Building Contracts and Property Inspections: What Every Homeowner Should Know

As a homeowner, understanding your building contract is crucial to protecting your investment. A well-drafted contract ensures transparency, accountability, and compliance with legal requirements. Below is a checklist to help you navigate the process with confidence.

When Do You Need a Building Contract?

By law, if the total cost of your building project exceeds $10,000, the builder must use a major domestic building contract. This applies to:

✔️ Constructing a new home, including associated works like driveways, fencing, landscaping, sewage, or heating systems
✔️ Renovations, alterations, extensions, and repairs (e.g. kitchen remodels, outdoor living areas)
✔️ Demolition or removal of all or part of a home
✔️ Preparation of plans or specifications if done by the builder (architects and engineers will use separate contracts)
✔️ Splitting a contract into smaller amounts to avoid legal obligations (e.g. a $4,000 pre-construction contract and a $7,000 main contract). Since the total price exceeds $10,000, a major domestic building contract is required.

Key Contract Inclusions

Your building contract must be detailed and legally compliant. It should include:

📌 Plans and specifications – Ensure these are detailed enough to obtain a building permit
📌 Fixtures, fittings & finishes – List make, model, and style to avoid surprises later
📌 Contract price & payment schedule – Avoid ambiguous pricing structures
📌 Deposit & progress payments – Ensure payments meet legal limits
📌 Start and finish dates – If unknown, specify how the start date will be determined
📌 Cooling-off period – You have five business days to withdraw unless you sought legal advice before signing

💡 Pro Tip: Seek legal and technical advice before signing to avoid costly mistakes.

Avoid Costly Surprises

Many disputes arise from prime cost items and provisional sums—these can lead to budget blowouts.

🔹 Prime Cost Items: Fixtures and fittings not specified at the time of signing.
Tip: Avoid these where possible by specifying all selections upfront.

🔹 Provisional Sum Items: Estimated costs for extra work (e.g. excavation, rock removal).
Tip: Get a comprehensive soil report to avoid unexpected costs.

What Your Builder Must Provide

If your contract exceeds $16,000, your builder must provide:

✔️ Domestic building insurance covering the project address
✔️ A copy of the signed building contract
✔️ Foundation data and a soil report confirming site suitability

Before signing, ensure the builder is registered with the Victorian Building Authority (VBA) and clarify who is responsible for permits and site-specific requirements (e.g. termite protection, fire safety).

Changes to Your Contract

Changes to a signed contract are only valid if they involve:

✅ Written variations to plans and specifications
✅ Adjustments to prime cost items not originally costed
✅ Adjustments for provisional sums where additional work is needed

📌 Use Variation Notices to document any changes, even if they don’t affect cost or timing.
💡 Tip: You should not be charged for changes due to poor planning by the builder.

Why Property Inspections Matter in Building Contracts

Building or renovating a home is a major financial commitment. To protect yourself:

✔️ Get everything in writing—verbal agreements have no legal weight
✔️ Avoid making advance payments—ensure work is completed and inspected first
✔️ Stay informed—maintain communication with your builder and seek advice when needed

If in doubt, consult an independent property inspection expert or legal advisor. A strong contract backed by regular inspections is your best protection against cost blowouts, disputes, and delays.