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What kind of contract do I need for home building in NSW?

November 3, 2020   Brigid NelmesPhilip Evangelou

The construction of residential buildings is highly regulated in NSW. The type of contract you need for home building depends on the cost of the work to be completed.

Overall rules

All residential building work must have a written contract if it is valued at over $5,000 (including GST)/ or where the contract price is unknown if the reasonable market cost of the labour and materials is more than $5,000 (including GST).

Neither small or large job contracts can require a deposit of more than 10%. 

Small jobs contracts ($5,000-$20,000) 

All residential work valued at between $5,000-$20,000 requires a ‘small jobs’ contract. These contracts must be in writing, dated and signed by each party. 

A small jobs contract must contain:

  • Parties names (including the contractor’s name as shown on their contractor licence)
  • The contractor’s licence number
  • A description of the work alongside any plans/specifications for the work 
  • The contract price
  • A ‘quality of construction’ clause noting that the work will comply with particular regulatory and statutory obligations, including the Building Code of Australia
  • A clause limiting the contractor’s liability for failing to comply with the quality of construction clause based solely on (i) a design/specification prepared by the homeowner (ii) a design/specification required by the homeowner if the contractor advised them in writing that such works go against the quality of construction clause. 
  • Contracts entered into on or after 1 January 2018 must include a copy of the Consumer Building Guide

Large job contracts (more than $20,000)

All residential work valued at over $20,000 requires an extensive home building contract. These contracts must be in writing, dated and signed by each party. Additional requirements to those above include:

  • Warranties required by the Home Building Act 1989 
  • The contract price, or a warning if the contract price is unknown or could change, on the first page of the contract
  • The cost of coverage under the Home Building Compensation Schedule if insurance is needed
  • A clause stating that any variations to the contract, plans or specification are (i) taken to be part of the contract and (ii) in writing and signed by both parties
  • A progress payment schedule
  • A termination clause
  • A checklist of 16 items as prescribed in the Home Building Regulation 2014 and a caution to the homeowner about signing if they cannot answer ‘yes’ to all items on the checklist
  • The homeowner must acknowledge that they have (i) understood the consumer building guide and (ii) completed the checklist
  • A statement of the homeowner’s entitlement to a signed copy of the contract within 5 days of signing
  • A statement of the contractor’s obligation to provide an insurance certificate under the Home Building Compensation Scheme for contracts valued over $20,000
  • A statement of the cooling-off period of 5 business days 

Key takeaway

The type of home building contract required in NSW depends on the cost of the job. The small jobs contract tends to cover repair, maintenance and small improvement works whereas the large jobs contract is needed for new homes, alterations and significant improvements. The Fair Trading home building contracts are freely accessible on the NSW Fair Trading website, however, some builders prefer to use their own or industry contracts. It is highly important to understand your legal rights and obligations under home building contracts whether you are a builder or a homeowner.

If you would like to speak with our construction lawyers, just contact us via 1300 337 997 or by filling out the contact form.

About Brigid Nelmes

Brigid NelmesBrigid is a legal intern at OpenLegal, working with our legal content team. She is currently completing her Bachelor of Laws and Bachelor of Arts (International Studies) at the University of Technology Sydney. Her interests are in digital/privacy and startup law.

About Philip Evangelou

phillipPhil is a director at OpenLegal. He has over 16 years experience working in private practice and in-house counsel in Sydney and London, giving him expertise in employment law, IP, finance, leases, dispute resolution, insurance and contracts.