SandorandJoffreyare close friends and have been since childhood. In 2013 they agreed to go into business together. Under this arrangement Joffrey purchases old houses in inner west Sydney and Sandor, who is a licensed building work contractor for the purposes of theHome Building Act 1989(NSW), uses his building skills to renovate them. The renovated houses are then sold and the profits split 50:50 between them.

Before Sandor starts work on any renovations, Joffrey gives him an estimate of what he thinks the renovated house would sell for. Sandor uses this information to determine what materials to use in the renovation. It takes Sandor (assisted occasionally on weekends by his brother Gregor) around five months to renovate a house and he typically starts within one month of Joffrey purchasing the house.

On 1 December 2019, Joffrey purchased a house in Marrickville. Prior to the start of the renovations, he told Sandor that he intends to move into the house and not sell it after Sandor has renovated it. Joffrey agreed to pay Sandor $250,000, which Joffrey said was an estimate of the amount Sandor would receive if the renovated property sold on the market at current market prices. In keeping with all their previous agreements, the arrangement between them is oral. There are emails with details of the property and the renovation schedule.

In light of Joffrey's expensive tastes, Sandor decided to spend an extra$80,000 ordering custom fittings for the kitchen, bathroom and sunken games room. Unlike their other renovation projects, Joffrey visited this project frequently and was pleased not only with the progress Sandor was making, but also with the attention to details evident in the kitchen, bathroom and sunken games room.

Having worked over the Christmas-New Year period, Sandor is due to complete the renovation ahead of schedule in early March 2020.

On 20 February 2020 the NSW State Government announced a planned re- routing of the M44 motorway through Marrickville. While the house itselfisn't subject to a compulsory acquisition order, this new route has devaluedproperties nearby. Joffrey now estimates the market price for the house to be just $100,000 more than he paid for it in December 2019.

Over a coffee at a nearby caf the following week, Joffrey tells Sandor thathe won't be moving into the house but intends to sell it. He also says he willpay Sandor his usual share at the current market price.

Advise Sandor

By way of background information on theHome Building Act 1989(NSW) seethis information from the NSW Department of Fair Trading. You can find the text of the Act on theNSW Legislation Website. You are required to look in particular at ss 7(1), 7(2) and 10 of the Act.