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.
Liquidated damages
Your building contract may include a liquidated damages clause.
This is an estimate of your potential losses if your builder breaches the contract; for example, if the builder fails to complete your home by the date agreed to in your contract.
The amount included in the liquidated damages clause can cover losses such as rent, travel and other out-of-pocket expenses.
It must be reasonable estimate of your expected loss and not extravagant or out of proportion.
If your contract does not contain a liquidated damages clause or the amount is left blank, you can still claim damages. You should seek legal advice.
Unfair contract terms
Victoria has laws to prevent unfair terms in consumer contracts, including contracts to build a house, and renovate, extend or repair an existing house.
Make sure your contract does not include these illegal terms:
- a clause requiring any dispute to go to arbitration (a compulsory arbitration clause)
- a caveat (a warning of some right or interest on the land title) on the building site land
- any statement that restricts or denies your rights to implied warranties (see building warranties and insurance)
- a cost escalation or ‘rise and fall’ clause, unless the contract price exceeds $500,000. The onus is on the builder to calculate into the contract price any likely rise in costs caused by inflation, wage increases and the like. If the builder wants to include a cost escalation clause, the Director of Consumer Affairs Victoria must approve it. The director has not yet approved any cost escalation clauses
- an agreement to pay the builder by a cost-plus method, if your contract is less than:
- $500,000 for contracts entered into before 1 August 2017, and
- $1 million for contracts entered into on or after 1 August 2017. An example of a cost-plus method is when a builder charges by the hour and you do not have a fixed price for your contract. You can use a cost-plus contract if you are renovating an existing house, but only in very limited circumstances. Get legal advice before you sign any cost-plus contract
- the expression ‘practical completion’. If you find it in your contract, delete it and insert ‘complete in accordance with the plans and specifications’.
For more information, view the Unfair contract terms page in our Products and services section.
Contracts for home improvements
We recommend using a written contract, regardless of the cost of the work. This ensures both parties are clear about the terms of the contract and their obligations.
For work worth up to $10,000, a contract should include:
- the date the contract is effective (this is the date on which both parties have signed)
- a start and finish date for the work, with allowances for delays
- a plan and specifications (detailed description) of the work to be done, including references to any Australian standards that apply
- the make and model number of any fittings such as ovens, tiles or tapware, and who is responsible for supplying these
- details of how variations to the contract may be made
- labour costs per hour; and per person if more than one person will be doing the work
- any insurances or warranties that may apply
- details of what happens if you cancel the contract, including any cancellation fees.
Look very closely at any long-term ‘guarantees’. These can sound attractive, but may not be of any benefit if the business is later sold or closed. Check carefully what they cover.
Contracts for outdoor projects
View our Outdoor home building projects checklist.
Pre-construction contracts
View our Pre-construction contracts page.
Changing a major domestic building contract
View our Changing a major domestic building contract checklist page.
Getting out of a building contract
View our Getting out of a major domestic building contract checklist page.