Understanding your building contract in Australia — what to check before you sign

Your building contract is the most important document you will sign during a new home build, and most homeowners sign it without fully understanding what they are agreeing to. The contract governs everything from how much you pay and when, to what your builder must do if defects appear and what happens if the project runs over time.

Which contract will you be offered?

Most volume builders and project builders in Australia use one of two standard contracts:

• HIA (Housing Industry Association) residential building contract — the most widely used residential contract in Australia
• MBA (Master Builders Association) residential building contract — used by many custom and boutique builders

Both are industry-standard contracts drafted by the relevant builder associations. Both are weighted toward the builder by default — they are not consumer-neutral documents. That said, both HIA and MBA contracts include minimum protections that cannot be contracted out of under state legislation.

Some large project builders use their own proprietary contracts rather than HIA or MBA standard forms. These can contain significantly less favourable terms. Independent legal review is particularly important for proprietary contracts.

The seven clauses that matter most

1. The contract price and inclusions schedule

The contract price clause defines what you are paying for. Check that:

• The price includes everything you were quoted — not just a base price with inclusions shown in a separate schedule
• The inclusions schedule matches your colour selection and product specification sheets exactly
• There is no “standard inclusions” language that could allow the builder to substitute cheaper products

Disputes about what was included in the price are among the most common sources of conflict in residential builds. The time to resolve ambiguity is before signing, not after.

2. Progress payment schedule

The contract should specify:

• The exact percentage due at each construction stage (slab, frame, lock-up, fixing, practical completion)
• What “completion” of each stage means before a payment claim is valid
• The timeframe for you to make each payment after receiving the builder’s claim (typically five business days)
• Your right to withhold payment if a stage is not genuinely complete

Be wary of contracts that define stages loosely — for example, defining lock-up as “external walls substantially complete” rather than “fully enclosed and lockable.” Vague definitions allow builders to claim payments before work that you would expect to be included is done.

Under QBCC rules in Queensland, residential building contracts over $20,000 must follow a statutory payment schedule. In NSW, the Home Building Act 1989 imposes similar protections. In Victoria, maximum deposit limits apply under the Domestic Building Contracts Act.

3. Variations clause

A variation is any change to the contract works after the contract is signed — whether initiated by you or your builder. The variations clause governs:

• How variations must be requested and agreed
• How the cost of a variation is calculated
• Whether variations carry a margin or fee
• Your right to reject a variation proposed by the builder

Critical point: You should never agree to a variation verbally. Under most HIA and MBA contracts, a variation must be in writing and signed by both parties before any work is done. If a builder carries out work that you did not formally approve in writing, the basis for the payment becomes contested.

Builder-initiated variations — where a builder claims they need to do something differently due to unforeseen site conditions — are legitimate in some circumstances (rock excavation, reactive soil, services not in expected locations). But they can also be used as a mechanism to extract additional money. Ensure the contract specifies what types of site condition entitle the builder to a variation claim, and that you have independent verification of the claimed condition before agreeing.

4. Delay and extension of time provisions

Most building contracts specify a contract completion date or a build period (e.g., “construction to be complete within 240 working days of the commencement date”). The delay provisions govern what happens when that date is not met.

Check:

• Liquidated damages — does the contract specify a daily rate you receive if the builder fails to complete on time? HIA contracts include a liquidated damages provision; some builders cross it out. If it is crossed out, you have no contractual remedy for delay beyond the law of damages.
• Extension of time claims — what events entitle the builder to extend the completion date? Common permitted events include: inclement weather, variations ordered by you, supplier delays, and industrial disputes. Check whether the definition of these events is narrow or broad.
• Notice requirements — most contracts require the builder to notify you of an extension of time claim within a specified period (e.g., 10 business days of the event). Builders who fail to give timely notice may lose their right to claim the extension.

5. Defects liability and warranty

The defects liability period (DLP) under a standard HIA contract is 13 weeks from practical completion. During the DLP, the builder must rectify any defects you notify in writing.

