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Home building contracts 

IMPORTANT: All residential building work worth over $5,000 requires a written contract. 

Contract essentials 

By law, you must provide a written contract for residential building work:

  • If the contract price is over $5,000 (including GST), or
  • if the contract price is not known, is for the provision of labour and materials by the contractor the reasonable market cost of which is more than $5,000 (including GST).

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Small jobs contracts 

Residential building work worth between $5,000 and $20,000 must be covered by a ‘small jobs’ contract. The written contract must be dated and signed by, or on behalf of, each party.

It must contain:

  • the parties' names, including the name of the holder of the contractor licence as shown on the contractor licence
  • the number of the contractor licence
  • a description of the work
  • any plans or specifications for the work,
  • the contract price if known,
  • a 'quality of construction' clause that states the work will comply with:
    i) the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
    ii) all other relevant codes, standards and specifications that the work is required to comply with under any law
    iii) the conditions of any relevant development consent or complying development certificate.
  • a clause that states that the contract may limit the liability of the contractor for failure to comply with the above work compliance clause if the failure relates solely to:
    i) a design or specification prepared by or on behalf of the home owner (but not the contractor) or
    ii) a design or specification required by the home owner if the contractor has advised the home owner in writing that they go against the 'work compliance clause'.

Contracts for large jobs 

Residential building work worth more than $20,000 requires an extensive home building contract. These contracts must contain:

  • the date and signatures of both the contractor and home owner
  • the home owner’s name and the exact name on your contractor’s licence and licence number
  • a sufficient description of the work to be carried out
  • attached plans and specifications
  • relevant warranties required by the Home Building Act 1989
  • the contract price, if known, which must be prominently displayed on the first page and a warning with an explanation if the contract price is not known or subject to change
  • a clause that states that any agreement to vary the contract or any plans and specifications to be done under the contract (including variations):
    i) are taken to form part of the contract
    ii) must be in writing and signed by both the home owner and contractor.
  • a progress payment schedule, which may only include the following types of payments:
    i) fixed payments to be made following the completion of specified stages of work. Payments must be of a specified amount or percentage of the contract price, and the stages of work must be described in clear and plain language.
    ii) payments to be made as work is performed and costs are incurred (and which may include the addition of a margin), at intervals fixed by the contract or on an ‘as invoiced’ basis. Claims for this second type of progress payment must be supported by invoices, receipts or other documentation.
    iii) a combination of the above two types of payments.
  • a termination clause, which must include a statement that the contract may be terminated in the circumstances provided by the general law and that this does not prevent the parties agreeing to additional circumstances in which the contract may be terminated.
  • a check list of 14 items that are prescribed in the Home Building Regulation 2014
  • a caution about signing the contract if the home owner cannot answer yes to all items in the check list
  • a note about the home owner’s entitlement to a copy of the signed contract within five days of signing
  • a note about the contractor's obligation to give an insurance certificate under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) if the contract value is over $20,000
  • a clear statement setting out the cooling-off period of five clear business days within which the home owner may cancel the contract, applicable to contracts valued at over $20,000
  • the home owner must provide a statement of acknowledgement that they have:
    i) read and understood the Consumer building guide which explains procedures for the resolution of contract and insurance disputes
    ii) completed the checklist and answered yes to all items on it.
  • a 'quality of construction' clause that states the work will comply with
    i) the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
    ii) all other relevant codes, standards and specifications that the work is required to comply with under any law
    iii) the conditions of any relevant development consent or complying development certificate.
  • a clause that states that the contract may limit the liability of the contractor for failure to comply with the above work compliance clause if the failure relates solely to:
    i) a design or specification prepared by or on behalf of the home owner (but not the contractor) or
    ii) a design or specification required by the home owner if the contractor has advised the home owner in writing that they go against the 'work compliance clause'.

Consumer Building Guide

If the work exceeds $5,000, the contractor must provide the home owner with a copy of the Consumer building guide. The Guide can be downloaded for free by contractors from the Consumer building guide web page and is updated to reflect any changes to laws or polices about home building.

Deposit

You cannot request a deposit of more than 10%, this requirement applies to both small jobs contracts and contracts for large jobs.

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Off-the-plan contracts for sale 

The off-the-plan contract for sale must include terms that:

  • inform the buyer that the developer selling the property does not need not give a certificate of insurance under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) if the building work has not yet started
  • inform the buyer that the law requires there to be a certificate of insurance under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) on the building work (unless it is a construction of a multi-storey building)
  • require the developer to give to the purchaser the certificate of insurance under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) within 14 days after the insurance was taken out
  • enable the purchaser to cancel the contract for sale if the certificate of insurance under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) is not provided within 14 days after being available.

The developer/builder who sells residential property off-the-plan does not need to attach a certificate of insurance under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) to the contract for sale, as long as the work contracted with the builder has not yet commenced.

Cancellations

The legal right of cancelling a contract under the Home Building Act 1989 is limited to situations without a certificate of insurance under the Home Building Compensation Fund (formerly known as Home Warranty Insurance) at the arranged time. In this situation, the prospective purchaser can only cancel before the contract has been completed (ie before settlement).

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Fair Trading home building contracts 

Fair Trading home building contracts can be downloaded for FREE in PDF format. There are two contracts available to use depending on the value of the building work:

Home building contract for work over $5,000 and up to $20,000 (size: 752kb)
Suitable for trade work, maintenance and repair work as well as smaller alterations or improvements likely to cost less than $20,000.

Home building contract for work over $20,000 (size: 1.2mb)
Suitable for new homes, alterations and additions.

The Fair Trading home building contract is in a saveable and fillable PDF format. They can be completed on screen and printed, then saved on your computer for re-use at another time.

Alternatively, as a builder or tradesperson, you may wish to use your own contract or one purchased from an industry association. Ensure you understand each clause and that the contract contains all of the items listed above as well as the contract checklist for owners entering a building contract.

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