Your protections
Notice for the homeowner
Home-building work includes building a new home, renovating, repairing or altering an existing home or placing a new home on a lot of land. It also includes associated work such as installing a swimming pool, cabinetry or tiling, constructing a garage, shed or pergola, or landscaping.
Your rights and protections for contracts involving this type of work, where the fixed-cost value is between $7,500 and $500,000, are covered by the Home Building Contracts Act 1991, and they apply whether or not your builder is registered. Before you sign a contract, your builder must provide you with a copy of the Notice for the homeowner which outlines their legal requirements and obligations.
For these to apply, your contract must:
- be in writing (a verbal agreement is not sufficient);
- contain all the terms, conditions and provisions of the agreement;
- show the date; and
- be signed by both parties.
For your added protection, builders are also responsible for any defects in the work, where you have given them notice within four months of practical completion, at no cost to you.
Copies of the Home Building Contracts Act 1991 and the Home Building Contracts Regulations 1992 are available on the Parliamentary Counsel's Office website.
Home indemnity insurance
Home indemnity insurance (HII) is an important safeguard for you and is there to help in the event of the death, disappearance or insolvency of your builder.
HII is a must for residential building work valued at more than $20,000 and it can cover damages such as loss of your deposit (up to $40,000), incomplete building work (up to $200,000) or to fix defective work (up to $200,000).
Your builder must give you a copy of your insurance certificate and you can also check for your policy on an online register maintained by QBE. You shouldn’t make any payments to your builder until it’s in place and they can’t start work on your project either.
It’s important to note that a preparations of plans agreement, or PPA, doesn’t form part of your contract and so isn’t covered by your HII policy. If your builder becomes insolvent or disappears while only preparing the plans under the PPA, you won’t be covered for any losses.
For more information and to see an example of a HII ‘Certificate of Insurance’ please click on the button below.
Building challenges
Deposits, progress payments and increases in price
As your work gets underway, your builder will be in contact to ask for an initial deposit and then for progress payments as more work is completed. There are limits and conditions on these payments and it’s important you understand how they work, as they can affect your home indemnity insurance.
The maximum deposit that your builder or tradesperson can ask you for before they start work is 6.5 per cent of the contract price, but it’s important to note that there is no limit on deposits when the contract is valued at more than $500,00, and in these circumstances, your HII coverage for loss of deposit is capped at $20,000.
Consider seeking professional advice if you are concerned about the size of a deposit you have been asked to pay.
There is a limited exception that applies for off-site cabinetry work, where the value of that work represents more than 50 per cent of the amount under the contract. In these cases, a deposit of no more than 20 per cent can be charged.
Once work has started, you should only make progress payments for work that has actually been done or materials already supplied. For example, your builder can’t ask for a progress payment for the purchase and delivery of bricks until the bricks have actually been delivered to the site. Upfront payments for variations to your contract are not allowed and, if made, can affect your protection under home indemnity insurances
At times, builders may face uncertain market conditions outside of their control and there are limited circumstances where they can pass increased labour and material costs to you.
If you believe a price increase is unjustified or excessive, you can lodge a complaint with Building and Energy, but generally a three-year time limit applies from when the dispute arose, so don’t delay if you believe a complaint is warranted.
Building contracts and progress payments
Extensions of time
Your builder may face other factors outside of their control and need to ask you for more time to complete their work on your home. For instance, they may not be able to source the materials specified in your contract nor an acceptable alternative.
If you’re asked for an extension of time, make sure you review your contract, ask your builder to outline the reasons for the request and confirm the relevant clause in the contract.
Granting an extension of time can sometimes also mean you paying increased costs, such as for labour. If you’re concerned about the time extension or price increase requested, it might be a good idea to think about seeking independent professional advice.
You can make a complaint to Building and Energy if your builder exceeds the time specified in your contract, but it’s important to note that if your builder has given you adequate notice of anticipated delay (it can be in writing, in person or by phone) and can justify the delay, your complaint may not be successful. There is also generally a three-year time limit after the dispute arose to lodge a complaint.
Termination of the contract
If you are thinking about terminating your contract, it’s important to understand your obligations, as well as your rights, to avoid potentially costly consequences. If you end your contract without having the right to do so, your builder could take you to court for damages and expenses, including loss of profit.
There are limited circumstances where you, as a home owner, can lawfully end a home building work contract, but it’s best to seek independent advice.
A guide on price increases to home building work contracts
Dispute resolution process
Homeowners or builders who believe there has been a breach of the HBCA or a home building work contract may be able to seek a remedy under the Building Services (Complaint Resolution and Administration) Act 2011. Building and Energy remains impartial when dealing with complaints, with decisions being made having regard to all the available evidence.
Tips for each stage of the building process
Topics
- Choosing a block of land and a builder
- Considering design and plans
- Signing the contract
- Before construction starts
- During construction
- Handover and moving in
Video with translated captions
The video is available with translated captions in the following 10 languages.
- Chinese Simplified (Mandarin)
- Vietnamese
- Korean
- Arabic
- Chinese Traditional (Cantonese)
- Hazaragi
- Karen
- Thai
- Punjabi
- Burmese
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