Guide to providing home building contracts

Residential building work worth between $5,000 and $20,000 must be covered by a small works contract. The written contract must be dated and signed by, or on behalf of, each party.

Small works contracts must contain:

• the parties' names, including the name of the holder of the contractor licence, as shown on the contractor licence
• the number of the contractor licence
• a description of the work
• any plans or specifications for the work
• the contract price, if known
• a 'quality of construction' clause that states the work will comply with:
  1. the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
  2. all other relevant codes, standards and specifications that the work is required to comply with under any law
  3. the conditions of any relevant development consent or complying development certificate.
• 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:
  1. a design or specification prepared by or on behalf of the home owner (but not the contractor), or
  2. a 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'.
• a copy of the Consumer Building Guide published by the Building Commission NSW.

Residential building work worth more than $20,000 needs an extensive home building contract.

Large jobs contracts must contain:

• the date and signatures of both the contractor and homeowner
• the home owner’s name and the exact name on your contractor’s licence and licence number
• a sufficient description of the work to be carried out
• attached plans and specifications
• relevant warranties required by the Home Building Act 1989
• the contract price, if known, which must be prominently displayed on the first page and a warning with an explanation if the contract price is not known or subject to change
• the cost of cover under the Home Building Compensation Scheme, if insurance is required
• a clause that states that any agreement to vary the contract or any plans and specifications to be done under the contract (including variations):
  1. are taken to form part of the contract
  2. must be in writing and signed by both the homeowner and contractor.
• a progress payment schedule, which may only include the following types of payments:
  1. fixed payments to be made following the completion of specified stages of work. Payments must be of a specified amount or percentage of the contract price, and the stages of work must be described in clear and plain language.
  2. payments to be made as work is performed and costs are incurred (and which may include the addition of a margin), at intervals fixed by the contract or on an ‘as invoiced’ basis. Claims for this second type of progress payment must be supported by invoices, receipts or other documentation.
  3. a combination of the above two types of payments.
• a termination clause, which must include a statement that the contract may be terminated in the circumstances provided by the general law and that this does not prevent the parties agreeing to additional circumstances in which the contract may be terminated.
• a checklist of 17 items that are prescribed in the Home Building Regulation 2014
• a caution about signing the contract if the homeowner cannot answer yes to all items in the checklist
• a note about the home owner’s entitlement to a copy of the signed contract within 5 days of signing
• a note about the contractor's obligation to give an insurance certificate under the Home Building Compensation Scheme (formerly known as home warranty insurance) if the contract value is over $20,000
• a clear statement setting out the cooling-off period of 5 clear business days within which the homeowner may cancel the contract, applicable to contracts valued at over $20,000
• the homeowner must provide a statement of acknowledgement that they have:
  1. read and understood the Consumer Building Guide, which explains procedures for the resolution of contract and insurance disputes
  2. completed the checklist and answered yes to all items on it.
• a 'quality of construction' clause that states the work will comply with:
  1. the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
  2. all other relevant codes, standards and specifications that the work is required to comply with under any law
  3. the conditions of any relevant development consent or complying development certificate.
• 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:
  1. a design or specification prepared by or on behalf of the homeowner (but not the contractor) or
  2. a design or specification required by the homeowner if the contractor has advised the homeowner in writing that they go against the 'work compliance clause'.