Building or renovating your home can be one of the most exciting times in your life – but it can also be one of the most stressful. Between the plans, the costs, and the endless decisions, it’s easy to overlook one of the most important parts of the process: the building contract.
If you’re planning any significant residential building work in Victoria, you’ll need a domestic building contract. But what exactly is that? Why does it matter? And what should you be watching out for before you sign?
Let’s break it down.
So, What Is a Domestic Building Contract?
A domestic building contract is simply a written agreement between you and a builder. It sets out what work is going to be done, how much it will cost, and who’s responsible for what.
This kind of contract is used for residential building work, like building a new home, renovating your kitchen, or putting on an extension. It’s not used for small repairs or work between a builder and their subcontractors. It’s specifically for when a homeowner is hiring a builder to do major work.
Why Is the Contract So Important?
It’s the rulebook for your building project.
When things go smoothly, you might not even think about the contract. But if something goes wrong, like delays, defects, or cost blowouts, it’s the contract that everyone turns to in order to figure out who’s responsible.
A well-written contract helps prevent misunderstandings. It keeps both the builder and the homeowner on the same page and can make it much easier to resolve any disputes if they arise.
What Does the Contract Actually Cover?
Think of the contract as your building project’s roadmap. It should clearly explain:
- What’s being built: This includes plans, drawings, and a description of the work
- How much it will cost: Including any allowances for things like fixtures or tiles
- When you’ll pay: Usually in stages as the work progresses
- When the work will be finished: Or at least, how long it’s expected to take
- What happens if something goes wrong: Including delays or unexpected issues
You should also receive a booklet called the Domestic Building Consumer Guide before you sign. It explains your rights as a homeowner and what to expect during the process.
Fixed-Price vs Cost-Plus Contracts
What’s the Difference?
Most people sign a fixed-price contract. That means the total price is agreed on upfront. It gives you more certainty and makes budgeting easier.
In some situations, like complex or unpredictable jobs, a builder might suggest a cost-plus contract. This means you pay for the actual costs of materials and labour as they go, plus a margin. It’s more flexible, but the final price isn’t known until the end.
For most residential builds, a fixed-price contract is the safer choice.
How Do You Know the Contract Is Fair?
Some contracts come from industry bodies like Master Builders or the Housing Industry Association. These are generally reliable and widely used, but that doesn’t mean they’re perfect for your situation.
Here are a few things to check before you sign:
- Are all the details correct? (builder name, dates, job description, price)
- Are there any hidden costs or vague wording?
- Do you understand what happens if changes need to be made?
- Has your builder explained the contract to you clearly?
If something feels off or you don’t fully understand a section, it’s always worth getting legal advice before you sign. It’s much easier to prevent a problem than to fix one later.
A Few Simple Protections You Should Know About
- You have a 5-day cooling-off period after signing, in case you change your mind
- Deposits are capped – you shouldn’t be asked to pay more than a set percentage upfront
- Insurance is required for most jobs over $16,000, to protect you if the builder disappears or goes bust
- Builders must be registered – always check this before agreeing to anything
These protections exist to stop people from being taken advantage of or left out of pocket if something goes wrong.
What Happens If the Contract Isn’t Done Properly?
Unfortunately, if your contract is missing key information – or if the builder isn’t registered – the whole agreement might not be legally valid. That can lead to big problems down the line, especially if there’s a dispute over payments or unfinished work.
In serious cases, the builder might even lose the right to be paid under the contract, or the homeowner might be left without protection.
Although there are legal safety nets, such as quantum meruit claims, restitution, estoppel and more, it’s far better to set things up correctly from the start than to rely on these measures after problems occur.
That’s why it’s so important to get it right from the beginning.
Final Thoughts: Don’t Build Without a Blueprint
Your building contract is more than just paperwork – it’s your safety net. It protects your rights, keeps the project on track, and gives you something to rely on if the unexpected happens.
At Warlows Legal, we help homeowners and builders understand what they’re signing, what’s missing, and what to look out for. Whether you’re about to start a new project or dealing with problems mid-way through, we’re here to help you protect what matters most.
Planning a building project?
Get in touch with Warlows Legal for straightforward, practical advice – before you sign on the dotted line.
