Preliminary Agreements

A Preliminary Agreement (PA), or Preparation of Plans Agreement, is a common document used by builders dealing with clients in the early stages of building a new home.

These agreements do not involve building work and are preparatory to entering a building contract. Some common features are:

1. the consumer is committed to paying a “deposit”, related to the cost of a home described in the document.
2. “this “deposit” is usually not refundable if the building contract does not eventuate.
3. A price for house construction is quoted.

You should note that this document only refers to a contract to draw up building plans. Only when a building contract is signed will both parties be committed to a price and a specific building product. Where there are delays in drawing up plans the period during which prices are held firm by the building company may have expired. Building costs may have increased in the meantime and buyers who signed a PA may receive a shock when a higher price is quoted to them at building contract stage.

Preliminary agreements serve consumers by allowing them to obtain plans and a price so as to allow then to make a decision on whether to progress to a building contract. A consumer is not obliged to do so but would face financial loss of their “deposit” or more if they fail to proceed to a building contract. Note than when the building plans are prepared they usually remain the property of the builder. If you decide not to proceed to build the builder may offer to sell the plans to you, or may wish to retain them himself.

Any dispute over a Preliminary Work Agreement must be taken to the Magistrates Court. As the contract does not relate to building work, any dispute is outside the jurisdiction of the Building Disputes Tribunal.