Before entering into a residential building contract

Ferrer Lawyers always recommends that you seek legal advice before signing any contract, especially a residential building contract.

There are a number of matters that you should consider before employing a builder or contractor where the work is more than $20,000 including:

  1. Check for a current contractor licence at NSW Fair Trading using the home building online licence check.
  2. A licence in the name of an individual does not permit the individual’s company or partnership to enter into a contract with you. The company or partnership must be licensed.
  3. Does the licence cover the type of work represented by the contractor?
  4. Is the name and number on the contractor licence the same as on the contract and current identification documents such as a driver’s licence or passport?
  5. Have all plans and drawings been attached to the contract?
  6. Is all the work to be undertaken included in the contract, plans and drawings?
  7. Does the contract have a start and finish date, and provide for liquidated damages in the case of delays?
  8. Does the contract clearly state the price without variation?
  9. If there is a variation in the work or price, does the contract provide clear warning and explanation how the work or price is to be varied?
  10. Is the requested deposit within the legal limit of 10% of the contract price?
  11. Whose responsibility is it to obtain approvals from council or other government entities?
  12. Does your contract ensure the contractor must obtain an occupation certificate or any other clearances prior to final payment to the contractor?
  13. Is a progress payment schedule included in your contract so that fixed payments are only made to the contractor following the conclusion of specified stages of work and not time on the job?
  14. Has the contractor provided you with evidence of insurance under the Home Building Compensation Scheme, formerly known as Builders Warranty Insurance? If not, you are not required to pay the contractor a deposit or any progress payments until such insurance is furnished by the contractor.
  15. Always check that a certificate of insurance is valid by contacting the insurance company or using the Home Building Compensation Check.
  16. Does your contract include the checklist of 14 items as required by law?
  17. Is there a schedule of finishes including your prime cost items such as fittings, appliances, tiles, taps etc and are they included in the contract price?
  18. Is there an arbitration clause included in your contract? If so, this clause is illegal and void for home building contracts.


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The danger signs

  1. Be wary of any builder or contractor that insists on an advance cash payment. A flourishing builder would never ask for money upfront to source materials, especially for a job that hasn’t even started. If they do ask then alarm bells should start ringing. It simply isn’t a business model you can trust.
  2. Be wary of any builder or contractor who insists that you sign a contract immediately to avoid a price increase. This usually means you need to read the fine print in the contract looking for hidden costs and other surprises including non-conformance with common industry practice.
  3. Be wary of any builder that is ready to start immediately because legitimate builders will need up to four months’ notice before they can study the plans and drawings, meet with you to discuss the build and any issues that they have, arrange their team of trades and secure the purchase of materials. Most builders and trades juggle a few jobs at once, meaning if they are taking on a new project it will usually have to fit in and around existing work or a future start date will be set. If they are able to start right away their current absence of work could be down to their lack of skills or more concerning, they are actually con artists.
  4. Be wary of any builder who suggests you get an owner-builder licence while they undertake the building work for you. This usually means that they are not licenced.
  5. Be wary of a builder or contractor who provide cheap quotes compared to the market. This usually means the scope of work is not complete, prime cost items and high end brands are excluded from your schedule of finishes, or cheaper materials are to be used.
  6. Be wary of old references. Any reputable builder or contractor should be able to supply current work references and be forthcoming about inspections to their last three projects. Also, it would be ideal if you met with the owners to discuss any issues with the builder or the works before making a decision. A personal recommendation from family, a friend or previous client is always a safer bet.
  7. Be wary of a builder or contractor’s online presence, including social media, photos and reviews. How long have they been in business? It is also recommended that you perform background checks with ASIC (current and previous businesses), Department of Fair Trading (complaints and licencing if valid, suspended, or cancelled), SafeWork (safety record and performance), NSW Land Registry Services (ownership of property for bonds and security) and Bankruptcy Register Search (current or previous bankruptcy).

Building defects tips and traps 

Before you buy

If buying off the plan: 

  1. Research the developer and the builder. 
  2. Engage your own consultant to check critical stages of the development.
  3. Run a body corporate records search on an existing apartment built by the developer or the builder to check the minutes for any issues raised around building defects.
  4. Get an independent building inspection done on the property when completed. 
  5. Negotiate the contract for sale to include grounds for immediate termination with a full refund of any deposit, stamp duty and legal costs if an independent building inspector’s report reveals defects at completion with:
    1. building fabric and cladding,
    2. fire protection,
    3. waterproofing,
    4. roof and rainwater disposal,
    5. fixed equipment including mechanical and hydraulics,
    6. main conduits,
    7. foundations and structural elements, or
    8. which renders the works unfit for their intended use, i.e. it must be fit for purpose.

After you buy

  1. Notify your apartment’s strata manager of any defects as soon as they occur.  
  2. Get an independent expert assessment of any defects.
  3. Seek remediation work and/or costs from the developer if within the statutory warranty period. 
  4. Don’t delay making a claim as builders warranty has fixed timeframe in each state and territory
  5. If your builder goes into liquidation and you are still facing repair costs make sure you disclose your debt to the administrator as soon as possible.

What to do if you fall victim

  1. Always try to communicate your concerns to your builder or contractor. Keep the lines of communication open by being honest and respectful at all times.
  2. If you’re unable to come to an amicable resolution with your builder or contractor, file a complaint with the NSW Home Building Dispute Resolution Service within NSW Fair Trading. Early intervention by experienced and trade qualified building inspectors are usually successful in resolving disputes. No matter where you’re located, inspectors are located throughout the state.
  3. An inspector will usually discuss the issues with each party separately initially and then meet on site to inspect the works in question.
  4. If the inspector finds that the works are defective or incomplete, he may issue a rectification order for the work to be completed by a certain date.
  5. If the works aren’t completed by the due date, the builder or contractor may face sanctions under the Home Building Act 1989 NSW including a public notice warning issued by Fair Trading; a caution or reprimand; conditions placed on the licence holder; suspension, cancellation or disqualification of the licence holder; fine of up to $22,000 for an individual or up to $110,000 for a corporation.
  6. If the inspector can’t resolve the dispute because the builder or contractor may not be at fault or the issue is monetary rather than performance of the construction work, then you can file a complaint with the NSW Civil and Administrative Tribunal for claims up to $500,000.
  7. Claims over $500,000 must be filed and heard before the District Court of NSW and the Supreme Court of NSW where the amount is over $750,000.

Ferrer Lawyers always recommend that you contact our expert advisors experienced in all building matters. Our trusted team and independent experts are highly respected and a prerequisite to protecting your rights and interests. Owners faced with building defects because of “dodgy” builders or “cowboy” contractors should call (02) 8823 3588 or email us with your enquiry at This email address is being protected from spambots. You need JavaScript enabled to view it. for further information, guidance or assistance.