Are you looking for building contractors to complete some residential building work? Have you looked at the Building Contract Checklist and determined that you need a building contract? Depending on the value, size and complexity of your project, you will need to provide and execute different home building contracts under the Home Building Act 1989 (NSW) (‘the Act’). Below, we examine the various types of building contracts in New South Wales, when to use them and what you should include in them.
Small Jobs Contract
If the residential building work is worth between $5,000 and $20,000, you will need a small jobs contract, governed by section 7AAA of the Act. Small jobs contracts need to be in writing, and the parties (or their representatives) must sign and date them. The contracts also need to contain:
- The names of the parties, including the name of who holds the contractor licence (as shown on the licence);
- The contractor’s licence number;
- The description of the work that the contract relates;
- Any plans and specifications for the work;
- The contract price (if known);
- A work compliance clause that states the work will comply with the Building Code of Australia, all other relevant codes and standards, and the conditions of any relevant development consent; and
- A clause that limits the liability of the contractor for failure to comply with the work compliance clause. This provision is only effective where the failure relates to the design the homeowner prepared or the design the owner required, and where the contractor has advised it goes against the work compliance clause.
The contractor must also give the homeowner a copy of the Consumer Building Guide, which outlines the laws and policies about home building.
Contracts (Other Than Small Jobs)
If the work is worth over $20,000, then this requires a more detailed and extensive home building contract. Section 7 of the Act governs these type of building contracts.
Along with the requirements listed under the small jobs contracts, it must also include:
- Any statutory warranties applicable to the work the Act requires;
- Details of any payments which are payable for progress under the contract;
- A clause that states that the parties may terminate the contract under general law principles and that this does not prevent the parties from agreeing to other circumstances in which they can terminate the contract;
- A clause that states any agreement to vary the contract is taken to form part of the contract and must be in writing;
- A checklist of the 14 items prescribed in the Home Building Regulation 2014, and a warning about signing if the homeowner has not answered ‘yes’ to all the items in the checklist;
- A clause that states that the homeowner is entitled to a copy of the signed contract within five days of signing;
- A clause that states that the contractor is obliged to give an insurance certificate to the homeowner;
- A clear statement that sets out the cooling-off period of five business days;
- A statement of acknowledgement provided by the homeowner; and
- Any other matters prescribed by regulations for inclusion.
Fair Trading Home Building Contracts
Both these different types of building contracts are free to download as standard forms from the NSW Fair Trading website. Alternatively, you may draft your own home building contract, or use one from an industry association.
If you are considering using a NSW building contract interstate, you should know that states have different regulations and legislation with regards to compliance.
In Victoria, building works worth $5000 and more will still require a contract. However, the contracts are all standard major domestic building contracts, and there is no division between small jobs and large jobs.
In South Australia, the parties only need a written building contract for building work valued at $12,000 or more.
Queensland has fairly extensive regulations regarding contracts and contains multiple contracts including for major works, minor works, demolition of residential premises, new home constructions and renovation.
When deciding what contract to use, it largely depends on the total value of the work. For larger projects where the work is worth over $200,000, the contract will be more extensive and requires more specific clauses. If you have any questions or need assistance drafting your home building contract, get in touch with our building and construction lawyers on 1300 544 755.