Charlene Clayton - February 15 2003
Personal Finance magazine – online
www.persfin.co.za

Building a home or renovating your property is not for the faint-hearted. Builders and homeowners seldom part company friends and, in the process, you can make enemies of your neighbours too. “Be prepared to be ripped off,” is the refrain from disillusioned homeowners who have had nasty experiences.

1. "My quote is not cast in stone"
The quotation is merely the bait to entice you into accepting a builder to do the job. The “extras” and even the slightest change to the plans will cost you more than you imagined, homeowners say. And what you may regard as part of the job, the builder will regard as an extra.

Claire*, from Hout Bay in Cape Town, says your builder will never tell you what the work will really cost. She and her husband were forced to take out an extra bond to pay their builder – or be stuck with an unfinished house.

The quote for their house was R850 000, but she and her husband ended up forking out R1.12 million.

Claire’s advice – which she does not believe is foolproof – is to have the builder give you a much more detailed quote than they are usually inclined to give and include any conceivable extras. Alternatively, keep a notebook in which you record any changes to the plans and the agreed extra costs, and have the builder sign for them.

Expect to pay 20 to 25 percent more than the quote, Chris*, from Four Ways in Sandton, says. Chris recently had his property renovated at a cost of almost R800 000. The original quote was for R580 000.

Colin de Kock, the executive director of the Gauteng Master Builders’ Association, warns that consumers should not simply accept the cheapest quote. To assess whether you are getting value for money, you should ask for two or three detailed quotes and then compare each price per task, rather than just the overall figures.

Bear in mind that many quotations are based on provisional prices. For instance, if you specify that you want carpets in your bedrooms, the builder will make an assumption about the type and quality of carpet unless you are specific about quality, type or make and unless you get actual prices upfront.

Never accept quotations based on a rate per square metre. One builder might quote you R2 000 a square metre and another will quote you R2 500 a square metre for the same job. Accepting either of these quotes can leave you seriously out of pocket, De Kock warns, because you have absolutely no idea what you will be getting for R2 000 or R2 500.
Quotes should be as detailed as possible.

2. "My contract is for MY protection"
“Our builder’s contract was structured completely in his favour,” Claire says.

And De Kock agrees that any contract drawn up by a builder is likely to be structured in his favour. He recommends that you obtain a copy of the standard building contract that is available from the local offices of the Master Builders’ Association for about R25.

The contract covers the common issues the building industry encounters, but you can delete those that are not relevant to you and add clauses where necessary.

Many consumers who turn to the Gauteng Master Builders’ Association for help don’t even know the address and other contact details of their builder when they hand over the money, De Kock says.

3. "I’ll use your deposit on somebody else’s house"
Chris says that before his builder even began the job, he asked for a 10 percent deposit on a renovation that was to cost under R600 000.

Basically, you hand over money to a builder – who is usually a total stranger – hoping that you will see him again and that he will use the money to start on your job. Builders generally want their money in stages, and as soon as they have done R50 000 worth of work, they want R50 000 from you – in addition to any deposit that you have paid, Chris says.

So, the builder is never out of pocket and the homeowner is at the mercy of the builder to continue with the work.

De Kock says this boils down to the contractor’s cash flow. Many small builders operate on a hand-to-mouth basis.

In general, the Gauteng Master Builders’ Association is not in favour of deposits because a reputable contractor should be able to make a start on your job – for example, at least lay the foundation of your house – before he asks for the first payment.

Another option in the case of small operators who say they cannot purchase the materials to make a start on your project, is to pay the suppliers directly. Then at least you own the materials.

4. "Don’t expect me to pass on any savings"
Even though there was a clause in Chris’s contract that bound the builder to pass on the savings if he found materials and fittings for less than the quoted price, Chris never saw a cent of it.

In fact, the opposite was true. “At one point, the builder told me he could get me a good discount if I paid cash for the garage doors. I later discovered that I could get better doors for R1 000 less than I paid.”

