As stated by the Department of fair Trading when entering into Contracts where any work is undertake in respect of Residential Units or Home Building members should take the following into consideration:

1. Contracts for works valued at over $1,000 to $5,000.Jobs worth between $1,001 (including GST) and $5,000 must be in writing and preferably require a written ‘small job’ contract with minimum basic information, while building jobs worth more than $5,000 must be covered by more extensive written contracts. Where the contract price is not known the question is “Does the reasonable cost of the labour and material provided excess the market cost of $1,000.00?” If so a written contract is required.

The following minimum information should be contained in the written contract:

  • the date of the contract
  • names and signatures of both parties
  • your licence number
  •  a brief description of the work.

2. Contract for works valued at over $5,000.

Residential building work worth more than $5,000 requires a more extensive home building contract and it must contain:

  • the date that it was signed by both parties
  • the client’s name and your or your company’s exact name which is reflected on your licence card and the licence
  •  a sufficient description of the work to be carried out
  • plans and specifications attached
  • relevant warranties required by the Home Building Act 1989
  • the contract price, which must be prominently displayed on the first page and a warning with an explanation if the contract price is subject to change or if the price is not known
  • a clear statement setting out the cooling-off period of five clear business days after being given a copy of the contract where it is valued over $20,000
  • a checklist of 12 items
  • a caution about signing the contract if the client cannot answer yes to all items in the check list
  • a note about the client’s entitlement to a copy of the signed contract within five days of signing
  • a note that you must give the client a home warranty insurance certificate if the contract is valued over $20,000 (or $12,000 if the contract was entered into before 1 February 2012)
  • a statement of acknowledgment by the client that the client has:

i) read and understood the Consumer building guide

ii) completed the check list and answered yes to all items on it

  •  a clause that states that all plans and specifications to be done under the contract (including variations) are taken to form part of the contract
  •  a clause that states that any agreement to vary the contract or any plans and specifications must be in writing and signed by you and the client
  • a clause that states that the work will comply with:

i) the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
ii) all other relevant codes, standards and specifications that the work is required to comply with under any law
iii) the conditions of any relevant development consent or complying development certificate

  •   a clause that states that the contract may limit the liability of the contractor for failure to comply with the above work compliance clause if the failure relates solely to:

i) a design or specification prepared by or on the client or a design or specification required by the client if you have advised the client in writing that it contravenes the clause referred to immediately above.

3. Contract for works valued at over $20,000.
Residential building work worth more than $20,000 requires a more extensive home building contract and it must contain all terms included d for contracts over $5,000 and in addition must include the following:

  •   a note that you must give the client a home warranty insurance certificate if the contract is valued over $20,000 (or $12,000 if the contract was entered into before 1 February 2012)

Building contractors undertaking residential building work in relation to the construction of a new multi storey (high-rise) building are not required to arrange home warranty insurance in respect of the work.
For the purposes of the exemption, a multi-storey building is a building that:

  • has a rise of more than 3 storeys, and
  • contains 2 or more separate dwellings.

Construction of a new multi-unit residential development (where the rise is 3 storeys or less, eg. villa units, town houses, low and medium rise projects etc) does require home warranty insurance cover to be in place. Similarly, home warranty insurance cover must also be taken out before residential building work is done on an existing multi-storey building (eg. repairs, maintenance, alterations and additions etc).
Should you require any advice or clarity on the above please contact Stafford Poyser at Construction Trade Industry Lawyers on (02) 9744 1099.