Home building work - Home building work is constructing a new home, renovating an existing dwelling, placing a transportable home on land, or carrying out any associated work, for example installing a swimming pool, constructing a garage or shed or performing landscaping work.
Builder - Under the HBC Act a ‘builder’ is any person who performs home building work for others and is not necessarily a registered builder.
Registration
Registration is required for builders, painters, building surveyors and building engineers. Please see licensing and registration for more information.
Building and Energy registration
Home building work contracts
Home building work contracts are an agreement for the performance of ‘home building work’ as defined by the Home Building Contracts Act 1991 (HBC Act).
It is the responsibility of the builder to ensure there is a written contract with their clients, outlining the scope of home building work, specifications, and terms.
What information is required for a home building work contract:
- Any agreement for the performance of ‘home building work’ must be in writing, signed, and dated by both parties.
- Include all specifications, addenda, and working drawings.
- Must comply with the HBC Act.
An oral agreement is not sufficient to comply with the Act.
Contract terms, deposits, and variations:
- The HBC Act prohibits "rise and fall" clauses. This means that the price agreed to between the parties should as far as possible be fixed and final.
- Deposits and progress payments cannot exceed 6.5% of the total cost before the commencement of building work. After the commencement of the work, any progress payment must be for work actually performed or materials already supplied.
- Variations to the contract must be in writing, dated, and signed by both parties before the variation work commences.
Notice for the homeowner
Builders must provide a notice for the homeowner before signing a contract. This notice summarises the requirements of the HBC Act, including home indemnity insurance.
Home indemnity insurance
The HBC Act requires home indemnity insurance for residential building work valued over $20,000. Builders must take out the insurance policy out in the owner's name before accepting any payment (including a deposit) or commencing work. Builders must give the homeowner a certificate confirming the existence of the insurance cover.
The insurance policy covers the homeowner against financial loss if the builder cannot complete residential building work or meet a valid claim for faulty or unsatisfactory building work because of death, disappearance, insolvency or due to non-renewal or cancellation of its builder registration due to financial grounds.
In most instances, the insurance policy must cover the residential building work during the construction period and for six years from the date of ‘practical completion’ (the six-year insurance period). Practical completion is when the building, extensions or renovations are completed and ready for occupation.
For further information see:
Home indemnity insurance fact sheet
Industry Bulletin 90 (example HII certificate included)
Cost plus contracts
Cost plus contracts are not home building work contracts for the purpose of the HBC Act however are subject to some of its provisions, those being:
- The requirement for cost plus contracts to be in writing and containing a heading ‘cost plus contract’.
- It must contain an acknowledgement by the parties that it is a cost-plus contract and that the HBC Act, apart from the dot point above and the requirement to obtain Home Indemnity Insurance, does not apply to the contract.
Dispute resolution
Building and Energy can deal with contractual disputes relating to lump sum home building work contracts between $7,500 and $500,000, provided the complaint is lodged within three years from the contract date or when the cause of the dispute arose.
Complaints about the standard of workmanship can be lodged regardless of the value of the works, provided the complaint is lodged within six years after the completion of the works.
Penalties
The provisions of the HBC Act are for the protection of both consumers and builders. Where a builder fails to comply with the provisions of the HBC Act, penalties of up to $10,000 in the case of an individual and $50,000 in the case of a company can be imposed.
If you are contemplating performing home building or associated work or carrying on a business to perform such work, you should seek independent legal advice about complying with your obligations under the HBC Act.
Seek Advice
If you are unsure what type of contract to use, what should be included, or want further information regarding your obligations to comply with the HBC Act contact a building association such as the Master Builders Association, Housing Industry Association or Australian Institute of Architects, or seek independent legal advice.
Failure to have a proper contract in place, or a contract that does not accurately reflect the agreement between the parties, can result in prosecution.
Further information
Click on the button below for more information.
Compliance inspections
This section provides general information regarding compliance inspections, including the purpose of a compliance inspection, who is subject to an inspection and what happens to the information once the compliance inspection is complete.
Purpose of the compliance inspection
Building and Energy carries out a range of building information and education activities, including compliance inspections, in order to reduce consumer harm and avoid disputes and complaints.
Non-compliance with legislative requirements often leads to consumer complaints which become a cost to both parties. The primary intention of a compliance inspection is to provide an opportunity to discuss any potential issues before they arise.
Who is subject to a compliance inspection?
This program is focused on assisting industry participants who are defined as 'builders' under the Home Building Contracts Act 1991 (the HBC Act) and are not required to be registered builders, to comply with their contractual obligations. These 'builders' may include, but not limited to, the supply and installation of:
- pools
- spas
- pergolas
- carports
- garages
- sheds
- fencing
- retaining walls
- paving
- driveways
- landscaping
- timber floors
- air conditioning
- painting work
- plumbing work
- other similar works
What is a compliance inspection?
The compliance inspection involves an examination of the contracts and associated records relating to a number of recently completed projects valued between $7,500 and $500,000 that fall within the jurisdiction of the HBC Act, with feedback and a report provided. Information obtained during the inspection will remain confidential unless Building and Energy is required to disclose the information by law.
Reporting to industry
General information and statistics will be published on the inspection findings under compliance reports.
