, preliminary contract, we call it a Preliminary Plans Agreement.
What does a preliminary agreement include?
A Preliminary Plans Agreement is quite common amongst builders and building consultants who are dealing with clients in the early stages of building a new home, whether they have obtained initial sketches or only in the early stages.
These agreements should not involve any part of the building work and are prior to entering into a building contract. Some common elements are:
the consumer is committed to paying a “deposit”, related to the cost of a home described in the document.
this “deposit” is usually not refundable if the building contract does not eventuate.
A price for house construction is quoted.
What are the benefits of using a Preliminary Agreement?
1) You own all the documentation
Prelims enable you to work with any building company prior to committing great sums of money. All the drawings, reports, consultant activities can be used for quotations and are required by all councils to obtain the required permits. Tip: Make sure you read the fine print. If you're signing a P.P.A with a building company, ensure you have ownership/copyright over all the drawings and documents or you will be LOCKED IN.
2) Let the experts organize the right consultants.
Another great benefit to a PPA is that clients are able to be hands-off from the pre-construction items involved with the initial stages. Allowing you to go about usual day-to-day tasks without having to worry about whether your building project is going according to plan.
Good brokers can effectively and seamlessly negotiate the best value consultants for you as well.
Having used and dealt with a number of consultants you can rest assured you are getting great value for money and have our “team” working to ensure cost savings where possible.
3) Budget in mind with early cost estimations.
We believe by far the best positive with Preliminary Agreement. Having designed and tendered so many times before, we understand what can be built within your budget. Once the concept design has been developed you'll have an accurate for your build ready to go. So many architects and draftspeople have no idea about what things actually cost - you pay these guys a ton of money and it turns out you can't actually build the dream home. What a shame.
When designing and costing, it should be assured that the build does not go over your desired budget. There is no point in designing something you cannot afford, that’s a lose-lose situation. We understand this can be one of the biggest investment of your life. To help relieve some of the costs we ensure all consultants/drawings/surveys are done properly so there are no nasty surprises down the track.
The Negatives
With every great concept, there are some drawbacks.
Not all PPA’s are alike, for example, some agreements provide for the builder to keep the plans at the end of the process, not the client. It is essential that prior to signing the PA, you discuss the ownership of the completed plans, and ensure that all is clear on the PA.
Always ensure that a special condition is noted, that the plans belong to the client. Always ensure the costings on the PPA are a FIXED PRICE.
A preliminary agreement won’t work for everyone, however, with a good understanding, they can be great value for your money and look after all the aspects of the pre-construction phase.
The HIA information sheet recommends what not to do under the Preliminary Agreement:
1. Ensure the scope of works does not cover any residential building work as defined under the Act;
2. Ensure the amount you claim under the agreement is relevant only to the preliminary works and not expressed as a percentage of the future residential contract or has an initial deposit or a credit for the later residential building contract;
3. Keep your Preliminary Agreement separate from your residential building contract; and
4. Do not execute the Preliminary Agreement at the same time as the residential building contract.
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