Avoiding disputes when working with friends or family

As a builder or tradesperson you will often be asked to ‘help out’ friends or family with their home renovation or building projects. Whether it be giving ideas and coming up with solutions or actually carrying out physical work onsite, this can lead to dispute if there are not solid boundaries put in place.

When doing business with friends and family it is easy to fall into the trap of being lax on your contract administration and fail to follow contractual obligations, which can lead to unfortunate consequences. It is our recommendation that when dealing with friends and family it remains essential to have your paperwork and contracts completed properly and everything be completed ‘above board’. You should adopt the same level of contract administration and compliance that you would normally do with a stranger, otherwise it is likely the project will run into issues.

A Costly Lesson from the Tribunal

A recent Tribunal case serves as an important reminder of the dangers involved when performing building work for family or friends and the consequences of failing to follow contractual obligations. This case illustrates a common situation where the builder took liberties that they would not have taken if the homeowner had been a stranger.

The builder also failed to finish the project, which had significant defects, and failed to comply with the contract when issuing progress claims. As a result the builder was ordered to pay damages to the homeowner for breach of contract, totaling a staggering $220,000. What makes this case even more concerning is that the builder was acting for his sister and brother-in-law.

Tips for Staying on Good Terms

Below are some tips for both homeowners and builders to ensure that if you do building work for family and friends you remain on good terms at the end of the build.

1. Use a proper building contract. It is tempting to believe that a contract is not necessary because there ‘is no way’ a dispute will come about between friends and family. Unfortunately we have the example of a Queensland builder who did not use a contract with a family member as they were certain that they had negotiated the details and that they would never get into a dispute. The family member made a formal complaint to the regulator and then also commenced proceedings in the Tribunal. A contract at the very least sets out the terms and conditions for the job and sets out in writing the price, timeframes and responsibilities of the parties.
2. Do variations correctly. It may seem strange getting friends or family to sign off on conversations onsite by doing a variation document; however, the majority of disputes arise from variations, so documenting them will save you some heartache (and dollars).
3. Exclude works properly. If a family member or friend wants to exclude works from the contract then this must be listed in the excluded items section of the contract. Otherwise the builder runs the risk of being held responsible for those works.
4. Never enter into a fake contract ‘for the bank’ when you know that it is not correct. This is also known as mortgage fraud, and no friend should ask a builder to put their livelihood on the line by entering into a dodgy contract for finance purposes.

Fairness and Professionalism on Both Sides

Doing works for friends and family can be rewarding, but both parties must be fair and professional. The homeowner must not be looking for favours or freebies from the builder without regard to their time and expertise. Likewise the builder must not assume that they can be lax with their contract administration and fail to put things in writing. It is important that both parties are comfortable with the transaction and with the agreement that has been reached.