What a Building Contract Should Include in NSW

A building contract is not really one document. It is a bundle: the legal terms, the drawings, the specification, the allowances and the payment schedule, all welded together. The disputes I get called into almost never come from an exotic clause. They come from something ordinary that was missing, vague or unrealistic on the day of signing. So here is the anatomy of a residential building contract that protects you, part by part, with what NSW law requires and what I look for beyond the legal minimum.

For contracts over $20,000 the Home Building Act 1989 prescribes much of this (section 7 sets the mandatory contents). Between $5,000 and $20,000 a simpler written contract is still compulsory. Everything below assumes the full contract, because that is where the money is.

1. The parties and the licence, exactly

The contract must name both parties, use the builder's name exactly as it appears on their contractor licence, and state the licence number. Verify it on the NSW licence register. Mismatched entities are how people end up suing a $2 company while the builder's real business carries on trading.

2. The drawings and specification, as contract documents

The contract must describe the work and include the plans and specifications, and this is where an architect gets opinionated: the drawings and spec are the contract. Every item they pin down is priced competitively on tender day. Every item they leave open is priced later, by one builder, with a margin, when you cannot say no. Thin documentation is not a paperwork problem, it is a financial one. It is also the quiet reason architect documented projects often land closer to their contract price than base priced ones.

3. The price, on the first page, with its escape hatches lit up

The law requires the contract price displayed prominently on the first page, and if the price can change, a warning next to it explaining how. Read that warning as carefully as the price. The usual escape hatches are provisional sums, prime cost items, and rise and fall clauses. None are automatically sinister, but each one is a place the fixed price can move, so each one deserves a question before signing rather than after.

4. Realistic allowances (PC and PS schedules)

Prime cost items are products not yet chosen (taps, tiles, appliances). Provisional sums are work not yet priceable (excavation is the classic). Both appear as allowances, and if the allowance is low, you pay the shortfall plus the builder's margin on it. Compare allowances across quotes line by line, and shrink them by choosing real products before signing. The full mechanics, including the worked numbers, are in provisional sums and prime cost items explained.

5. A progress payment schedule tied to completed work

Section 8A of the Act allows two shapes of progress payment: a set amount on completion of a stage described "in clear and plain language", or actual costs incurred with invoices. What you want is boring and specific: deposit (capped at 10%), then stages like slab, frame, lockup, fixing, completion, each payable when that work genuinely exists. What you do not want is payments tied to calendar dates, or a schedule weighted toward the early stages. Keep the final payment meaningful, because the last cheque is your only real leverage on the defect list.

6. The statutory warranties, and what they are worth

Contracts over $20,000 must set out the statutory warranties from section 18B: due care and skill, conformity with plans, good and suitable new materials, legal compliance, reasonable time, and a dwelling fit for occupation. They apply even if the contract stays silent, run for 6 years on major defects and 2 years on the rest, and cannot be contracted away. The practical detail, including the 6 month notice duty that catches owners out, is in my pre-signing questions guide.

7. Insurance, attached, before any money moves

The contract must show the cost of Home Building Compensation cover, and the builder must hand you the actual certificate for your job before taking a cent, deposit included. Staple it to the contract. While you are at it, sight their public liability and workers compensation certificates too.

8. The cooling off statement

Contracts over $20,000 must contain a conspicuous statement of your cooling off rights: 5 clear business days from receiving your signed copy. If the statement is missing, the law gives you an extended right to rescind once you find out. A builder who resists the cooling off period in any form has told you something important.

9. A variations clause with signatures in it

Variations must be written, priced (cost and time), and signed by both parties before the varied work proceeds. On site, the temptation to nod along to a quick change is enormous, and every one of those nods becomes a disputed invoice at the end. The clause matters, and so does the discipline of using it.

10. Liquidated damages and a real construction period

The contract should state the construction period, a fair allowance for wet weather (on the Central Coast, generous), and liquidated damages that reflect what a late handover actually costs you per week. A serious number here is not aggression, it is proof the builder believes their own timeline. Ten dollar a week damages are a red flag, not a clause.

11. The compulsory paperwork riders

Contracts over $20,000 must include the official 17 item owner checklist and information about the Security of Payment Act, and you must be given the Consumer Building Guide before signing anything over $5,000. You must also receive your signed copy of the contract within 5 business days. The official checklist is genuinely good; if you can answer yes to all 17 items, you are ahead of most people who build.

12. Use a recognised form, then still read it

HIA, Master Builders, ABIC and the free Fair Trading contract are all battle tested starting points. What matters is the schedule entries and special conditions typed into them, because that is where a standard contract stops being standard. If any clause lets the builder change the price at their discretion, guts the damages, or makes payments due on dates, negotiate it out before signing.

A contract like the one described above does not make a project immune to trouble. It makes trouble survivable, and it makes the good outcome the default rather than a hope. If you would like a second set of eyes across a contract and its drawings before you sign, that is part of what I do in a free site assessment, and the rest of the journey is mapped in before you build on the Central Coast.