by rob@elementsofhome.com.au | Oct 2, 2023 | builders, building, contracts | 0 comments


Important note: the following changes commenced on 1 August 2017:

  • The threshold amount for a major domestic building contract increased from more than $5,000 to more than $10,000
  • The threshold amount above which cost plus contracts are permitted has increased from $500,000 or more to $1 million or more. For a cost plus contract entered into before 1 August 2017, the limit remains $500,000 or more.

Your builder must give you a copy of the Domestic Building Consumer Guide before you sign a major domestic building contract. For more information on this and other building law changes, view our Domestic Building Consumer Guide page.


When you must have a written contract

A written contract is vital if you are going to build a house, or intend repairing, renovating or extending your home, regardless of how much you are spending.

It is a crucial document in settling any dispute with your building contractor. Essential requirements for home building contracts are set out in the Domestic Building Contracts Act 1995.

We recommend you have a written contract for all building works, regardless of size and price.


By law, you must have a written ‘major domestic building contract’ for work worth more than $10,000

including:

  • erecting or constructing a home and associated landscaping, paving, retaining structures, driveways, fencing, lighting, heating, air conditioning, water supply or sewerage
  • renovations, alterations, extensions, repairs and any other improvements
  • work associated with renovation, alteration, extension or repair of a home. This includes landscaping, paving, retaining structures, driveways, fencing, garages, workshops, swimming pools or spas
  • preparation of plans or specifications by the builder (unless prepared by a registered architect, engineer or draftsperson)
  • demolition or removal of a home
  • any work associated with building on land zoned for residential purposes and for which a building permit is required.


Only registered builders can:

  • enter into a major domestic building contract and take out domestic building insurance, which is required for work over $16,000 and protects you if the builder dies, becomes insolvent or disappears
  • reblock, restump, demolish or remove a home, regardless of the value of this work.


You are not required to have a domestic building contract for jobs that involve only one of the following:

  • plastering
  • tiling (wall and floor)
  • electrical work
  • glazing
  • insulating
  • painting
  • plumbing, gas-fitting and draining
  • installing floor coverings
  • attaching external fixtures (awnings, security screens, insect screens and balustrades)
  • erecting a chain wire fence around a tennis court
  • erecting a mast, pole, antenna, aerial or similar structure.


However, we recommend you have a written contract for all work carried out on your property. The builder is required to give you sufficient time to have the contract documents reviewed by your legal representative before you sign.


Some building contractors use standard contracts prepared by industry organisations. Even if your contract is standard, we recommend you get independent legal advice before you sign – although this means you no longer have five days to change your mind after signing the contract.

The builder must also give you a copy of the contract signed by you and the builder. Do not accept a copy unless it has been signed by the builder.


Model domestic building contract for new homes

You can use our free model domestic building contract when planning to build a new home. The contract balances your and the builder’s rights and obligations. If a dispute arises, the contract provides a clear path to the requirements of the law.

Download a copy:


Before you sign a major domestic building contract

Check:


You automatically have rights to visit your building site. For more information about this, view our Building progress page. Before you sign, we recommend you:

  • delete any clause in your contract that limits your rights to visit your building before you sign
  • get a building lawyer to review your contract before you sign. The Law Institute of Victoria has a referral service that can help you find a building lawyer.


Check these costs are included in your contract price:

  • the building fee, which may or may not include the cost of mandatory inspections by the building surveyor and may vary between companies
  • planning permit fees (if your council requires a planning permit)
  • lodgement fee paid to the local council for recording purposes
  • crossing deposit or asset protection fee paid to the local council and refundable at the end of the project, if no damage has occurred to council property
  • inspection fee, a non-refundable fee paid to the council for the cost of their inspection of council assets
  • government levy charges when the contracted cost of work is more than $10,000. There are three levies based on the total cost of your building, which also apply to owner builders. Your building surveyor can advise you of these costs.


For more information on what to do before you sign, view our Building contracts checklist page.


Types of Contracts:


New Homes Contract

This contract is suitable for the construction of a new home. It is a fixed price contract, subject to variations and other price adjustments.

The contract is plain language and tailored to meet all legislative requirements, including rules relating to domestic building insurance, has a fair and balanced risk allocation and includes the required Contract Information Statement.


Alteration, Additions and Renovations Contract

This contract is suitable for alterations, addition, renovations to a home or where the work to be performed is not to completion (e.g. to lock-up stage).

This contract is similar to the New Homes Contract (fixed price) but with additional clauses specific to alterations, additions and renovations projects.


Cost Plus Contract

This contract is for domestic building works to be done on a cost plus basis. We recommend you consult HIA before using a cost plus contract as the law places restrictions on its use when doing domestic building work.

A cost plus contract can be used for domestic building work where:

The cost of the construction is estimated to be $1,000,000 or more; or

The work involves the renovation, restoration or refurbishment of an existing home and it is not possible to calculate the cost of a substantial part of the work without carrying out some domestic building work.


Small Works Contract

This contract is for domestic building work which is not complex, does not affect the foundations or slab of an existing building or require engineered footings or foundations. It would be suitable for smaller alteration and renovation projects.


Kitchen, Bathroom and Laundry Supply and Install Contract

This contract is suitable for the supply, installation or renovation of kitchens, bathrooms and laundries. However, is not suitable where structural changes are involved.


Domestic Building Contract For Building Works under $10,000

This contract is not suitable for domestic building work with a cost greater than $10,000 as it does not comply with the legal requirements of a major domestic building contract. It is suitable for use in the manufacture, supply and installation of cabinets and related works, bathroom renovations, carports, garages, pergolas and other small projects.


Commercial Contracts

HIA also has a suite of commercial contracts which are suitable for commercial works and for use between builders and subcontractors.


Medium Works Commercial Contract – with or without an Architect or Superintendent

This contract is for small and medium size commercial building work. There are two versions of this contract available to provide for situations where the owner is, or is not, engaging an architect, engineer or other professional to superintend the building works.


Cost Plus Medium Commercial Contract – with or without an Architect and Superintendent

This contract is similar to the Medium Works Commercial contract however building works will be completed on a cost plus basis.


Project Trade Contract

This contract is for used between builders and subcontractors and sets out the terms and conditions that relate to performance and completion of trade work. This contract is to be used where a subcontractor is only engaged for a single project. While it is not mandatory for builders and trade contractors to have written contracts, this is highly recommended as it clarifies the terms of the agreement and is helpful in the event of a dispute.


Period Trade Contract

This contract is similar to the project trade contract however is suitable where you have an ongoing relationship with a subcontractor or multiple jobs over a period of time. The contract allows for negotiation on the period that the contract runs and the length of the defects liability period. The contract conditions are to be used with a Work Order or quote.

While it is not mandatory for builders and trade contractors to have a written contract, this is highly recommended as it clarifies the terms of the agreement and is helpful in the event of a dispute.


Further sites to check:

Building contracts – Consumer Affairs Victoria

Which building contract should you use in Victoria? (hia.com.au)

Building contracts | Victorian Building Authority (vba.vic.gov.au)

Building a home | YourHome