Australian families accuse builder of demanding more money after signing fixed-price contracts
Hopeful homeowners fear becoming homeless, after their builder demands more money to complete the job.
Oracle Platinum Homes sent price variations to dozens of its customers who thought they were on fixed-price contracts, demanding tens of thousands of dollars to finish their dream home.
Olivia Sheppard and her partner invested all of their savings into buying their first home for their young family.
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They entered into a fixed price contract with Oracle Platinum Homes in December 2020.
The Logan Reserve home should have been completed in August 2021, but Sheppard said construction didn’t even begin until September.
“It took them 10 weeks to get the engagement approved. They were submitting engineering plans with hand-drawn trees on them, which was the first kind of red flag for us,” Sheppard said.
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Now she has a half-built house, with Oracle demanding $48,000, in an unexpected bill – blaming unpredictable price hikes.
It’s money the young couple simply doesn’t have to hand over.
“I think as first-time homeowners and first-time home buyers, it was supposed to be such an exciting thing and we’re now at the point where we’re actually trying to feel the joy of it, because of disappointment that could be ahead,” Sheppard said.
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Nicole Terechow’s house should also have been completed last year.
She too signed a fixed price contract with Oracle in December 2020.
After months of delays on her project, she went to Oracle headquarters in March this year for a crisis meeting with the company’s director, Tom Orel, where she received a post-it note stating that she now owed an additional $68,000.
“There’s nothing left in the kitty and he just said ‘well you can go to your bank and you can talk to your bank because the equity in the property would have gone up,'” Terechow said.
Terechow says she didn’t think Oracle was allowed to ask for more money, on the grounds that they’re facing COVID-19-induced pricing pressure, under the contract she signed.
Now she faces the prospect that her house won’t be finished if she doesn’t pay.
Building and construction lawyer Brent Turnbull said this was a gray area for consumers and the builder and it came down to each individual contract.
“You really have to assess whether there’s a business and practical benefit to potentially, maybe paying the builder a certain amount, just to keep the builder alive and complete your project,” Turnbull said.
“They kind of have the advantage, unfortunately, that the consumer needs the house to be built and wants the house to be built and they’re able to use it.”
David and Karolynn Towerton are in a similar position.
Their house, however, is complete, but Oracle still demands another $40,000 before handing over the keys.
“The house was deeded to us on certificate, the electrics are in our name, the insurance is in our name, the rates are in our name. He just holds the keys,” Mr Towerton said.
Russ Stephens is the co-founder of the Association of Professional Builders and he said builders across the country are struggling to stay afloat with increased demand, price increases and supply issues.
“The industry was always going to be busy anyway, with or without the landlord subsidy that literally bought burning fuel,” Stephens said.
“We expect to see many more construction companies collapse as the year progresses.”
In a statement to A topical matterOracle defended its actions saying, “Oracle is taking all necessary steps to avoid a situation where they would be forced to abandon builds, which would be even more detrimental to our owners.”
“The last thing we want is to not be able to finish our owners’ homes.”
Oracle Platinum Homes Full Statement – A Current Affair response
What has delayed the construction schedule for some clients’ homes?
The current construction industry environment has been widely publicized, including recent stories on your own Today Show. Please see the link below which discusses well-known supply and trade delays and rate increases.
THE TODAY SHOW – Australian builders forced to close due to staff shortages
Customers we spoke to say they have been impacted by price swings despite having a fixed contract, what is causing the price swings?
As reported by Noel Towell of The Age on 1st May “The Master Builders Association says 98% of its members are seeing their profits cut or losing money as the price of lumber, steel, concrete and other building materials has soared and deliveries are delayed for up to six months.
Wood prices rose by 50-100% last year, steel by 30-60% and concrete by 20-40%, while the war in Ukraine has pushed up the price of wood products from from Russia by 25%. This year.
A critical shortage of skilled tradespeople is also making the crisis worse. »
Oracle absorbed these increases for an extended period and is now asking customers to accept price increases. This decision was not taken lightly and was only made to ensure the continued financial viability of the business.
Customers say the company has no legal right to raise prices based on their contracts, on what legal basis did you hit them with this cost increase?
Oracle sought legal advice before issuing these increases and acted on that advice.
Some customers say they haven’t received any breakdown regarding the additional costs involved, why hasn’t Oracle been able to provide this?
Any customer who requested a breakdown of the increase directly with us received this information in writing.
Was Oracle ill-prepared for the number of customers you got from the homebuilder grant?
What the industry is going through is unprecedented and we believe no one was prepared for the increased demand and cost we are experiencing. When the homebuilder subsidy was introduced, most people in the industry were expecting a severe recession. Instead, we had a boom with now widely publicized price increases and labor shortages. Even the Reserve Bank was caught off guard by rapid inflation.
How Oracle handles issues is an ongoing challenge. We continue to evolve our internal processes, resources, people, businesses and supplier base to meet growing demand.
For example, before the boom, Oracle employed 60 people. At the peak, we did everything we could and grew to over 100 employees, which was more than enough for the sales made.
We had done everything we could to ensure that the request was met.
What happens to people who don’t pay these price changes?
Oracle talks about all the necessary steps to avoid a situation where they would be forced to abandon builds that would be even more detrimental to our owners. The last thing we want is to not be able to finish our owners’ houses.
Oracle is open to negotiations and we are in discussions with several owners. Our priority is to ensure that our owners’ builds are completed as well as protect our business and we are able to stand behind our product and honor our lifetime structural warranty.
What steps is Oracle taking to resolve these disputes with its customers?
Oracle remains committed to working with its customers to help them achieve a positive construction outcome during this difficult time.
We are working on a solution favorable to both our owners and Oracle.
Statement from a CCSB spokesperson:
Queensland’s building regulator has urged homeowners to seek legal advice before making payments outside the terms of a fixed price building contract which are described as ‘contract variations’, in order to ensure that payments are authorized under the contract.
The Queensland Building and Construction Commission – the QBCC – has issued a public warning that some building contractors are asking for additional funds to cover rising material and labor costs.
CCSQ Commissioner Anissa Levy said she sympathizes with builders and homeowners caught up in the current building material and labor shortages.
However, Ms Levy warned that there may be no contractual basis for contractors to seek payment for increased labor and material costs as “contract variations”. under a fixed price contract.
She said parties trying to resolve contractual issues related to material or labor shortages should consider mediation through the expedited builder-consumer dispute resolution framework administered by the QBCC.
Information on the mediation process is available on the CCSQ website.
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