Building Contracts and Legal Obligations

A building contract is a complex legal document that defines your rights and the builder's responsibilities.

HIA and MBA Standard Contracts

Most residential building work in Victoria is conducted using standard contracts developed by the Housing Industry Association (HIA) or the Master Builders Association (MBA). These templates are designed to comply with the Domestic Building Contracts Act 1995. While these are standard forms, they contain many variables that must be filled in, such as the contract price, completion date, and liquidated damages. It is essential to ensure that every blank space is correctly populated and that any 'special conditions' added by the builder are thoroughly reviewed by a legal professional before you sign. A standard contract does not mean it is automatically balanced in your favour.

One of the most important sections of the contract is the 'Scope of Works'. This should describe in detail exactly what the builder will do and what materials they will use. If a specific feature, like a stone benchtop or a particular brand of air conditioner, is not listed in the scope or specifications, the builder is not legally required to provide it. Avoid vague terms like 'builder's range' or 'to be decided'. The more specific the contract, the less room there is for disputes later. Ensure that all architectural drawings and engineering plans are formally incorporated into the contract documents.

Timeframes and Delay Penalties

The contract must state a start date and a duration for the build. If the builder fails to complete the project by the agreed date, you may be entitled to 'liquidated damages'. This is a pre determined daily or weekly amount that the builder pays you to compensate for your extra costs, such as rent or storage. In Victorian contracts, this amount is often set very low by default. You should negotiate a realistic figure that covers your actual costs if the build is delayed. Conversely, the builder is entitled to 'extensions of time' for reasons beyond their control, such as inclement weather or industry wide material shortages.

It is vital to understand the process for extensions of time. The builder must provide you with a written notice stating the reason for the delay and the number of days they are adding to the contract. You have a limited window to dispute these claims. If you do not respond, the extension is often deemed accepted. Keeping a close eye on these notices is crucial for managing your expectations and your finance. If the builder regularly asks for extensions without valid reasons, it may indicate poor project management or financial stress within their company.

Your Right to Reconsider

In Victoria, you have a mandatory five business day cooling off period after receiving a signed copy of a domestic building contract valued at more than 10,000 dollars. During this time, you can withdraw from the contract by giving written notice to the builder. However, you may have to pay a small penalty fee if you choose to cancel. This period is your last chance to have the contract reviewed by a specialist construction lawyer. They can identify unfair clauses, such as those that allow the builder to increase the price for reasons that should be their responsibility, or clauses that limit your right to inspect the site.

Do not feel pressured to sign a contract on the spot, even if the builder offers a 'limited time' discount. The financial commitment of building a home is too great to rush. A construction lawyer can also help you understand the 'implied warranties' that exist under Victorian law, regardless of what the contract says. These warranties include that the work will be performed with reasonable care and skill, that materials will be 'good and suitable', and that the home will be fit for occupation. Understanding these baseline rights gives you more leverage if the quality of work is substandard.

• Review the complete Scope of Works
• Negotiate a realistic liquidated damages rate
• Verify the cooling off period dates
• Check for unfair special conditions
• Ensure all plans and specs are attached