Nicolas Rovolas is a Senior Associate at Aitken Lawyers in the litigation team, and was admitted to practice in 2001, specialising in building & construction, corporate and commercial litigation.

Thinking of building or renovating? Most complaints received by the Office of Fair Trading relate to residential building work. In our experience, the majority of the complaints relate to poor workmanship, substandard materials and unfinished work.

Knowing your builder

That’s why before the work starts, it is important to research your builder.

Before signing your contract, you need to be certain what you are contracting your builder to do and that they are qualified to do the work. It is important, when you are choosing a builder to check the Office of Fair Trading website to check the builder’s licence.

The website will show the builder’s licence number, the type of licence, and whether there have been any cancellations, suspensions, prosecutions, insurance claims or other negative events in the history of the license.

Obviously, if the builder has only been licensed for a short period of time, or if there is a history of infringements, disciplinary actions and the like then you would want to think twice about retaining the builder.

Don’t stop there though. Try to speak to current or recent clients to find out what the builder was like to work with and the quality of his work.

It also helps to meet with your builder and communicate what your expectations are with the proposed building works. Early communication often allows the parties to determine any probable variations to the proposed works prior to the works commencing.

Understanding your contract

The next step is to ensure that your contract for residential building work complies with legal requirements and protects you and not just the builder.

If the proposed building work is over $5,000 (including GST) a builder must provide you with a written contract for residential building work. Usually residential building work between $5,000 and $20,000 is covered by a ‘small jobs’ contract. The builder must also provide you with a copy of the consumer building guide.

Some things to consider to protect yourself

Residential building in excess of $20,000 in value needs a more extensive home building contract signed by both the builder and home owner. 

Your contract must contain the relevant statutory warranties under the Home Building Act; approved plans and specifications; an agreed contract price or “cost plus”; and a description of the work to be done, to name but a few.

Most importantly, you need to be confident that the work can be done for the contract price and that the builder has taken out a home warranty insurance policy with a recognised insurer. We are able to review and advise you on your building contract before you sign it.

Often builders are often short on funds and ask for money upfront and home owners feel compelled to pay the money so that they can have the building work promptly completed. It is important to remember that a builder must never require you to pay a deposit amount that is more than that required by law, which is usually 10% of the contract price, or estimate the costs of works (if on a “cost-plus” basis).

As a home owner, you must also be aware that the Home Building Act 1989 requires a builder to obtain home warranty insurance for residential building exceeding $20,000.00 before starting any work or taking any money under the contract, including the deposit.

Changing the contract or the scope of work

Generally, building contracts contain a provision for variations to the contract works. Such variations often involve an adjustment to the contract price. Any variation to the contract should be recorded in writing and approved by you and the builder.

If you are thinking of building or renovating we are able to review and advise you on your building contract before you sign it, as to enter into a contract without advice will no doubt increase your exposure to cost overruns, builder’s walking off site and defective work. Call our team on 02 8987 0000.

This article contains general information and is prepared without taking into account your specific objectives.  Before acting on the contents, you should obtain the specific legal advice in relation to your own circumstances.