Home building delays in NSW

Many building projects are delayed because of ongoing global building materials and skilled worker shortages plus the recent worldwide unprecedented events.

Find out what to do about delays, price increases, insolvent builders and solving disputes.

Key information

  • The combination of COVID-19, global trade sanctions and natural disasters has led to increasing timeframes and prices across the industry.
  • Before you sign a contract, make sure you discuss your timeframe and budget with your builder or tradesperson and think about adding in reasonable allowances when calculating commencement and completion dates in your contract.
  • If the project is valued at $20,000 or more, check your builder or tradesperson has Home Building Compensation Cover. This can protect you if your builder becomes insolvent or disappears.
  • If your project is already underway, work closely with your builder or tradesperson to understand whether you can fix time delays, and be prepared to be flexible.
  • Under most contracts, your builder or tradesperson cannot change or increase prices unless there is a variation in the work they are completing.
  • During delays, you should continue to pay your builder or tradesperson as agreed in your contract, and only after work has been completed.
  • There are limited circumstances in which you can terminate your contract. If you have a dispute with your builder or tradesperson, there are steps you can take to resolve it.
  • If your builder becomes insolvent or disappears, you may be covered under the home building compensation (HBC) scheme.

My builder has become insolvent

A company becomes insolvent when it is unable to pay its debts. Insolvency usually happens when a company decides to wind up its affairs or is ordered to do so by a court.

If your builder or tradesperson cannot complete building work or fix defects because they have become insolvent, died, disappeared or had their licence suspended, you may be covered by the HBC cover. You should immediately notify the HBC insurer in writing as delay may impact your claim.

HBC Insurance

If the value of your project is over $20,000, your builder or tradesperson must obtain a certificate of HBC cover before they start work or ask for payment from you.

If the HBC cover is not in place, you may not be able to recover your money if your builder or tradesperson fails to complete the work.

You can check whether your build is covered under the HBC scheme as well as the validity of the certificate of cover using the free online portal. You will need either the policy certificate number or your street address or the builder’s name or licence number.

The HBC covers a maximum of $340,000 for non-completion or defects within the statutory warranty period.

Note that any deposit of more than 10% of the contract price may not be recoverable under the HBC cover.

Repossession of goods and materials

Sometimes when a builder is unable to or stops paying their bills, unfixed goods on site may go missing, or works that have been carried out may be damaged.

Subcontractors who have not been paid by your builder are not entitled to go on your building site and take back materials that have been paid for and form part of the building works. It is important that theft or damage to your property is reported to the NSW Police by calling 131 444.

HomeBuilder grant

If your builder becomes insolvent, this will not impact the HomeBuilder grant that you may have received.

Although the program requires work to start by specified dates, the Australian Government has extended the construction commencement requirement under Home Builder from 6 to 18 months.

Why are projects getting delayed?

Unexpected events like COVID-19, global trade difficulties and natural disasters such as the NSW and QLD floods have affected the building industry. There are not enough quality materials or skilled workers to carry out building jobs.

However, since mid-2020 there has been a significant increase in the number of people wanting to build or renovate their homes.

This means that builders and their customers need to pay increasingly higher prices to get basic building items and to find enough workers to complete a job. This has resulted in delays in completion of projects and unexpected increases to the project cost.

113,943 total dwelling approvals in NSW since 2020*

Increases in housing construction materials. 15.4% national increase & 13.4% Sydney increase since March 2021*

36% of builders say the rising cost of materials is a significant challenge**

*Source: ABS March 2022

** Source: Procore Builder Survey

What to do about delays

Before you sign a contract

If you are planning on building or renovating, keep in mind the challenges that the building industry is facing.

Make sure you discuss your timeframe and budget with your builder or tradesperson, including any circumstances that could delay your project. You should also agree on any flexibility in the start and finish dates.

Discuss the best way to communicate with your builder or tradesperson, for example, phone call or email. Keep in mind that many businesses are short on staff, so may not be able to respond to your questions immediately.

Check your builder or tradesperson is licensed

You can check your builder or tradesperson holds the right licence to do the work by using NSW Fair Trading’s online tool

You should do some research and carry out checks before choosing a builder or tradesperson. Check for any warning notices about the person carrying out unfair business practices.

Adding in new contract clauses

If your builder or tradesperson agrees, you can include extra clauses in your building contract, such as a time limit for construction and procedures to be followed in case of delay.

