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Home Building Contracts 101

In order to protect your investments and ensure your home renovation goes smoothly you're going to need a well drawn up contract. In order to save you some time and effort here is a lesson in home building contracts from what to include when writing one up, back down to what to check before signing...


Information from this article has been sourced from 'NSW Government Home Building Contracts' Page




Contract essentials

By you must provide a written contract if:

  • If the contract price is over $5000
  • If the price of the contract is unknown, but the cost of provision of labour and materials by contractor should be over $5000


Small Jobs Contracts

A 'small jobs' contract is required for any jobs costing between $5,000 to $20,000. It must include:

  • Name of both parties
  • Contractors license number
  • A brief description of the work
  • Contract price if known
  • A quality of construction clause that states the work done will comply with
    1. The Building Code of Australia
    2. All other relevant codes, standards and specifications
    3. The conditions of any relevant development consent or complying development certificate


Contracts for Large Jobs

When a building job costs over $20,000 a more extensive written contract must be drawn up. It must include:

  • Signatures of both parties and dates signed
  • Names of both parties
  • Contractors license number
  • A detailed description of the work to be carried out with attached plans and specifications
  • Relevant warranties
  • The contract price (displayed on first page)
  • A clause stating that any agreement to vary the contract or plans
    1. Are taken to form part of the contract
    2. Must be in writing and signed by both parties
  • A progress payment schedule for
    1. Fixed payments made following completion of specific stages of work
    2. Payments made as work is performed and costs are incurred at intervals fixed by contract
  • A termination clause
  • A check list of 14 items prescribed in Home building regulation 2014
Screen Shot 2016-07-11 at 1.03.43 PM The checklist mentioned in the 2014 Home Building Regulation
  • Caution about signing contract if home owner cannot complete aforementioned checklist
  • Note about home owner's entitlement to copy of contract within 5 days of signing
  • Note about contractor's obligation to give an insurance certificate under the Home Building Compensation Fund
  • Statement setting out five business day cooling-off period within which home owner may cancel contract
  • Statement provided by home owner claiming they have
    1. Read and understood Consumer building guide
    2. Completed aforementioned checklist
  • Quality of construction clause (see above for details)
  • Clause that states contract may limit liability of contractor for failure to comply with contract if failure relates to design or specification
    1. Prepared on behalf of home owner
    2. Required by home owner if the contractor has advised the home owner in writing that they go against the 'work compliance clause'.


What to Check before Signing

  • Ensure payments listed on the contract are for work actually done, not time spent
  • Ensure costs proposed for each stage of work are realistic
  • Be clear on the duration of warranties
  • Discuss anything you're unclear on with the builder
  • If you're unhappy request changes to the contract
  • Get legal advice before you make a change to a standard contract
  • Don't sign any contract if it doesn't meet all the previously discussed criteria


Making Variations to the Contract

A variation is a change or adjustment to what has already been agreed in the contract. Either you as a home owner might decide you want something different, or the builder may need to change due to council requirements or unforeseen circumstances. If the reason for variation is the builders fault you DO NOT need to pay extra.

Variations must be made in writing and signed by both parties. In almost all cases variations will impact the contract price. Therefore documents authorising variations must also contain a statement explaining cost implications of variation.


Ending the Contract

The contract should contain provisions about ending the contract, and these must be followed. It is important to remember that ending a contract should only be undertaken as a last resort. Before deciding to terminate the contract there should be:

  • Careful consideration
  • Reasonable negotiation between parties
  • Legal advice obtained
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