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 and be signed and dated 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 proceedings being brought against the builder. If you are unsure about contractual requirements or a particular aspect of the contract you should 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:
- must be in writing;
- must contain all the terms, conditions and provisions of the agreement; and
- must be signed and dated by both parties.
- '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.
- must be in writing;
- must be signed and dated by both parties; and
- a copy must be given to the home owner prior to any work commencing.