If your builder or tradesperson cannot meet the deadline, they would then need to ask you for an extension of time. If they don’t ask for an extension of time, you could be owed money for damages or breach of contract.

If you are unsure about adding in contract clauses, seek independent professional advice.

Insurance

Residential building work must be adequately insured. Check that anyone who will be working on your project has current insurance.

If your project is underway

You need to work closely with your builder or tradesperson and ask them to be upfront about any delays .

Your builder or tradesperson might be able to suggest alternative materials, products or changes to the project that could help fix delays. You should be aware that variations to materials, products or the project may change the cost and could impact on the quality of the build.

If your builder or tradesperson needs to ask for an extension of time, make sure they tell you the reasons why it will be needed. Before you agree, check your contract for any relevant clauses about time delays.

Sometimes extensions of time may mean you need to pay more for materials and labour. Therefore, it is important that you understand any requirements under the contract.

If your builder or tradesperson cannot meet the deadline in the contract and you haven’t agreed to an extension of time, you could be owed money for damages or breach of contract. If your project is delayed, it is best to be prepared. If you are building a new home and waiting to move in, consider whether you need to find alternative accommodation or extend your existing living arrangements. It is better to have explored all options should the need arise.

What to do about increased prices

If your builder or tradesperson asks to increase prices, check your contract for any clauses that would allow them to do this.

Under most contracts, your builder or tradesperson cannot change prices unless there is a variation in the work they are completing. Check if any work has been added or removed, or if there has been a change to designs or materials.

If the value of your contract is over $20,000, your builder or tradesperson cannot increase their prices, unless your contract contains a clause for this.

If your contract does allow for an increase in prices, you may be able to negotiate with your builder or tradesperson, however it is best to seek professional advice before you do so.

Should I continue to pay my builder or tradesperson?

Yes, you should make progress payments as agreed in your contract, onlyafter the work has been completed.If your contract includes an “as invoiced” payment clause, make sure your builder or tradesperson gives you evidence such as invoices or receipts that show labour and costs incurred.

If you do not make a progress payment as outlined in your contract, the builder or tradesperson can initiate legal recovery for the payment. .

If you make any additional payment that is not a required progress payment set out in your contract, you may not be able to recover losses for such payments under the HBC cover.

What is a progress payment?

A progress payment, or “milestone payment” is a payment made on a specific date or after a specific event, for completed work.

A progress payment can be made when:

  • your contract clearly describes a specific stage of work that must be completed, or
  • your contract states payments must be made at fixed time intervals, or
  • you agree to pay “as invoiced”, for work completed. For example, you may agree to pay your builder or tradesperson at the end of every month for the cost of labour and materials for work completed in that month.

Resolving building disputes

Things may not always go to plan in your home building or renovation project.

Aim to create positive communication with your builder or tradesperson, as a lack of communication can make disputes much harder to resolve.

If you find yourself in a dispute, you can follow this list of steps to resolve it.

If you are unable to resolve a dispute with your builder or tradesperson, you can lodge a complaint with NSW Fair Trading. Make sure you keep all relevant documents including any invoices and receipts, as well as a copy of your initial contract.

Terminating a contract

There are limited circumstances in which you can terminate your contract. If you are considering termination, it is important to understand your rights, including statutory warranties.

If you terminate  your contract, your builder or tradesperson may choose to take legal action for damages and expenses, including loss of profit. If you are unsure of your right to terminate your contract, seek independent professional advice.

Statutory warranties

“Statutory warranties” are your rights under a residential building contract.

Even if these terms are not written in the contract you sign, they still apply to your building project. These warranties are:

  • the work will be performed with due care and skill
  • the work will be in line with any plans and specifications in the contract
  • all materials supplied will be suitable for purpose
  • materials will be new, unless otherwise specified
  • the work will comply with all laws
  • the work will be done with due diligence and within the time stated in the contract, or otherwise in a reasonable time
  • the work will result in a house that is reasonably fit to live in, if the work includes:
  • construction of a dwelling
  • making alterations or additions to a dwelling
  • repairing, renovating, decorating or protective treatment of a dwelling
  • the work and materials used will be reasonably fit for the purpose or result agreed to by the owner and contractor, while indicating that the owner relies on the contractor’s skill and judgment.

The warranties apply from the time the work is completed. If a builder or tradesperson breaches one of these warranties, you have the right to take legal action for six years for major defects and two years for other losses.

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