The SA Chapter has recently received some queries regarding the acceptance of ABIC contracts by lending institutions.  The key concerns appear to be that there is no schedule of payments written into ABIC contracts and that they are not seen as a fixed price contract as they contain clauses regarding variations.

The banks and building societies would prefer to lend against a MBA or HIA contract – ones which they see on a regular basis and which they believe they understand.  The fact that the MBA and HIA contracts do not prevent variations to the construction cost and that a schedule of payments can lead to payment exceeding value of the completed work on site does not appear to outweigh the certainty provided by known contracts.

The key concern from my perspective is that lenders appear to not value the service provided by Architects and that they consider a contract administered by a professional as of greater risk than a contract where an often inexperienced client represents themselves.  Some lenders even send valuers to check on the Architect’s assessment of progress claims prior to releasing funds, further highlighting their lack of trust in an architect’s professional skills.

The SA Chapter is interested to hear from members who have had difficulties resulting from the ABIC contracts.  The Institute has already had fruitful discussions with the Commonwealth Bank regarding the schedule of payments issue.  As a result we have a platform for addressing any other issues in relation to this suite of contracts.

The ultimate end game is that lenders preference architect administered contracts because they recognise that architects add value and reduce risk.

Nicolette Di Lernia, SA Chapter Manager