From 1 August 2017, the threshold amount for a major domestic building contract increased from $5,000 to $10,000.
You must use a major domestic building contract for work worth more than $10,000 - Include the costs of all items like taxes, levies and local council charges in the contract price
- Do not use the term ‘practical completion’ in the contract
By law, as a registered building practitioner, you must use a written major domestic building contract for work worth more than $10,000 (even if your client is an owner builder).
If the total cost of the project is more than $10,000, you must use a major domestic building contract even if the contract is split into several smaller amounts – for example, a pre-construction contract worth $4,000 and the main contract worth $7,000. We do not recommend splitting contracts.
We recommend you use a written contract for all building work, including work worth $10,000 or less, to help:
- ensure you and your client are clear about the work to be carried out
- minimise or resolve any disputes that may arise.
You must give your client a copy of the Domestic Building Consumer Guide before they sign a major domestic building contract. For more information, view our Domestic Building Consumer Guide page.
What to include in your major domestic building contract
The contract must be in writing and must:
- be written in clear English
- set out in full all the terms of the contract
- give detailed descriptions of the work to be carried out
- state the names and addresses of the parties to the contract
- state your registration number as it appears on your builder’s registration certificate
- state the contract price
- state the amount of the deposit and progress payments as required by law
- state the date the contract is effective (the date on which both parties have signed the contract)
- give clear advice about the five-day cooling-off period
- include definitions of words and key phrases used in the contract
- set out implied warranties
- contain an Approved domestic building contracts checklist (Word, 100KB).
The contract should also, when applicable to the proposed work:
- include plans and specifications containing enough information to get a building permit for the work
- set out details of the required domestic building insurance, if the contract is for more than $16,000
- state the number of days allowed for each type of foreseeable delay and inclement weather
- state a start and finish date, with allowances for delays. If the start date is not known, the contract must state:
- how the start date will be determined
- that you will do everything that is reasonably possible to start work as soon as possible
- the number of days required to finish the work once it has started.
For more information, view our Domestic building contracts section.
Reasonable allowance provisions
You should make a reasonable cost allowance in your contract for:
- supply and delivery of prime cost items even though the actual item has either not been selected or the price is not known when the contract is signed. Prime cost items are client selections of fixtures and fittings included in the contract but not specifically identified and costed
- the cost of carrying out additional work if, after making reasonable enquiries, you cannot give a definite price when preparing the contract (provisional sum items)
- the nature and location of the building site. For example, if you are building on a rural property or a steeply-sloping site, you must allow for transport, excavation (if required) and access costs.
Prime cost and provisional sum items can lead to disputes with your client.
It is important to specify as much as possible in the contract for a fixed total price, to avoid disputes.
Before offering the contract to your client
You should check:
- you are currently registered with the Victorian Building Authority in the appropriate registration class if the contract is more than $10,000, or if you are going to re-stump, re-block, demolish or remove a home, or do any structural building work
- you have confirmed the site is suitable for the proposed works, and have obtained foundation data and a soil report. It is your responsibility to satisfy yourself that the foundation data is accurate
- the work has the required building and/or planning permits, or the contract states who is responsible for obtaining these
- the work is clearly and comprehensively described in the contract, including plans or specifications and any other relevant documents
- the client has included all special requirements and finishes in the plans and specifications
- fixtures and fittings included in the contract but not specifically identified, or of unknown price, are clearly stated as provisional sum items or prime cost items and adequate costs are allowed for these
- for work worth more than $16,000, you provide the client with a current certificate of domestic building insurance covering the building project’s address
- the requested deposit is within the legal limit
- the price and timing of progress payments are legal and clearly stated
- your client understands the procedure for changes to the contract (variations)
- you and your client share an understanding of what is ‘reasonable access’ to the building site
- the start and finish dates are clearly stated
- the procedure for delays and extensions of time is clearly stated
- the penalty for exceeding construction time (liquidated damages) is clearly stated with a defined amount
- the clause containing the five-day cooling-off period is included for contracts over $10,000
- you and your client understand the circumstances in which either of you can end the contract.
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 your client’s rights and obligations. If a dispute arises, the contract provides a clear path to the requirements of the law.
Download a copy of the Building contract for new homes (Word, 1.2MB)