Claire found that she was charged twice in some instances. For instance, she paid double for her fireplace. “Builders make money by charging a mark-up on all materials they purchase, to the extent that you can pay up to 50 percent more for everything. They certainly don’t want to pass on discounts they get from suppliers,” she says.

De Kock urges consumers to make sure everything is put in writing. The contract should give as much detail as possible, and any amendments should be put in writing. The contract then forms the basis of the agreement, and you know what you are due to pay for every item. Then if any changes are made, you and the builder will know whether you owe him or he owes you. For instance, if your contract includes a carpet for R60 a square metre, and you choose a carpet that is R100 a square metre, you will owe the builder R40 a square metre.

No deviation from the original plan should be undertaken by the builder unless it is discussed, priced, agreed to and put in writing. It is also important that any deviation be in writing before the work is done, not afterwards, De Kock says.

5. "The completion date is never as close as you think"
“If there is a builder who sticks to the time frame specified in his contract, I’ll eat my front door,” says Chris, who has undertaken four building projects on various homes.

Chris’s latest builder completed the renovation five months late, despite the penalty clauses in the contract if he did not finish on time. By the time Chris wanted to impose a penalty, the builder was bankrupt.

Claire says her dream home was supposed to be completed by the end of February this year, but the house was finished only eight months later. In her case too, penalty clauses for late completion proved to be of no value.

Despite this, De Kock says penalty clauses for not completing a project on time should be included in the contract. If the builder does not meet the deadline, you have two choices: either you can take him to court or you can go to arbitration.

These processes do cost money, but at least you have a deadline in writing. Don’t be afraid to apply the penalty clause, he says. Some smaller contractors go out of their way to be nice to you and build up a relationship with you, only to abuse it.

If, for example, two months before the deadline, it looks as if your builder is not going to be finished on time, write him a letter referring to the penalty clause in your contract. Do the same thing one month and then two weeks before the deadline, warning him that you will be applying the penalty clause.

6. "I may not be there to finish your job"
Bankrupt builders are the cause of huge financial hardship for homeowners. When Chris’s builder went belly up, Chris was so desperate to get his house completed that he started buying materials himself and paying the builder and his crew daily to finish the job. Even so, he was being fleeced: The builder charged Chris R90 a day for each of his labourers, but an innocuous remark by one of the labourers revealed he was getting only R50 a day.

A Benoni couple’s builder sweet-talked them into handing over the second instalment of R60 000 before it was due in terms of the contract, which was when the roof was to go up. A few days later, they discovered that the builder had been placed under liquidation. They were left with a house that was two-thirds complete, and were R60 000 out of pocket.

Subsequently, they also found that the aluminium window frames and other materials the builder claimed to have bought and paid for with the first instalment had yet to be purchased.

You can get some protection against these kinds of practices by making sure that progress payments to your contractor are for work completed to date and no more, De Kock says. This way, if you do have to get somebody else to complete the work, you will not be out of pocket.

It is also important to do some homework before appointing a builder. Find out if a builder is reputable by asking for references. Then take the trouble to phone those referees. Preferably visit buildings he has worked on to see if his quality of work matches up to your standards.

7. "I’ll make your neighbours hate you"
Chris’s neighbours no longer speak to him, despite the fact that he went out of his way, right from the start of the job, to get their consent for his renovations. “After all, we have to live next to them for years to come.”

While some neighbours will make unreasonable demands – such as the one who wanted his side of the wall plastered free of charge – others simply get fed up with the dust, dirt and extra traffic in the street that comes with a building project. “They get frustrated and take it out on the owner of the property,” Chris says.

One of Chris’s neighbours had a burglary when he was building and indirectly blamed him. “She said she would not have been burgled if I had not been building,” Chris says.

Building can be pretty hairy for neighbours, Chris admits. “At one stage, our entire street was without water for a few hours because the water mains had to be switched off.”

