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Another Day, Another $13,000 Dollars

Our home-building experience has been pretty much backwards since day one. Just a second, let me part the mists of time for you...

::insert harp music here::

Way back when we were first considering moving house, we overheard a lot of young couples talking to sales consultants. One recurring conversation we heard was this:

Young Couple: Hi! We're so excited to be on our first home building adventure! Our excitement is palpable and infectious, don't you think?

Sales Consultant: Yes, it is! Especially because that boundless enthusiasm suggests I can probably sell you stacks of add-ons and inflate my commission! Let's talk turkey.

Young Couple: Okay! Well, we've chosen our dream home. It's the (insert house name here). It's so perfect for us. ::giggle::

Sales Consultant: Excellent! A wonderful choice. Where are you planning to build?

Young Couple: Right here. Here's the plan for our block of land. We bought it six months ago, and the titles come through next month. Oh, I'm just so excited!

Sales Consultant: Um...you realise the house plan you've chosen won't actually fit on this block, right?

Young Couple: What? ::cries::

We saw a few too many dreams dashed for us to go about things the same way, and since to us the house we were going to build was far more important than the location, shape or condition of the land upon which we were going to build it, we decided to choose the house first.

Eventually, we settled on the Mercer 35 by Metricon. At 25 metres long, the house takes up a significant chunk of land. On the standard 32m block with a 5m setback, that typically left us with 2m of back yard. As a couple planning to have a family at some point, and with me a keen gardener, that wasn't really going to cut the mustard. So we sought extra-long blocks so we could have a back yard for kids and garden.

We didn't find many blocks that size (with the exception of Manhattan Place in Tarneit), although in estates with cul-de-sacs the two blocks at the end of the cul-de-sac were frequently really long (up to 50m in a couple of memorable cases).

The continuing search took us more than six months, by which time we were wondering if we would ever find a block of land upon which to fit our house.

Finally, we found one at Renaissance Rise. We put a deposit down in October 2007, with titles expected in March 2008. Just the right amount of time.

Then we went to see the home sales consultant. He pointed out that the base cost of our preferred façade was due to increase by $5-8k in roughly six weeks' time. If we wanted the house at the current price, we should probably sign now. (An old tactic, but a good one--especially since we did our homework and found his claim to be true.)

The complicating factor was that we had only three months from the date of deposit to sign the final contracts, or we would cop the increase in house price anyway. Still, that put the signing of the final contracts sometime in early/mid March, which would be maybe a couple weeks before the land was titled--but no big deal. Metricon would let that one slide.


So we signed, went through prelim contracts, signed the final contract on March 12, and then proceeded to wait through a series of delays for a further eight months before our land was actually titled.

One component of the contract is site costs. We were told by the sales consultant that because we were building a Metricon house on Metricon land, he was able to offer us "fixed site costs". These costs, he told us, would never change, and Metricon would have to wear any additional costs incurred beyond those specified in the contract.

What we found out many months later is what he meant was "the costs become fixed after the second soil test".

Throw in some bank dramas (we had to get our mortgage drawn up, approved and signed within five days) and by the time we signed the mortgage Metricon hadn't yet done the second soil test--because they couldn't do it until the land is subdivided and titled.

However, because we'd already signed our final construction contracts, the cost of those was factored into the amount of the loan from the bank.

Now the second soil tests have come back, we're facing a $13,000 shortfall in the amount of money provided by the bank because our slab has been upgraded from H- to P-class and we have additional provisional costs for rock included as well.

Only problem is, theoretically the bank only provides mortgages based on the amount quoted in a fixed price contract. If we're getting variations at this point, clearly the contract price is not fixed.

So now, thanks to our backwards experience, we're in yet another legal and procedural grey area: can Metricon change the price of our contract after we've signed it? If they can, how can we get the bank to change the amount of our mortgage? If they can't, what happens and who ends up wearing the costs?

Metricon treats these variations as "Pre-Construction Variations", which is not a term I've heard used by a bank before; they tend to talk about "Pre-" and "Post-Contract Variations".

So why is the process not standardised? Why isn't there one set of rules for both banks and construction companies? Have we not learned from the financial crisis that allowing organisations to determine the rules themselves is not a great idea?

Anyway, enough of a rant.

The upshot of the whole thing is that we're now trying to decide whether to engage a solicitor to tell us whether the variations are legal or not, and if they aren't what to do about it next. It's all rather irritating, but one way or another everything will get done.