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Things to Check before entering into a Domestic Building Contract

Before you sign a domestic building contract, there are a number of things that you should check.

1. When should I enter a domestic building contract?

In Victoria, the law requires you to enter into a domestic building contract when you carry out one or more of the following domestic building works and the total cost is $5,000 or more:

  • Building;
  • Repairs;
  • Improvements;
  • Maintenance;
  • Demolition; and/or
  • Removal.

However, as a precaution, it is best to enter a domestic building contract when carrying out any domestic building work – regardless of size or cost.

2. Why do I need a domestic building contract?

Trusting your builder without having the correctly drafted contract in place will leave you unprotected and is in fact a gamble with your money. Having a domestic building contract ensures that you and your builder are crystal clear about what works are to be carried out and, therefore, reduces the likelihood of confusion and disagreement later down the track. It will save you having to sue and also protect you should there be a disagreement.

3. Is my builder registered and do they have insurance?

Only builders that are registered with the Victorian Builders Association can carry out domestic building works and enter into domestic building contracts and of course these builders are the only builders that would be provided with insurance. To confirm that your builder is registered, you can conduct a practitioner search on the Victorian Builders Association website. The results of this search should match the details contained in your domestic building contract and your Building Permit.

Also, if the cost of your domestic building works is $12,000 or more, your builder will need to obtain home warranty insurance and provide you with a copy of this policy. Your domestic building contract will also need to include details about this.

4. What should be included in my domestic building contract?

At the risk of stating the obvious, your domestic building contract must be written in plain English. It must include a full description of the works to be carried out and be accompanied by plans and specifications of sufficient detail so that a building permit may be granted.

Your domestic building contract should also include details about the following:

  • Date of contract;
  • Names and addresses of the parties to the contract;
  • Home warranty insurance;
  • Commencement and completion date;
  • Cooling-off period;
  • Right to access;
  • Implied warranties;
  • Damages;
  • Termination; and
  • Definitions.

Finally, an approved checklist should also be included in your domestic building contract.

5. What shouldn’t be included in my domestic building contract?

You should make sure that your contract does not contain any illegal or unfair terms such as:

  • Compulsory arbitration;
  • Builder’s caveat or interest in land;
  • Limitation or exclusion of implied warranties;
  • Cost escalation of rise and fall (unless the cost of domestic building works is $500,000 or
  • more); and/or
  • Payment by a cost-plus method if your building contract is $500,000 or less.

It is also worth mentioning that your builder must give you sufficient time to review your domestic building contract.

Some builders may tell you that your domestic building contract is the ‘standard contract used by everyone’. While this may be true, do not lower your guard. Make sure you read through your contract very carefully and if you have any queries or concerns seek independent legal advice as soon as possible.

Also, you should never sign a domestic building contract and then forward to your builder to do the same. This is because your builder may add or remove items from the contract without your knowledge.

6. Are there any additional fees and/or charges? 

In addition to the contract price, there may be a number of fees and/or charges that are applicable to your domestic building contract.

These may include, but are not limited to the following:

  • Building fee: This varies from builder to builder and may or may not be included in the cost of inspections carried out by the building surveyor;
  • Permit fee;
  • Council lodgement fee;
  • Asset protection fee: This paid directly to the local council and is refundable at the end of the project providing no damage has been done to council property;
  • Inspection fee: This is also paid directly to the local council and is used for the cost of their inspection of council assets and is non-refundable;
  • Government levies: These levies are calculated on the total cost of your works and are usually advised by your building surveyor. It is important to note that owner-builders are not exempt from paying these levies.

7. Are there any other documents that I may need to sign?

Yes. It is not uncommon for a builder to ask you to sign any one of the following before signing a domestic building contract:

  • Preliminary agreement;
  • Quote;
  • Order;
  • Estimate; and/or
  •  Authority to proceed.

You should be aware that work carried out as a result of you signing one or more of these documents may or may not constitute domestic building work. If you are unsure about the distinction or any other aspect of your domestic building contract, you should consult a legal practitioner as soon as possible CALL BOUTIQUE MELBOURNE LAWYERS 1300 556 140.