Red flags to look for in a granny flat quote

Most granny flat builders are legitimate businesses doing competent work. The warning signs below are worth knowing anyway, because the cost of missing one is measured in tens of thousands of dollars and the cost of checking is an afternoon.

The 3 that matter most are an unverifiable licence, a large deposit requested before insurance is in place, and a refusal to put exclusions in writing.

A NSW builder’s licence can be checked publicly through NSW Fair Trading. Check that:

• The licence exists and is current
• It is held by the exact entity that will sign your contract, not a related company with a similar name
• It covers the class of work

A mismatch between the licensed entity and the contracting entity is a serious problem, and it is not always obvious.

Home Building Compensation cover is required for most residential building work in NSW over $20,000 including GST. The builder must have it in place before starting work or taking any payment, including a deposit.

If you are asked for a deposit and told the insurance will follow, that is the wrong order. You can check whether a policy has been issued for your property through the HBCF Certificates Register at Verify NSW.

Deposits on residential building work in NSW are regulated. If you are asked for a deposit that feels large relative to the contract, check the current limit with NSW Fair Trading before paying it.

Discounts that expire at the end of the meeting, or a price that is only available if you commit now, are sales pressure rather than commercial reality. A genuine price for a 6 figure build will still be there in a week.

A quote significantly below every other one is worth understanding rather than celebrating.

Usually the explanation is scope: floor coverings, driveway, fencing, connections and site works are excluded, and they will all be needed. Occasionally it is specification, with lower grade fittings than you are picturing. Sometimes it is a business pricing work below cost to win it, which creates its own risks partway through a build.

Ask what makes it lower. A good builder can explain their price.

• Payment stages tied to dates instead of completed work. You should pay for work that is finished, not for a calendar reaching a certain day.
• A broad clause allowing price adjustment for “site conditions” with no definition of what counts.
• No defects liability period, or no process for reporting and rectifying defects.
• Variations not required to be in writing before work proceeds. This is how disputes start.
• No stated timeframe, or no consequence attached to it.
• The contracting entity differing from the licensed entity.

Have any building contract reviewed before you sign. It is a small cost against a 6-figure commitment.

To be fair about the other side of this, here is what a straightforward builder does.

• Gives you the licence number without being asked twice
• Inspects the block before producing a price
• Arranges a soil test and prices site works from it
• Provides an itemised inclusion list and a written exclusion list
• Has HBCF cover in place before taking a deposit
• Ties payments to completed stages
• Puts variations in writing with a price before the work happens
• Answers the awkward questions directly

A short checklist.