Building contracts in Victoria

A domestic building contract is a legally binding agreement between a homeowner and a builder or contractor. It records the residential building work to be completed, along with the agreed price, plans, specifications, payment terms, construction timeframe and each party’s responsibilities.

In Victoria, domestic building work can include constructing a new home, completing an extension or renovation, making repairs and carrying out other improvements connected with a residence. The contract provides a shared reference point throughout the build and may become important if questions, delays or building disputes arise.

For most projects involving more than one trade and costing over $10,000, the builder must use a written major domestic building contract before work begins. These contracts are regulated by the Domestic Building Contracts Act 1995 (Vic).

In Victoria, you generally need a written major domestic building contract when the work costs more than $10,000. This applies to residential building work such as constructing a home, completing an extension or renovation, undertaking major repairs or carrying out related work as part of the broader project.

The $10,000 threshold applies to the total project cost. A project cannot be divided into several smaller agreements to avoid the major domestic building contract requirements. Pre-construction services may also form part of the total where they include design, specifications, permits or other domestic building work.

Even where work costs $10,000 or less, Consumer Affairs Victoria recommends using a written agreement. Recording the scope, price, materials, dates and responsibilities can reduce uncertainty and provide useful evidence if a disagreement arises.

Learn how Supa Group manages fixed start and completion dates to give homeowners greater clarity around their extension timeline before construction begins.

Prime cost items and provisional sums are allowances used when part of a construction project cannot be priced exactly before the building contract is signed. They are included within the contract price, but the amount you ultimately pay may change once the actual item is selected or the work is completed.

A prime cost item is an allowance for a fixture or fitting that has not yet been specifically selected or priced. Common examples include:

• Taps and basins
• Tiles and flooring
• Ovens and other appliances
• Door hardware
• Bathroom fittings

A provisional sum is an estimated amount for labour, materials or building work where the builder cannot reasonably determine the final cost in advance. This may apply to excavation, underpinning or other work affected by site conditions.

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Your contract must list these allowances and explain how any adjustment will be calculated. The builder must make a reasonable estimate rather than using an unrealistically small figure to make the overall price appear lower. They must also provide evidence of the actual cost, such as an invoice or receipt.

Where possible, make your selections before signing and include the brand, model, quantity and agreed price in the contract. Reducing the number of allowances can provide greater certainty and help prevent common issues or building disputes towards the end of the project.

Progress payments divide the contract price into instalments linked to completed stages of the building work. Rather than paying for the entire house extension upfront, you make each payment when the relevant construction milestone is reached, and the amount becomes due under your contract.

For a standard Victorian domestic building contract covering all stages, payments are generally structured as follows:

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Before making a payment, check that the stage:

• Has been fully completed
• Meets the plans and specifications
• Has passed any required building surveyor inspection
• Matches the payment milestone in your contract

An independent building consultant can also inspect the work before payments are due. This provides an additional check on quality and progress, although it does not replace the building surveyor’s role.

Do not pay for incomplete work or make advance payments outside the agreed schedule. Domestic building insurance may not cover work paid for before it is completed. At the end of the project, the builder is generally not entitled to final payment until the work is finished in accordance with the contract and the relevant occupancy permit or certificate of final inspection has been issued.

Changes made after a building contract is signed are generally treated as variations. A variation may be requested by you or your builder, or ordered by an authorised professional such as a building surveyor, architect, engineer or building inspector.

Even a seemingly small change to your house extension can affect materials, labour, permits, sequencing and the completion date. Before granting verbal permission for additional work, ask that the change be documented so you can understand its full effect on the construction project.

Under Victorian home-building rules, variations should generally be agreed to in writing before the work is changed. The variation notice should record the revised plans or specifications, the price adjustment and the new completion date.

Variations to price, scope and timing

A written variation should clearly explain:

• what work is being added, removed or changed
• why the change is required
• how the contract price will increase or decrease
• whether the builder’s margin or other fees apply
• how the variation affects the construction schedule
• the revised contract price and completion date
• whether permits, approvals or inspections must change

Both you and the builder should sign the variation before work proceeds. This keeps each party’s rights and obligations clear and helps reduce the risk of a later building dispute.

A formal variation notice may not be required when the builder reasonably believes the change will not affect a permit, delay the project or increase the original contract price by more than 2%. Consumer Affairs Victoria nevertheless recommends putting all changes in writing to help resolve disputes.

You should not generally have to pay for extra work needed to address an issue that the builder should reasonably have identified before construction began. For example, an additional charge may be questioned when foreseeable site conditions should have been considered based on available foundation data.

