Contracts

It is the builder’s responsibility to ensure that a written contract, that accurately reflects the agreement reached, is in place between themselves and their client.

Contracts will vary depending on whether the type of building work that is proposed is residential or commercial. Any agreement for the performance of ‘home building work’ as defined by the Home Building Contracts Act 1991, must be in writing, be dated and signed by both parties. The contract documentation should include all specifications, addenda and working drawings. 

If you are unsure what type of contract to use or what should be included, contact a building association such as the Master Builders Association, Housing Industry Association or Australian Institute of Architects, who may be able to provide advice as well as a selection of contract templates.

Failure to have proper contracts in place, or contracts that do not accurately reflect the agreement between the parties, can result in prosecution proceedings being brought against you. If you are unsure about contractual requirements or a particular aspect of the contract, seek independent professional advice.

Home building contracts

Home building contract provisions under the Home Building Contracts Act 1991 (HBC Act) apply to fixed price contracts for ‘home building work’ valued between $7,500 and $500,000. Under the HBC Act limited provisions apply to cost plus contracts.

‘Home building work’ is constructing a new home, renovating an existing dwelling, placing a transportable home on land, or carrying out any associated work, ie installing a swimming pool, kitchen cabinetry, constructing a garage or shed or performing landscaping work.

Under the HBC Act a ‘builder’ is any person who performs home building work for others, and is not necessarily a registered builder.

The main provisions of the HBC Act are:

The contract:

• must be in writing;
• must contain all the terms, conditions and provisions of the agreement;
• must be signed by both parties; and
• must show the date.

A copy must be given to the home owner as soon as reasonably practicable, after both parties have signed but before any work is commenced.

Contract terms:

• 'Rise and fall' clauses are prohibited; and
• some exceptions apply to costs incurred due to an increase in government charges or duty.

Deposits and progress payments

A home building contract cannot provide for a payment that exceeds 6.5% of the total cost before the commencement of building work. After the commencement of the work, any progress payment must be for work actually performed or materials already supplied.

Contract variations:

• must be in writing;
• must be signed by both parties; and
• must show the date.

A copy must be given to the home owner as soon as reasonably practicable, after both parties have signed but before any work is commenced.

Notice for the home owner

Before a home building work contract is signed the builder is required to provide the owner with a copy of the Notice for the home owner, which summarises the requirements of the HBC Act.

The notice includes information regarding home indemnity insurance as well as builders’ obligations when entering into a home building contract. 

A copy of the notice is available via the link above, or refer to Schedule 1 of the Home Building Contracts Regulations 1992, available on the State Law Publisher website. 

Please note: The Regulations may be updated from time to time, and it is your responsibility to ensure you are using the current version of the notice. The current version is available on the State Law Publisher website.

If you need assistance, please contact the Building Commission on 1300 489 099.