Home Building Contracts

Whether you are a builder or homeowner, a building project generally involves substantial sums of money and mutual trust and confidence.

The Home Building Act 1989 (NSW) (the Act) requires builders to provide a written contract for residential building work in New South Wales where the price is over $5,000. The Act prescribes minimum terms and conditions to be included in the contract, with more extensive terms required for building works over $20,000.

A home building contract should include the full scope of works to be performed, with plans, specifications and schedules, and contain minimum terms, conditions and warranties in compliance with the Act and the Australian Consumer Law.

Although many home building contracts may appear or be represented as a ‘standard form’ contract, this does not avoid the need for careful review to ensure it is complete, fair and balanced. After all, a building project is typically not ‘standard’ – each has its unique features and complexities.

The Act provides certain statutory warranties for homeowners, including warranties as to the quality of workmanship and materials used in a residential building project. Homeowners also have various consumer rights and builders are restricted from requesting progress payments in excess of the amounts prescribed for each stage of the project.

When reviewing a home building contract, a lawyer will ensure it is fair, balanced and does not breach the consumer protection provisions under the Act. If the homeowner has not already done so, the lawyer should recommend or undertake registration and licensing checks on the builder or building entity.

A construction lawyer will explain the parties’ respective obligations under the contract, flag the potential for hidden costs such as incomplete prime cost schedules, and ensure that important provisions are not overlooked.

Builders may benefit from having home building contracts drafted professionally to ensure they are compliant with legislation, accurately describe the parties and site and include all necessary terms and conditions. While most contracts are prepared in good faith, many are made in haste and omit important provisions and / or do not meet the legislative requirements.

Builders are generally well aware that not everything goes according to plan and a project can be adversely affected by weather conditions, trade and material supply issues. A building contract should deal with these contingencies to ensure that fair and reasonable processes are in place and avoid situations that could potentially justify a homeowner’s right to terminate the contract.

A misunderstanding between parties involved in a building project can soon lead to a protracted dispute wasting valuable time and resources. A transparent complying home building contract is a great start to a mutually beneficial arrangement between a builder and homeowner.

A contract review provides an opportunity to identify omissions, ambiguous terms and non-complying provisions.

The building and construction team at Effective Legal Solutions has a wealth of building law, construction and project management experience and can assist in all aspects of your home building contracts.