When it comes to residential building work, a written contract must be provided by your builder or trades person for jobs where the contract price is $5,000 (including GST) or more. In the event where the contract price is not known, but the reasonable market cost for labour and materials is more than $5,000, a contract must be used.
There are two types of contracts that can be used, depending on the size of the job. For jobs worth between $5,000 and $20,000, a small job contract can be used to capture the basic information. Any residential building work over $20,000 must use the more detailed and extensive large job contract.
Small Job Contracts: $5,000 to $20,000
Residential building work worth between $5,000 and $20,000 must be covered by a small jobs contract. The written contract must be dated and signed by, or on behalf of, each party. The contract may also specify work to be paid for at regular intervals. This type of contract is suitable for trade work, any maintenance or repairs, or smaller alterations and improvements.
The small job contract must contain the following:
- the parties' names, including the name of the holder of the contractor licence as shown on the contractor licence
- the contractor licence number
- a description of the work
- any plans or specifications for the work
- the contract price if known
- a quality of construction clause that states the work will comply with
- the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
- all other relevant codes, standards and specifications that the work is required to comply with under any law
- the conditions of any relevant development consent or complying development certificate.
- a clause that states the contract may limit the contractor's liability for failure to comply with the above work compliance clause if the failure relates solely to:
- a design or specification prepared by or on behalf of the home owner (but not the contractor) or
- a design or specification required by the home owner if the contractor has advised the home owner in writing that they go against the 'work compliance clause'.
- an information sheet about registered certifiers, if you are required to appoint a certifier for the job
- a provision indicating the client’s freedom to choose their own certifier, if one is required.
Large Job Contracts: $20,000 and over
Residential building work worth over $20,000 requires an extensive home building contract. This is typically suitable for new homes, major alterations and additions.
A large job contract must contain the following:
- the date and signatures of both the homeowner and the contractor
- the parties' names, including the name of the holder of the contractor licence as shown on the contractor licence. You can check these details are correct here.
- a sufficient description of the work to be carried out
- plans and specifications attached
- relevant warranties required by the Home Building Act 1989
- the contract price, if known, which must be prominently displayed on the first page and a warning with an explanation if the contract price is subject to change or if the price is not known
- a clear statement setting out the cooling-off period of five clear business days after being given a copy of the contract where it is valued over $20,000
- a checklist of 17 items as listed and required
- a caution about signing the contract if you cannot answer yes to all items in the checklist
- a progress payment schedule, which may only include the following types of payments:
- fixed payments to be made following the completion of specified stages of work. Payments must be of a specified amount or percentage of the contract price, and the stages of work must be described in clear and plain language.
- payments to be made as work is performed and costs are incurred (and which may include the addition of a margin), at intervals fixed by the contract or on an ‘as invoiced’ basis. Claims for this second type of progress payment must be supported by invoices, receipts or other documentation.
- a combination of the above two types of payments.
- a termination clause, which must include a statement that the contract may be terminated in the circumstances provided by the general law and that this doesn't prevent the parties agreeing to additional circumstances in which the contract may be terminated
- a note about the home owner’s entitlement to a copy of the signed contract within five days of signing
- a note that the contractor must give you an insurance certificate under the Home Building Compensation (HBC) Scheme (formally known as home warranty insurance) if the contract is valued over $20,000
- a statement of acknowledgement by the home owner that they have:
- read and understood the Consumer building guide
- completed the check list and answered yes to all items on it
- a clause that states that all plans and specifications to be done under the contract (including variations) are taken to form part of the contract
- a clause that states that any agreement to vary the contract or any plans and specifications must be in writing and signed by you and your contractor
- a clause that states that the work will comply with:
- the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
- all other relevant codes, standards and specifications that the work is required to comply with under any law
- the conditions of any relevant development consent or complying development certificate a clause that states that the contract may limit the liability of the contractor for failure to comply with the above work compliance clause if the failure relates solely to:
- a design or specification prepared by or on your behalf of the owner or a design or specification required by the owner if the contractor has advised the owner in writing that it contravenes the clause referred to immediately above.
- an information sheet about registered certifiers, if you are required to appoint a certifier for the job, indicating the client’s freedom to choose their own certifier.
You can check that a certificate of cover is valid by getting in touch with the insurance company listed on the certificate or by using HBC Check.
A copy of the contract must be provided by the builder or tradesperson within five business days after the homeowner has signed it. Weekends, NSW public holidays 27-31 December (inclusive) do not count.
How much deposit is required for building work contracts?
Whether it’s a small job contract or large job contract, the builder or tradesperson cannot request a deposit of more than 10 percent. Small jobs tend to not require a deposit. It’s important to note, that if the building work is required to be covered under the Home Building Compensation Scheme, it is illegal for the contractor to ask for a deposit or other payment under the contract unless the cover has been taken out, and a certificate of the cover is provided to you.
What to know before signing a contract?
Before signing any contract with a builder or trades person, you should take note of the following:
- make sure there's nothing in your contract which makes you responsible for termite control instead of the builder or trades person
- ensure that progress payments listed on the contract are for work actually done and not time on the job
- make sure the dollar value placed on each stage of work is realistic
- be clear about the duration of warranties
If you’re unsure of anything, be sure to discuss this with the builder or trades person to gain clarity. You also have the right to request changes to the contract if you’re not happy. We recommend seeking independent legal advice before signing any contract or for any changes or amendments.
Where to find building work contracts?
Building contracts can be downloaded for free from the NSW Fair Trading website.
Get in touch
To find out more about building work contracts, contact the friendly team at The Strata Collective today.