In the building and construction industry, progress payments represent significant milestones in the construction of your home or building project. One such milestone is reaching lockup stage, which in the world of granny flats can mean something quite different to what it does in residential house building [What Does The Lockup Stage of a Granny Flat Mean?].
Because it’s your job to ensure the funds are released at appropriate times throughout the project to avoid holdups or delays, it’s important that you understand how progress payments are typically structured.
Who chooses the schedule for progress payments?
Each state has different legislation governing building contracts, but broadly speaking, a payment schedule won’t really deviate from the following construction milestones:
- Substantial completion fixing (tiling, tapware, painting)
- Practical completion
Some elements may be eliminated, based on the nature of the project. For instance, if the builder is only getting the granny flat up to lockup stage, or if you will be sourcing the concrete slab yourself.
How much does each stage cost?
Aside from the deposit, which, by law in NSW, may not exceed 10 percent of the contract price, the amounts you pay as you reach each stage of the building process may vary builder-to-builder, however the NSW Department of Fair Trading cautions you to be wary of progress payment amounts that exceed 20 percent.
Sometimes your bank or whoever is financing your granny flat may request different progress payment amounts from your builder, although the schedule — that is, the stage at which they come due — typically won’t change.
As a general rule, you can expect to pay the following amounts as you reach each stage of the building process:
- Deposit — 10%
- Base — 20%
- Frame — 20%
- Lockup — 10%
- Fixing — 20%
- Substantial fixing completion — 19%
- Practical completion — 1%
Also keep in mind that the deposit it meant to represent the first payment, so you shouldn’t be expected to pay the deposit at the time the contract is signed, and then immediately make a progress payment for the base. You should also ensure that the specified work has been completed and verified, ideally by an independent building inspector, before you make a payment. Should you make a payment ahead of a stage completion, you may compromise your insurance coverage.
For more information about building contracts and your rights, visit the state regulatory body in your state (the Department of Fair Trading in NSW, for example). For more property news, insights and analysis, continue reading our blog. Alternatively, subscribe below to have our latest blogs delivered straight to your inbox.
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