Whether you’re renovating your current home or building a new property, having the right building contract is essential to ensure everyone understands their rights and responsibilities. Home building contracts come in different forms depending on the size and type of project. It’s important to understand these different building contracts and to have the right one in place.
Types of Home Building Contracts
Home building contracts can come in a variety of forms.
Industry standard contract – These are the most common and contain standard terms that can be personalised by both parties to make it specific to each project. These contracts can be either fixed price or cost-plus, depending on your needs and the build itself.
Some of the industry standard contract options are:
Housing Industry Association contracts
- NSW Small Works Contract (for jobs under $20,000)
- NSW Small Works Contract (for jobs $20,000 – $50,000)
- NSW Residential Building Contract for Renovations and Additions
- NSW Residential Building Contract for Works on a Cost Plus Basis
Master Builders Association (MBA) contracts
- Head Contract Cost Plus (Residential)
- Residential Building (BC4)
- Residential Minor Works
- Small Residential Renovations and Additions
Department of Fair-Trading contracts
- Home Building Contract for Work between $5,000 and $20,000
- Home Building Contract of Work over $20,000
Custom contract – These contracts are specifically designed for you and your building work. Depending on the nature of the build, your requirements, and other factors you and your contractor discuss, these contracts can either be fixed price or cost-plus.
What is a Fixed Price Contract?
Fixed price contracts are commonly used for domestic buildings, these contracts state pricing terms as a fixed lump sum that cannot be changed unless there are variations to the scope of works.
Fixed price contracts may also include provisional allowances for parts of a project where the price cannot be determined ahead of time, such as excavation costs.
What is a Cost-plus Contract?
Cost-plus contracts place no firm limit on the price of a project. The owner agrees to covering all costs, plus a margin for overheads.
While these contracts can be used for any project, they make the most sense when the nature of the work makes it difficult or impossible to provide an accurate quote before starting. For example, when renovating a home, the state of the building may be impossible to ascertain before work has begun.
What’s in a Building Contract?
Your home building contract outlines all roles, rights, and responsibilities of the parties involved. It should include everything that has been agreed upon, such as:
- What kind of work is taking place
- Any plans or specifications for the work
- The timeframe for the work
- The contract price if known
- What happens if disputes arise and how to deal with them
- How to manage variations to the build
- What happens if there are delays and how to manage the process
Contracts for Smaller Jobs
Residential building work worth between $5,000 and $20,000, including interior renovations, can be covered by a small jobs contract. These contracts need to include details about both parties, the contractor license, and the kind of work being completed as well as:
- 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 and all other relevant codes, standards, conditions of development consent and specifications that the work is required to comply with under any law.
- 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 behalf of the homeowner or any design or specification required by the homeowner if the contractor has advised the home owner in writing that they go against the work compliance clause.
Contract must also include a copy of the Consumer Building Guide published by the Department of Finance, Services and Innovation.
Contracts for Larger Jobs
Home building contracts for work over $20,000 are much more extensive. Additionally to the information above, these contracts require the contract price to be prominently displayed and include additional information like:
- Relevant warranties and insurance required
- A progress payment schedule (either fixed or made has costs are incurred)
- A termination clause
- Checklist of 14 items that are prescribed in the Home Building Regulation 2014
- A statement setting out the cooling-off period of five clear business days
- A note about the contractor’s obligation to give an insurance certificate under the Home Building Compensation Scheme if the contract value is over $20,000
The homeowner also has to provide a statement of acknowledgement that they understand the procedures and checklist.
Looking for Reliable Builders in New South Wales?
Family Home Designers & Builders have provided quality building design, construction, and renovations in the North Shore area for over 25 years. If you need assistance with your next project, get in touch with our team today or call 9417 5777.