Before approving a variation

Check whether the proposed change:

• is already included in the original scope
• is essential or simply a custom addition
• offers enough value to justify the extra cost
• changes other selections or completed work
• requires permission from the building surveyor or council
• affects your budget or finance approval
• changes a guarantee, warranty or insurance arrangement

Avoid directly managing changes with tradespeople unless your contract expressly allows it. Instructions given outside the agreed process can create confusion about responsibility, cost and delays.

Contract note

A variation should not be used as a general cost-plus arrangement or as an open-ended indemnity for every unexpected expense. Review any broad clause that allows one company to change the price or scope without your genuine agreement, as it may raise concerns about unfair contract terms.

The cooling-off period gives you a limited opportunity to withdraw from a major domestic building contract after receiving a copy signed by the builder. In Victoria, it generally lasts five business days, beginning on the date you receive the signed contract rather than the date you signed it.

To end the agreement during this period, you must give the builder written notice by one of the delivery methods permitted by law or specified in the contract. The builder may retain $100 plus approved out-of-pocket expenses incurred before the withdrawal, but must refund the remaining money you have paid.

You may not receive a cooling-off period if:

• You engaged a lawyer to review the contract before signing
• You previously entered into a substantially similar contract with the same builder for the same home or land

Your contract must clearly explain the cooling-off right. If the required notice was omitted, you may have seven days from becoming aware of the omission to withdraw.

Use these five business days to review the full agreement, including the scope, allowances, payment schedule, guarantees and each party’s rights and obligations. Contact an independent building lawyer promptly if you find unclear clauses, unfair terms or conditions that could affect your ability to terminate the contract or resolve disputes later.

A construction contract can shape your budget, responsibilities and options for the entire build. Before signing, read every document as a complete package rather than reviewing the main agreement in isolation. This includes schedules, special conditions, plans, specifications and any separate deed or preliminary agreement.

Consider having an independent building lawyer review the contract, particularly if it includes custom clauses, broad indemnity provisions, or terms normally used for commercial projects. Legal advice can help clarify your rights and obligations, but obtaining it before signing may affect your cooling-off rights.

Builder registration and insurance

Confirm that the named company and individual builder hold the correct Victorian registration for your type of project. The registration details in the contract should match the official practitioner record, not just a trading name.

For major domestic building contracts signed from 1 July 2026, builders must arrange Home Warranty insurance after signing if the work is worth more than $20,000 and the home has no more than three storeys. You should receive a notice of cover; if it does not arrive, contact the Building and Plumbing Commission.

Also check:

• Who is responsible for public liability and site insurance
• Whether your home insurer needs to approve the work
• What the insurance covers during and after construction
• Whether any HIA-backed warranty or structural guarantee has separate conditions
• Whether the builder can provide evidence of current cover

A company guarantee is not a substitute for statutory protections. Check who provides it, what defects it covers, and whether it remains valid if the business is sold, closes, or becomes insolvent.

Inclusions, exclusions and allowances

Review the inclusions and exclusions together so you understand what the quoted price does and does not cover. Pay particular attention to work that may fall between the builder, homeowner and external contractors.

Check responsibility for:

• demolition and site preparation
• engineering, surveying and soil reports
• permits, council charges and mandatory inspections
• utility connections and upgrades
• painting, flooring and landscaping
• temporary fencing, access and waste removal
• owner-supplied fixtures or materials

Confirm whether each allowance is fixed, adjustable or excluded. The contract should not leave essential parts of the build dependent on assumptions that have not been priced or assigned to either party.

Payment stages and completion dates

Check that every payment is tied to a clearly defined, completed stage and that the completion date is calculated consistently across the contract and its schedules. Look for special conditions that alter the standard payment stages or give one party broad power to extend the timeframe.

Also, confirm how the contract handles:

• notice of a delay or extension
• practical completion inspections
• defects identified before handover
• occupancy permits or certificates of final inspection
• final payment and access to the completed home
• liquidated damages or other compensation for delay

The contract should provide a practical path for addressing incomplete work without creating conflicting obligations. Consumer Affairs Victoria recommends removing clauses that restrict reasonable site access and obtaining legal advice before agreeing to unusual conditions.

A clear building contract gives you a reliable framework for managing your extension or renovation from approval through to completion. It brings the scope, price, payment stages, timeframe, and responsibilities into a single agreement, helping you make informed decisions as the project progresses.

Before signing, take the time to review the full contract package, ask questions about anything unclear and seek independent advice where needed. The more detail that is confirmed upfront, the easier it is to manage changes, track progress and reduce the risk of disputes later.

Backed by more than 50 years’ experience delivering Melbourne home extensions and renovations, Supa Group uses transparent HIA-standard contracts for alterations, additions and renovations, with fixed pricing and confirmed timelines before work begins.