In Claire’s case, she had to pay for repairs to the sprinkler system on the estate where her house was built. The damage, she says, was caused by trucks delivering materials to the site.

De Kock says a lot of the nuisance associated with building, such as noise and dust, is unavoidable. The best you can do is interact with your neighbours, give them advance warning of something that may cause a problem and apologise when things go wrong. Checking on the reputation of your builder and any problems he caused for neighbours on previous contracts will also help.

8. “I’ll sneak in second-hand fittings and poor-quality materials"
Ruth*, from Claremont in Cape Town, bought a new house from a developer and then discovered peeling enamel in her bath after using it a few times. It turned out that the builder had fitted second-hand re-enamelled baths in her house. Ruth also found a 25-year-old hot-water cylinder and second-hand roof trusses.

After asking for, and receiving, quotes on specially treated timber for decks at his property, Chris discovered that the builder had used ordinary pine. A check with the supplier revealed that he had not stocked the treated timber for many years.

Chris also found that his builder had used sea sand instead of building sand. “That’s why he was so keen to paint, because the paint acts as a bonding agent for the plaster,” Chris says.

The window handles were of such poor quality that some have broken off.

De Kock says the only way to prevent the use of substandard materials is to specify in the quotation and contract the quality of the fittings and materials you want used. You can then point out to the builder that the materials are not the agreed quality and insist that he replaces the materials. If you don’t want the work redone, you can accept the materials and demand to be credited for the cheaper materials.

9. "My guarantees are empty promises"
The system of paying builders in stages as they complete sections of work means that, by the time the job is finished, most people have paid the builder in full – and more, since costs often exceed the quoted budget. So there is no incentive for the builder to come back three months later to fix the cracks in your wall or the leak in your roof that you discover after the first bout of seasonal rain.

Chris says guarantees are not worth the paper they are written on, even if you are fortunate enough to have a builder who is not declared bankrupt.

The plaster is falling off some of the walls and there are leaks in the plumbing, but Claire’s builder refuses to make good, despite the three-year guarantee he gave in his contract, because they are in dispute over payment. A forensic audit of the builder’s costs found that he overcharged them by R20 000. This was over and above an overcharge of R50 000 that the bank (which granted the bond) picked up. The forensic audit cost the couple R14 000.

According to De Kock, the reality is that there is no such thing as perfect building, so a builder’s willingness to come back and fix things is important.

A guarantee is worth something only if it comes from a reputable builder. So, again, you must make sure you appoint a reputable builder.

When you check on past work, ask specifically whether guarantees were honoured and how long it took for the builder to do the repairs. And if your builder does not honour his guarantees, you should challenge him in arbitration or in court.

You can give your builder the incentive to honour his guarantee by holding back a percentage of the price (a retention fund), say five percent, for three months. During this time, you can pick up any problems and get the builder back to rectify them.

Also, tell the builder that you will not pay the full amount until you have seen a fully specified final account, De Kock says.

10. "I don’t stick to building regulations"
Chris ended up paying R8 000 in fines to the local council because his builder failed to adhere to the building regulations and started the job before the plans had been approved.

The builder told Chris that it was “standard practice” for builders to start work before the plans were approved because approval by the council was such a slow process.

Chris warns that you are completely at the mercy of the builder: ordinary homeowners don’t know whether the foundations of their houses have been dug to the right depth or whether the cracks that appear in a building that has settled are serious or not ... until it is too late.

Claire tells of a neighbour whose builder did not build in enough structural support for the garages. Since the house was built on top of the garages, it started collapsing. The owner had to have repairs done at great expense.

De Kock says that you should never start building, or allow your builder to do so, without approved plans.

Once again, the reputation of a builder is key when it comes to a contractor sticking to building regulations. Check out your builder thoroughly, he says. A builder who has a good reputation has his reputation at stake and will redo work that does not conform to building regulations.

* Names have been changed to protect homeowners.