The renovation contract
Professional building associations such as the Housing Industry Association have template contract documentation available for most home building and kitchen and bathroom renovation projects.
A contract defines the agreement between you and the builder. It ensures that you and your builder are agreeing to the same thing and outlines the responsibilities of each party. It also gives you legal recourse if the renovation goes off track, and protects you in the event of damage or accidents and against claims by unpaid subcontractors.
The scope and complexity of the contract will vary according to the size of your project, but most contracts will contain the standard information outlined below. If you have any concerns or questions about the contract, discuss them with your professional builder before you sign. You may also want to ask your lawyer to review it first.
- The parties to the contract (i.e. you and the builder), including street addresses, telephone and fax numbers, email addresses and the builder’s business or GST number.
- Contract documents must also identify all attachments such as:
specifications: description of work and a precise list of materials and products (e.g. types, brands, grades, thickness, colour, model)
other documents signed by both parties in the course of the contract (e.g. any variation documents)
- Description of work to be done by the builder, and also work not to be done under the contract, or to be done by you or others outside the terms of the contract.
- Start and completion dates often include a statement indicating that the builder cannot be responsible for delays due to circumstances beyond the builder’s control, changes to the work, and so on.
- Terms of payment set out the total amount of the contract and a payment schedule: deposit upon signing the contract; how and when the balance will be paid (at regular intervals or specific milestones), and the treatment of taxes.
- Changes in work once the renovation is in progress (also called variations) must be written up as variation documents, signed by both parties and attached to the contract. Any change to the contract price and schedule should be clearly noted on the order.
- Allowances (often called prime cost and provisional sum allowances) refer to a lump sum in the contract price, allocated for items to be selected directly by the homeowners, such as flooring, fixtures or cabinets.
- Standards of work describe the builder’s commitment to performing the work in accordance with the contract documents and in a diligent and workmanlike manner with minimum inconvenience to your household, to protect your property as well as neighbouring properties and to comply with regulatory requirements. This includes responsibility for daily clean-up.
- Homeowners warranty insurance. Professional builders in all states except Tasmania must obtain a policy of homeowners warranty insurance before they undertake any renovations or works to your home. This policy covers you for defective works and non-completion of works if the builder disappears, dies or goes in solvent (in Queensland this coverage is more extensive). Your builder should also take out public liability insurance and construction works insurance which covers any damage to the works, e.g. fire, as well as property damage and injury caused to third parties as a result of the works, e.g. neighbours during the course of construction. The builder should be covered for workers compensation as well.
- Council or shire building permits, inspections and approvals are usually arranged by professional builders as part of their service (note that homeowners are ultimately responsible for complying with these regulations). The contract should specify who is going to obtain and pay for them.
- The builder’s warranty describes what is covered and for how long. It should include a statement of the contractor’s intent to handover manufacturers’ product warranties to you upon completion of work.
- Statutory warranties – Building legislation in most states and territories imply certain warranties into home renovation and building contracts. These warranties include:
- all materials used will be good and suitable for the purpose for which they are used unless the contract states otherwise
- the contractor will comply with all relevant laws
- the works will be completed in an appropriate and skilful way
- the works will be carried out in accordance with the plans and specifications
- any provisional amounts are calculated with reasonable care and skill
- the work will be carried out with reasonable diligence
- the work will be suitable for habitation when finished.
- Use of facilities and utilities should be outlined, e.g. water, electricity, washroom and storage for materials.
- Dispute resolution in the event of a conflict. This may stipulate that the parties will attempt a mediation or arbitration before commencing litigation. Such clauses depend upon various state legislation.
- Warning statements and cooling off periods. Home building contract legislation in the various states variously requires that the builder provides you with a contract information statement and/or warning statement or checklist before you sign the contract. Also homeowners in Queensland, NSW, Victoria and South Australia have a five-day cooling off period during which they can terminate the contract. Exceptions exist where legal advice was obtained prior to signing the building contract
A written contract is your best renovation tool. It is also a solid indication that you are working with a professional builder. Do it properly and get it in writing.
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