Beyond the DLP, your rights come from statutory warranties under state legislation. The statutory warranty period is typically:

• Queensland — 12 months for non-structural defects, 6 years and 3 months for structural defects (backed by QBCC Home Warranty Insurance)
• NSW — 2 years for non-major defects, 6 years for major defects (Home Building Act 1989)
• Victoria — 10 years for major defects under the amended Domestic Building Contracts Act
• South Australia, WA, Tasmania, ACT, NT — varying periods under equivalent legislation, generally 2 years for minor and 6–7 years for major defects

The contract cannot reduce these statutory minimums. Any clause that purports to limit your remedy to the 13-week DLP is unenforceable to the extent it conflicts with state legislation.

6. Dispute resolution

The dispute resolution clause sets out the process for resolving disagreements. In most HIA and MBA contracts, this involves:

1. A formal dispute notice served on the other party
2. A meeting or negotiation period (typically 10–20 business days)
3. If unresolved, referral to an agreed mediation service
4. If mediation fails, referral to a building tribunal or court

In practice, most disputes that do not resolve by negotiation are taken to the relevant state building authority (QBCC in Queensland, NSW Fair Trading, DBDRV in Victoria) or to a civil and administrative tribunal (QCAT, NCAT, VCAT, SACAT, etc.).

7. Contract termination

Check what events entitle you to terminate the contract. Under most HIA contracts, you can terminate if the builder:

• Fails to start work within the specified time
• Suspends work for an extended period without justification
• Becomes insolvent or enters administration

Termination is a last resort and triggers complex financial consequences. If you are in a situation where you are considering termination, seek advice from your state building authority or a construction lawyer before acting.

Before you sign: three things to do

Get independent advice

For any contract over $20,000 — and virtually all residential builds will exceed this — getting independent legal advice before signing is worth the cost. A construction lawyer will identify unusual clauses, advise on your exposure, and may be able to negotiate amendments. This typically costs $300–$800 and can save significantly more.

Check your builder’s licence

In Australia, builders must be licensed in the state where they are building. Confirm your builder’s licence is:

• Current (not expired or suspended)
• Covers residential building work
• Has no relevant disciplinary history

Check licence status directly with your state authority:

• QLD: QBCC licence search
• NSW: NSW Fair Trading licence check
• VIC: Victorian Building Authority (VBA) register
• SA: CBS licence register
• WA: Building Commission WA licence search

Confirm home warranty insurance

For residential building work above certain thresholds (typically $20,000), builders in most states must take out home warranty insurance (also called domestic building insurance or home indemnity insurance) before receiving your deposit. Confirm this is in place before you pay anything.

The insurance provides cover if your builder fails to complete the work or dies, disappears, or becomes insolvent — it does not cover defects during the build where the builder is alive and trading.

What you cannot contract out of

Regardless of what your contract says, the Australian Consumer Law (ACL) and state residential building legislation provide guarantees and protections that cannot be reduced by contract. These include:

• The right to have defective work remediated free of charge within the statutory warranty period
• Protection against unfair contract terms (under the unfair contract terms provisions of the ACL, which apply to standard form consumer contracts)
• QBCC’s right to investigate licensed builders in Queensland regardless of what your dispute resolution clause says
• The right to take a dispute to QCAT, NCAT, VCAT, or equivalent tribunals regardless of arbitration clauses

If a clause in your contract appears to take away a right that legislation provides, the clause is likely unenforceable. But it is much better to identify it before signing than to argue about it during a dispute.

Key Takeaways

• Most residential building contracts in Australia use HIA or MBA standard forms — proprietary builder contracts require closer scrutiny
• The inclusions schedule and contract price clause determine exactly what you are paying for; resolve all ambiguity before signing
• The variations clause must require written agreement before any variation work begins — verbal agreements are nearly impossible to enforce
• Progress payments are due only when a stage is genuinely complete; check that the contract defines each stage clearly
• Statutory warranty periods cannot be reduced by contract — they operate whether or not the contract references them
• Always verify your builder’s licence and confirm home warranty insurance is in place before paying the deposit