01.05.2015

Are Your Domestic Building Contracts up to Scratch?

Ensure you comply with your contract obligations

The Victorian Building Authority urge domestic builders to be aware of the requirements for domestic building contracts after five registered building practitioners were fined a total of $18,000 in just three months in 2015 for not complying with their contractual obligations.

The five practitioners were reprimanded and fined for breaches of the Domestic Building Contracts Act 1995 (DBCA) and the VBA says it is vital the Act is understood and adhered to.

VBA Director of Compliance and Performance, Murray Smith, said registered building practitioners need to ensure they understand the requirements before issuing a contract for domestic building work.

“When undertaking a building project valued at more than $5,000 you should always provide your client with a compliant domestic building contract and encourage your client to read the contract to make sure they fully understand it,” said Mr Smith.

The DBCA requires registered building practitioners to provide a written major domestic building contract for any building work where the contract price is more than $5,000. The DBCA also lists specific requirements for building contracts, such as the information that must be included in the contract and rules governing requests for deposits and progress payments.

Some of the common breaches of the DBCA include:

  • not providing a contract in writing that includes necessary details, such as the full terms of the contract, description of the work and full details of the builder and owner;
  • not providing a written variation of plans or specifications by the builder;
  • demanding too much payment for the deposit or progress payment. A builder must not demand or receive a deposit of more than 5 per cent of any contract price that is $20,000 or more, or 10 per cent if the contract price is less than $20,000. The requirements for progress payments are outlined in Section 40 of the DBCA;
  • issuing an invoice prior to receiving approval of the relevant mandatory inspection stage (eg. framing).

“Contracts protect both the consumer and practitioner, and provide a baseline in case a dispute arises. If the correct information isn’t recorded in the contract, either as part of the original agreement or in a variation, the contract may not meet the requirements of the DBCA and, more importantly, it makes it difficult to resolve disputes,” Mr Smith said.

Although the DBCA only covers contracts for work where the contract price is more than $5,000, the VBA recommends practitioners use a written contract for all building work, regardless of the cost, to minimise or resolve any disputes that may arise.

There are a number of contract and legal obligation courses which are available to practitioners who want to improve their understanding of requirements for domestic building contracts. These courses are offered through Registered Training Organisations and industry organisations.

Visit the VBA website at www.vba.vic.gov.au for more details about requirements for building contracts.

A building contracts checklist and additional information, including a model domestic building contract, is also available from the Consumer Affairs Victoria website at www.consumer.vic.gov.au.