39Varying or entering into new construction contracts

39  Varying or entering into new construction contracts

 (1) Where:

 (a) a construction contract for a new home is to be varied, or a replacement contract is to be entered into, in the circumstances mentioned in clause 1.14 of Schedule 1; and

 (b) the purchase price under the varied or replacement contract is higher than the original purchase price;

Housing Australia must not increase the Commonwealth’s contribution to the purchase price to more than 40% of the purchase price under the varied or replacement contract.

Example: The original construction contract is for the amount of $500,000 and the Commonwealth contribution is 30% of the purchase price of the property. Under the arrangement, Housing Australia would pay, on behalf of the Commonwealth, 30% of the purchase price of the land at the settlement date, followed by 30% of the value of each progress payment during the course of the construction. During construction, the contract is varied due to higher building costs, resulting in a new amount of $600,000. Housing Australia may provide up to an additional $90,000, on behalf of the Commonwealth, for a total contribution of $240,000 (40% of $600,000). If an additional $90,000 is paid on behalf of the Commonwealth, this would increase the Commonwealth share to 40%.

 (2) Subsection (1) applies even if the increase to the purchase price would mean that Housing Australia contributes less than the amount required to ensure that its contribution and applicant’s deposit together equal at least 20% of the new value of the property.

Note: This may mean that the participant has to bear the cost of lenders’ mortgage insurance.

Division 6—Terminating arrangements in specified circumstances