THE COMPANY NEWSLETTER OF
SPECTRUM COACH & SPECTRUM LAWYERS
We can’t believe it’s already the end of January 2022! We also cannot believe that we are fortunate to be into our third year of association between Spectrum Lawyers and Spectrum Coach. Some might say we are crazy to be married and work together, whereas others who know us will say that is why we work so well for our clients.
We love what we do because we see the effects for our clients, whether it be generating that next sale, securing the next site start, negotiating favourable terms in these difficult market conditions or resolving a dispute.
Offering a spectrum of services in both business sales, operations and legal services provides our clients with a wholistic approach they cannot get from any other business. But more importantly, we like to learn from our clients too. We like to understand their business as no one client is the same and we like to tailor our services accordingly.
Fred and Donna combined have over forty years experience in the housing industry and are passionate about the industry and their clients. We hope you enjoy this edition of Spectrum Speaks which offers an insight into our businesses and also some articles to provide you with information on areas which are hot topics for some of our clients.
New year, new services
BY DONNA ABU-ELIAS
2022 has not started off the way most of us expected or hoped it would. With surging COVID cases and pressure continually placed on the construction industry, it’s easy to feel overwhelmed.
But rather than focus on the negativity of the current situation, we have decided to stay positive, focus on the things we can control and channel our energy into some exciting projects for 2022!
This year is already shaping up to be a busy one, with a lot of work being carried on from last year. Below is a snapshot into some of the areas we are working on:
- Unfortunately, 2021 saw many builders go into administration (whether voluntary or involuntary) which left some owners without a builder. We are assisting clients with their Domestic Building Insurance claims with VMIA and assisting clients negotiate new building contracts with new builders.
- Representing clients in both the Supreme Court, County Court, VCAT and DBDRV in relation to:
- Building disputes relating to defective building works, slab movement, adequate site drainage. These cases are complex and involve large volumes of documents, expert evidence, witness statements by clients and/or their representatives/contractors. They are also very lengthy given the delays in the Courts and Tribunal at the moment, so during the process we assist clients consider reasonable settlement options.
- 2021 was a difficult year for cashflow for many builders and this saw a rise in payment claim disputes, whether it is representing an owner
against a builder who has wrongfully claimed a progress stage (as the staged works are not complete) or whether it’s representing a builder where the owner has not paid the progress claim. This may include where the owners have wrongfully taken possession of the property prior to payment and/or repudiated the contract by not complying with their contractual obligations.
- As many know, litigation is lengthy and expensive, therefore we facilitate negotiations and settlements between the parties where litigations is not a viable option. Each negotiated outcome depends on the facts and the parties’ appetite to settle.
- Sometimes builders (or third parties) may choose tobuy-back the property to avoid litigation, and wherethis is in the interest of all parties, we will negotiatesuch settlements, and now that we offerconveyancing services, we act as conveyancers toprepare the necessary contracts and documentationand finalise the settlement.
- Some clients are seeing 2022 as an opportunity togrow their business, and they are purchasing land tobuild a display home. We assist our clients byreviewing their display village contract of real estateand again as we now provide conveyancing services,we act as our client’s conveyancers to finalise thesettlement of the property.
- Building projects are complex and during theproject a client may wrongfully terminate thecontract (amounting to a repudiation of thecontract) or may issue an invalid notice. We providetimely advice to our clients to guide themthroughout the duration of their project. Likewise,we advise our clients and prepare the requirednotices for clients who wish to end contracts duringa project (or before the works have commenced) toensure the proper process is followed to avoid abreach of the contractual requirements. Our aim isto assist our clients manage their projects to avoidunnecessary litigation where possible.
- Pursuing claims by builders against contractors for recharges arising from the contractor’s defective workmanship or joining contractors to claims issued by owners. As builders may be liable to owners for generally up to a 10-year limitation period in Victoria, there needs to be accountability between the builders and their contractors and/or suppliers to ensure the risk allocation is fair and reasonable. Where a claim is brought against a builder, there may be some instances where such claims arise due to the workmanship of another party (eg, a plumber, registered building surveyor, concreter, carpenter etc). Whilst the builder is still liable for their own obligations under the contract and legislative requirements, we advise and assist builders (or other parties) consider what avenues are available to apportion to the liability in appropriate cases.
- 2022 is also a year where businesses are venturinginto new areas or extending current services, whichrequires us to assist our clients by helping themobtain trademarks on new logos, names or slogans.It is exciting to assist clients with their growth andadvise them along the way about procurementcontracts, terms and conditions, websites, andadvertising.
