How to Handle Delays in Building Projects
Posted on January 09, 2025
Delays are common in building projects, but how you handle them can significantly impact the outcome of the job and your relationship with your clients. Whether you are the contractor or the homeowner, understanding your legal rights and obligations when it comes to delays is essential for a smooth and successful project. Here’s a guide on how to handle delays in building projects.
Understand the Contract Clauses
The first step in managing delays is understanding what your contract says about them. Most building contracts, including standard contracts like those from the Housing Industry Association and the Master Builders Association, include clauses outlining what happens if there is a delay.
Key things to look for include:
- Time for Completion: The contract should specify a date or period of time for completing the work (in South Australia, if the contract does not specify a completion date, the builder must carry out the work at a reasonable pace).
- Extension of Time: Check if there are any provisions that allow for an extension in the event of delays (e.g., bad weather, material shortages, or client changes such as variations).
- Liquidated Damages: Some, but not all, contracts include liquidated damages clauses, which specify a set amount the builder must pay the homeowner for each day the project is delayed beyond the completion date.
Communicate Early and Often
Delays can often be minimised or avoided with proactive communication. If you think there is going to be a delay, it’s important to inform the client as soon as possible. A clear and timely communication plan will not only demonstrate professionalism but also help you manage expectations and avoid conflicts.
Some, but again not all, contracts will require you to notify your client as soon as you recognise a delay or potential delay. Even if your contract does not require you to notify your client of a delay or potential delay, it is recommended that you still send a formal notice to your client. The notice should explain the reason for the delay, how long it is expected to last, and the impact on the project timeline.
You should also keep records and document all communications, including emails, letters, and meeting notes. These documents will be useful if the situation escalates into a dispute.
Request an Extension
If the delay is due to circumstances outside of your control – such as bad weather or material shortages, you should consider requesting an extension of time (EOT) under the terms of the contract.
Key things to look for:
- Follow the procedure: Contracts often specify how an EOT request should be made, including the format and timing. Be sure to follow these procedures carefully.
- Provide Evidence: Include supporting documentation for your EOT request, such as weather reports, delivery records, or other proof that the delay is justified.
- Negotiate with the Client: If the delay is significant, be prepared to negotiate with the client for a new completion date that works for both parties.
Consequences of Delays
Delays can have legal consequences if not handled properly. If the delay is caused by the contractor and such delays are not covered by an EOT event under the contract (e.g. bad weather or material shortages), the client may be entitled to seek damages even if the contract does not have a liquidated damages clause.
If your contract includes a liquidated damages clause, be aware that delays could result in financial “penalties”. To protect yourself, it’s important to clearly communicate delays and their causes, and to follow the proper procedures for requesting time extensions.
Client Responsibilities
While contractors are often the focus of delay-related disputes, clients and homeowners also have obligations that can affect the project timeline.
For example:
- Client Delays: If the client is responsible for delays – such as failing to approve plans, provide necessary documents, or make timely payments – it’s important to promptly address these issues in writing. Depending on your contract, these delays may entitle you to an EOT or may even allow you to suspend the work. If timely payments are not made, you may be entitled to claim interest.
- Notify of Client Delays: As with contractor-caused delays, if the client or homeowner is delaying progress, notify them promptly and refer to the relevant clauses in the contract. Keep records of all communications to prevent disputes.
Conclusion
Delays should be managed promptly and professionally. Understanding your contract and ensuring good and timely communication should minimise disputes. Always make sure you document everything and seek legal advice if you find yourself in a challenging situation.
