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Progress payments for residential building work in Victoria

In the residential building industry, the right to claim a progress payment generally arises when the work as defined in the contract, has been completed.

In the residential building industry, the right to claim a progress payment generally arises when the work as defined in the contract, has been completed. 

The Victorian HIA Contracts provide builders with two options for progress payments:

  • Method 1, which are the prescribed progress stages and percentages; or 
  • Method 2, which allows builders to fill in their own customised progress stages and percentages.  

Method 1 – Prescribed progress payment stages

Method 1 uses the prescribed progress stages required by section 40 of the Domestic Building Contracts Act 1995 (the Act).  The stages are described as: 

1. Base Stage

  • in the case of a home with a timber floor, the stage when the concrete footings for the floor are poured and the base brickwork is built to floor level
  • in the case of a home with a timber floor with no base brickwork, the stage when the stumps, piers or columns are completed
  • in the case of a home with a suspended concrete slab floor, the stage when the concrete footings are poured
  • in the case of a home with a concrete floor, the stage when the floor is completed
  • in the case of a home for which the exterior walls and roof are constructed before the floor is constructed, the stage when the concrete footings are poured

2. Frame Stage
When a home’s frame is completed and approved by a building surveyor.

3. Lock-up Stage
When a home’s external wall cladding and roof covering is fixed, the flooring is laid, and external doors and external windows are fixed (even if those doors or windows are only temporary).

4. Fixing Stage
When a home’s internal cladding, architraves, skirting, doors, built in shelves, baths, basins, troughs, sinks, cabinets, and cupboards are fitted and fixed in position.

5. Completion
When the building works under the contract have been completed.

The percentage of the contract price able to be claimed by a builder for each stage of works will depend upon what the builder is being contracted to perform. The below table prescribes the different stages and percentages which may apply under Method 1.

Type of Contract Percentage of Contract Stages Included 
(as described above)
Contract to build to lock-up stage 20%
Base Stage
Frame Stage
Contract to build to fixing stage 12%
Base Stage
Frame Stage
Lock-up stage
Contract to build all stages  10%
Base Stage
Frame Stage
Lock-up Stage
Fixing Stage

Note: The progress stages should add up to 100% once the builder adds:

  • the deposit (5% or 10%); and
  • the final payment.  

Method 2 – Customised progress payment stages

Method 2 allows the builder and the client to agree to different progress payment stages and percentages.  This option offers parties flexibility as progress stages may be customised to suit business and cashflow needs.  The amount claimed in each stage must reflect the value of the works being completed. 

When using Method 2 it is important to be very clear in the description of the works to be completed in each stage. 

If Method 2 is selected, the owner must sign a separate form acknowledging that their legal rights are changing and agreeing to the different progress stages being used. This is included in the HIA Contracts. 

When can you request payment?

A claim for payment can only be made once all the work under a relevant progress payment stage has been completed. 

Limits on Deposits

Section 11 of the Act also sets out limits on the amount of a deposit that can be taken.

The builder cannot take a deposit of more than:

  • 5% for contracts over $20,000; or 
  • 10% for contracts less than $20,000 

These limits cannot be changed, even if you are using Method 2. 

Failure to comply with this requirement may result in the owner being able to terminate the contract and the builder may also face penalties.

To find out more, contact HIA's Workplace Services team

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