- Assisting clients respond to VBA investigations forbreaches of registration obligations or breaches oflegislation.
As we indicated at the end of last year, we haveintroduced two new areas – Conveyancing and Probate.This is largely due to Hannah Smith joining our firm.With the combination of Donna’s 10+ years’ experiencein conveyancing added with Hannah’s extensiveexperience, this is an area we can offer our clients.Likewise with probate, Hannah has practiced in probatelaw for many years so this will see a fuller serviceoffered to clients who engage Spectrum Lawyers &Consultants for their Wills.
So, although 2022 may not look exactly how weexpected it to, we are entering the new year with apositive mindset, and we are excited to be able to assistour clients in a broader spectrum of areas.
“We are excited to broadenour spectrum of services in2022.”
Case Study: Triple R Builders
BY FRED ABU-ELIAS
Here at Spectrum Coach, we’re proud of our fastgrowing list of clients, but we do believe it’s importantto acknowledge those who have worked with us forquite some time.
In this article, we’ll be taking a look at three of ourlongest-standing clients, who we’ve nicknamed our“Triple R Builders”. Rosin Bros, RODA Developmentsand Ramsay Builders have been working closely withour team for some time now with a focus on increasingleads and sales. Although these businesses are quitesimilar in nature, the support they’ve needed, andtherefore our approach, has been quite different.These builders have taught our team a lot about thediversity of businesses within in the new homesindustry, and at times, challenged us to come up withnew and improved strategies to close sales.
RODA has been working with Spectrum Coach sinceAugust 2020, with the aim of improvingcommunication to increase sales. Along the way, wetaught the RODA team that some things are better saidface to face, while other information should betransmitted via email. RODA has also learned about thepower of selling in stages and the importance ofunderstanding what the next stage is for each client.RODA often turn to our team to help hold themaccountable in order to avoid complacency. Each timewe regroup, we brainstorm new sales strategies toincrease sales and improve functionality. If we identify aweak area of the business, we focus on identifyingsolutions to improve this.
Rosin Bros have only been working with SpectrumCoach since March 2021, but in that short time we haveseen a significant improvement in their sales, theirconversion of leads to appointments and ultimately,conversion from appointments to contracts.Rosin Bros were facing the common issue of puttingtoo much time and work into a potential sale, for littlereturn. This meant that they were not progressing tothe next stage of the sales process, which causeddelays and wasted time.
Since identifying this issue, Rosin Bros have been ableto focus on growing their business and improving theirprocesses, and to do so they have started to makechanges to their business internally.
Before working with Spectrum Coach, Ramsay Builderswould assess clients based off a questionnaire theywould send, asking clients to fill it in and send it back.Once we started working with them, we slightlyadapted this clever process and suggested that theystart to have a conversation with the clients based offtheir responses to the questionnaire, to build strongerrelationships with potential clients.
Ramsay Builders have changed their sales processdramatically, by implementing new processes andsteps, and analysing each individual client tounderstand their needs and motivations better. We’revery pleased to say that this has increased sales as well.
“We believe it’s importantto acknowledge those whohave worked with us forquite some time.”
What’s so special about our Triple R Builders? Each ofthese three builders have developed a successful andtrusting reputation in their respective communities, inwhat they do and what they deliver. This is becausethey take the time to build relationships with theirclients, allowing them to understand their client’slifestyle and enabling them to deliver a product thatworks for their client’s unique needs.
The biggest change for these industry leaders is thatthey now identify themselves as salespeople, not justbusiness owners and builders. Becoming a salespersonis in fact a skill, and there needs to be a process tofollow to become successful in this field.
Spectrum Coach want to extend a big thank you to theTriple R Builders for their continued support and theirtrust in us to guide and mentor them. These clients areon track to keep smashing sales targets and willcontinue to manage their businesses efficiently.
The next step involves challenging the norm and seeinghow they can improve as salespeople and businessowners, with the guidance of Spectrum Coach.
“Spectrum Coach want toextend a big thank you tothe Triple R Builders fortheir continued support andtheir trust in us to guideand mentor them.”
Cost escalation – a builder’s right to charge for increased labour and material costs
BY DONNA ABU-ELIAS
COVID has affected construction projects in more waysthan one – whether it be time delays due to lockdowns,shortage of trades or materials, workers in isolation orprice increases. All of which have had a huge impact ona company’s cashflow. It is common for our firm to beasked by builders how they can protect their profitmargins when entering into building contracts forprojects which may not start for some time.
