What aspects of fees and costs are covered under the Code?
Issues associated with architects’ professional fees and costs are common sources of complaints. In order to mitigate the risk of these issues arising, the Code contains requirements in relation to:
- when a fee may be collected;
- what a client agreement must provide in relation to fees and costs;
- provision of statements of account to clients; and
- compliance with a previously agreed fee structure in the relation to the provision of architectural services.
Under clause 6 of the Code, an architect cannot collect any fee unless a signed client agreement is in place. This means that money, including a deposit, cannot be paid until the client agreement has been finalised and signed. A short-form interim agreement that meets all mandatory content requirements for the relevant scope of work could be used until the detailed client agreement is finalised and executed.
The Code also contains requirements regarding information about fees that must be included in the client agreement. In particular, the client agreement must include:
- a clear and unambiguous statement of how the professional fees and costs of the services will be calculated;
- a requirement that the architect must inform the client—
- how a change or amendment to the services will affect the professional fees and costs for the services; and
- about the circumstances in which professional fees or costs may escalate;
- where possible, reasonable estimates of disbursements; and
- a statement of how professional fees and costs, including disbursements, will be paid.
The Code does not prescribe the basis for calculating fees. However, under clause 6, the client agreement must clearly explain how professional fees and costs will be calculated. In addition, the Australian Consumer Law requires that, unless quoting to a business, prices must be presented as a singular figure that includes all additional charges and taxes (such as the Goods and Services Tax, or GST).
The ARBV considers that it is important to specify the precise way fees are calculated, such as whether fees are fixed, or calculated as a proportion of the cost of works and, if so whether the cost of works includes GST or excludes GST. The following scenarios may breach the requirements in the Code:
- A fee that does not specify whether or not GST is included or is ambiguous as to whether or not GST is included.
- A fee that is exclusive of GST for a client that is not a business.
Clause 7 provides that an architect who has entered into an agreement to provide architectural services must ensure that the fees and costs charged do not exceed the agreed fee structure in the client agreement.
Under the Code, regular statements of account (commonly called ‘invoices’) must be provided by architects to clients unless the client expressly agrees otherwise. Regular and structured invoicing enables clients to keep track of costs and their budget, while also enabling architects to manage their cashflow in a predicable manner.
The Code does not identify how frequently the statements of account must be provided to clients, but they must be ‘regular’, unless otherwise expressly agreed with the client. The timing of statements of account should be documented in the client agreement to provide certainty for the client.
If a client agrees to a change to the timing of statements of account provided for under the client agreement, this should be clearly documented in writing in order to provide both the architect and the client a written record of the agreement.
The Code does not specify what must be included in statements of account. However, it is good practice to provide statements of account that are sufficiently detailed to enable the client to easily identify the charges for specific services.
Statements of account are documents and cannot be provided verbally. If verbal advice regarding fees and costs is given, it should be promptly followed with written advice.
It is good practice to provide written receipts for all payments made against a statement of account promptly. To provide clarity for the client, the written receipts could cross-reference the relevant statement of account so that the client has a clear record of the statements of account that have been settled.
Under clause 15 of the Code, which sets out architect’s record-keeping obligations, architects must keep records of financial transactions.
Statements of account, payment receipts, and agreements to changes to the timing of statements of account are records that are covered this obligation. As such, they must be kept for a period of 10 years after the completion of the architectural services which they relate to or the limitation period under section 134 of the Building Act 1993 (Vic), whichever is longer.
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