Section 15 of the Domestic Building Contracts Act (DBCAct) prohibits a builder from having a cost escalationclause in a domestic building contract where the valueis less than $500,000. A ‘cost escalation clause’ asdefined by section 15 of the DBC Act is “a provision in acontract under which the contract price may beincreased to reflect increased costs of labour ormaterials or increased costs caused by delays incarrying out the work to be carried out under thecontract”. It is noted that this section does not apply togovernment taxes or charges or prime costs /provisional sums.
So, what can a builder do if they are faced with largeincreases as we’ve seen arising from COVID? How can abuilder protect their profit margin?
Can a builder issue a variation?
A true variation is a change to the plans orspecifications in the building contract. Therefore, if theonly change is a change to the price, this is a not a truevariation and an owner is now bound to accept thebuilder’s variation for increased costs. There are twoexceptions to this:
- The parties can agree to sign a variation, but thevariation should clearly acknowledge the agreementbetween the parties (and acknowledge that there isno change to the plans and specifications)
- Where a product is not available or the parties haveagreed to alter the plans and specifications, thenthe associated price increase can be changed byway of a variation. It is important to ensure that avariation notice is issued and signed in accordancewith the building contract Especially as s41(5) provides that if the contract isended under this provision, the builder is entitled to areasonable price for the works carried out under thecontract to date (but pursuant to subsection 6, no morethan you would have been entitled to recover under thecontract). The only question therefore is what is a‘reasonable price’, this may not be agreeable betweenthe parties and you are limited to the amounts as perthe contract and no more.
Are the items prime costs / provisional sum items?
Where the building contract properly allocates costs asprime cost and provisional sum items, the builder maybe entitled to charge the owners for increases in theactual costs. However, caution should be given as thereare strict requirements under both the DBC Act and thebuilding contract when costing prime costs /provisional sums and also when adjusting theseamounts, so it is important the builder strictly adheresto these requirements to be able to enforce any priceadjustments.
It is important to issue extensions of time
COVID has seen many delays due to lockdowns,difficulties in obtaining materials from overseas and ashortage of labour. It is therefore important that propernotices be issued for any delays. Whether a builderwishes to impose liquidated damages for the extensionof time or not (as the builder wants to stay friendly atthe beginning of the project), it is still important toextend the building period with a proper notice ofextension of time as soon as possible, to avoid having topay the owner liquidated damages at the end of theproject if the building period blows out. Also rememberthat some contracts permit extensions at thecommencement of works, so if the works are delayed incommencing, remember to get your EOT in.
Builders should also be mindful of section 41 of the DBCAct 1995 (Vic). This section permits an owner to end abuilding contract if the contract price increases by 15%or more where “the reason for the increased time orcost was something that could not have beenreasonably foreseen by the builder on the date thecontract was made” (s41(1)(b)). It is noted that, anyincrease does not include any amounts which “arise asa result of a prime cost item or a provisional sum orthat is caused by a variation made under s38.”
If the owner seeks to end the contract under s41 of theDBC Act, the “owner must give the builder a signednotice stating that the building owner is ending thecontract under this section and giving details of whythe contract is being ended.”
Sometimes a builder does want to bring the contract toan end, so this may be a good option (depending onthe circumstances).
Can a builder just end the contract because it is not financially viable for to continue?
Not necessarily – at least not without mutual consent.The building contract will set out the rights toterminate a contract. Usually, termination can onlyarise for breach of contract. Therefore, escalated costswould not be a right to end a contract, unless theparties both agree to bring the contract to an end. It isimportant to document any mutual ending of acontract by way of a terms of settlement, deed oragreement.
There are also some important considerations beforeentering into a building contract:
- Some builders are considering moving away fromthe standard fixed price building contracts andentering into Cost Plus Contracts. However, buildersshould note that a Cost Plus Contract may only beentered into where the value of the building worksis for $1 million or more.
- Look closely at your procurement contracts withyour suppliers. Try to lock in prices to avoid pricerises during a building contract (or find analternative supplier where possible).
How do you budget sales and forecast?
BY FRED ABU-ELIAS
At the beginning of this year, I started reflecting onwhat I wanted to achieve in 2022. Last year I worked onmy budget and forecasted what I wanted to achieve formy own business. I have done the same with mybuilders, I always ask the crystal ball question, howmany sales do you want?
Each builder should know what their breakeven point isand how many sales they need to cover costs. We thenwork out what they want to achieve above and beyondthis and divide this number into months. From here wecan work out how many leads and appointments weneed to convert to achieve these goals. There is ascience to it.
Once the budget is set, I recommend having a weeklysales meeting, covering the following items:
- Number of leads
- Number of future appointments
- What is your follow-up date for the client?
When coaching I always ask the question, when are youpredicting to close the client? In most cases, we canforecast three months out. The way we do this is byunderstanding where the client sits within our salesjourney and by setting expectations with the client.You should break down your yearly sales budget byquarters and also by months, as well as budgeting for anumber, we should also add a name to that number ona monthly basis.
As a business owner when managing a sales
consultant, you should refer to your budget and your
monthly sales forecast to make sure you are on target
to achieve your monthly sales budget / forecast.
I am often asked; how can you predict how many sales
you are going to get? The answer to that is, if you have
leads coming in and you have followed a sales process,
you should be able to predict sales three months into
What is a reasonable scope ofremediation for defective works?
BY DONNA ABU-ELIAS
It is common for Spectrum Lawyers to be engaged byeither the builder or the owners where the partiesacknowledge that the building works may be defective(that is, there is an argument that the building workswere not carried out in a proper and workmanlikemanner (clause 8(a)), and/or that the building workswere not carried out with reasonable care and skill(clause 8(d)). However, the dispute really arises becausethe scope of remediation cannot be agreed betweenthe parties.
This very issue was considered by the Victorian Civiland Administrative Tribunal at the end of 2021, in thecase of Lu and Tang v Metricon Homes Pty Ltd(Building and Property)  VCAT 1359. This caserelated to the supply and installation of engineeredtimber flooring to the ground floor (of a two-storeyresidential dwelling). In this case the owners hadengaged Metricon Homes (the builder) to design andconstruct the two-storey dwelling and included in thecontract was the supply and installation of the timberflooring. The owners claimed that the flooring to theground floor was defective and pursued the builder fordamages totalling $155,413.20 on the basis that theowners wanted all of the floorboards on the groundfloor to be removed and replaced.
Whilst the Tribunal found that the builder hadbreached its statutory warranties (as contained insection 8 of the DBC Act 1995 (DBCA) and thosereplicated in the building contract), the Tribunal wasrequired to consider whether the replacement of all ofthe floorboards on the ground floor was necessary andreasonable to rectify the defective work. It is noted thatMetricon contended that peaking at the end of thefloorboards is a known risk where the home is leftunheated over the winter months. However, theTribunal did not accept this as no warnings had beenprovided to the owners by the builder at the time ofhandover. Further, Metricon also asserted that theowners had failed to mitigate their loss by refusing toaccept Metricon’s offer to re-sand and re-stain theflooring (and if they had accepted the offer the ownerswould not have incurred the cost of alternativeaccommodation and removal of furniture). The Tribunaldid not accept this argument as the Tribunal believedthat at the time the offer was made by Metricon (inmid-2019) the owners did not have any independentopinions about the merits of Metricon’s proposal.
The Tribunal found that replacing the entire groundfloor flooring was not necessary and reasonable butrather, the builder could in fact re-sand and re-stain asan appropriate remedy. Therefore the owners are notentitled to the cost of the full removal and replacementof the timber flooring on the ground floor as it isdisproportionate to the nature and extent of thedefective work. This decision, namely to consider the‘reasonable and necessary’ test can be found in manycases, to support the test of whether the rectificationworks (as defined in Bellgrove v Eldridge  HCA 36)are:
- Necessary to produce conformity with the terms ofthe contract.
- The reasonable course to adopt in all thecircumstances.
In the decision of Senior Member Walker in ClaredonHomes Vic Pty Ltd v Zalega  VCAT 1202, SeniorMember Walker summarised the decision in Ruxley,that suggests that account can be taken of thefollowing matters at least:
- Whether and to what extent the work, although notin conformity with the contract, is nonethelessserviceable.
- Whether and to what extent the defect has affectedthe value of the work or the building as a whole.
- The cost of rectification, the proportion that thebreach bears to the cost of rectification and whetherthe cost of rectification would be whollydisproportionate to the real damage suffered byreason of it.
“When discussingremediation scopes it isimportant to consider whatis necessary andreasonable.”
- The likelihood that, if rectification cost is awarded,the sum so ordered will actually be spent onrectification. Obviously, a successful plaintiff canspend his damages as he sees fit but this may be auseful indicator of whether the amount sought isgreater than the real loss suffered
Considering the above, VCAT ordered the builder to paythe amount of $28,913.81 to the owners as this was theappropriate remedy (which was reasonable andproportionate to the nature and extent of the defectivework) – the cost to re-sand and re-stain ($13,428.80),diminution in the life of the flooring ($13,841.61),accommodation for 6 days ($818.40) and furnitureremoval ($825.00).
Accordingly, it is important for parties to rememberwhen discussing remediation scopes with owners thatthey are only required to consider what is necessaryand reasonable and all communications should beframed in this manner. Whilst it may not always bepossible to convince an owner on what is necessary andreasonable, it will assist in mitigating your loss shouldyou find yourself in a dispute.
Are sales about closing the client?
BY FRED ABU-ELIAS
Are sales always about closing? You can answer this inso many ways, however, the way I like to answer this isto start with – what does it take to close a sale? If youremove the pressure of closing and hitting monthlytargets and instead focus on building relationships,then for me sales is more about how manyrelationships I can create and build on.
When I started Spectrum Coach, I had to go out andsell my business. I didn’t have a tangible product that aclient could see, so I had to sell myself and my years ofexperience. I had to build new relationships andmaintain those relationships. When I would walk into ameeting, instead of starting off by doing an entire spielabout what I could offer them, I would start by showingthem what I could do for them, advising them how theyshould sell, and I was always willing to give them freetraining.
A while ago I wrote an article called “the importance ofrelationship building when starting a new business”.Relationships are one of the most, if not the mostimportant aspects of sales. If you do not have arelationship with your clients, they will not buy fromyou. For me, when selling I genuinely wanted to get toknow my clients, what their motivators were and whythey did what they did. It’s always great to listen tosomeone’s story, not because it will lead to a sale butbecause it helps you understand how important you areto them and why they are sitting in front of you.
The close will always come in the end, people buy frompeople they trust, and you gain trust by building arelationship. I’m glad to say that I have strongrelationships with all my clients and that to me is mynumber one priority.
SPECTRUM LAWYERS & CONSULTANTS
Spectrum Lawyers provide legal services with legal expertise across all areas of building & construction law.
Building and construction law
- To assist builders and/or owners efficiently resolve building disputes.
- Developing streamline procedures and training to manage the spectrum of challenges in today’s market.
- Advising consultants and contractors on their legal obligations under the Building Act and Building Regulations.
- Advising building surveyors on compliance issues.
- Debt recovery.
- Dispute resolution at private mediations, DBDRV, Tribunal and Courts.
- Reviewing building contracts and advising on rights and obligations.
- Assisting clients with the purchase or sale of residential or commercial property.
General Counsel Services
- Reviewing and advising on procurement contracts and licenses.
- Advising on general business law and day-to-day business operation issues.
- Drafting policies.
- Reviewing and drafting polices and terms and conditions.
- Negotiating contractual documents.
- Providing training (contract law, Australian Consumer Law, advertising, warranty, etc.)
Probate, Wills and Powers of Attorney
- Administering estates.
- Drafting Wills and Powers of Attorney to protect your family and assets
Spectrum Coach provides 5 core areas of service, Sales, Marketing, Operations, Home Designs and BusinessCoaching. They are designed to understand your business intimately, this allows us to provide the focused,dedicated support that we hold to high standards to all our clients. We understand that every business is different,and will have different needs. Choose one of our services or choose them all – whatever works for you and yourbusiness.
Without sales, you don’t have a business. Our training gives you guidance at a micro level, arming you with specificstrategies that are proven to close sales
Your front end and back end operations are key to turning a profit. From taking the initial sale to getting to a sitestart, we have designed processes that improve efficiencies, increase profits, and that are easily adopted, helpingyou to manage your jobs more effectively.
Design & Drafting
Our extensive design library has a range of plans you can use to sell your new homes, and are fully customisable.Our training will equip you with the tools you need to sell these plans based on their respective features andbenefits. Need a custom design? We can do that too.
You’re busy doing what you do best – building homes. Let our in-house team help you market your business so youcan do more of what you love. We can guide you through marketing your brand, generating leads, and can evenhelp you build a website. We can also manage your social media, including writing content and posting on yoursocial media pages.
We get it – running a new homes business is complicated. As the business owner, you have to be across everyaspect, and not all of them are going to be your specialty. Our general business coaching gives you a team that areskilled in all areas of business, from construction to finance.