BUILD 2025: Your building contract

Your building contract

Entering into a building contract is one of the most significant financial commitments you’ll make, so it’s important to seek independent advice before signing anything.

Many builders use a standard form contract, but some contracts may include amendments or special conditions, along with critical timeframes and key terms such as ‘prime cost’ and ‘provisional sum.’ It pays to have a professional clarify these details for you, but here’s a summary of some terms you might come across.

TIMEFRAMES

Your contract will outline a number of timeframes including:

• when the builder is expected to start work

• the timeframe you have to respond to notifications

• the period in which you must inform the builder about any issues, and

• the time they have to address and fix those problems.

Your contract will also include deadlines for progress payments to your builder.

HAVE YOUR BUILDING CONTRACT LOOKED AT BY A LEGAL PROFESSIONAL WHO CAN HELP YOU UNDERSTAND YOUR RIGHTS AND OBLIGATIONS.

VARIATIONS

Most contracts say that any changes must be documented in writing. If you need to change something in your contract, you must inform your builder as soon as possible. This could involve anything from altering your selections to changes in the floor plan and design. Even if you discuss these changes verbally, you should confirm your requests in writing, and your builder should respond in kind.

PROVISIONAL SUM

A provisional sum is used in a contract where an owner has not yet made a selection (for example, kitchen joinery), or when a builder can’t determine an accurate price for an item. With a global shortage of building products and labour, provisional sums are currently being used for items with material and/or labour components likely to experience price fluctuations. Some examples include timber, steel frames and windows.

A provisional sum is an estimate only, and you will be charged (by way of a variation) the actual cost, plus builder’s margin.

PRIME COST

A prime cost is an amount the builder allocates for the supply of necessary items that have not been selected by you.

Example: a builder may include tiles at a price of $40 per square metre, but if you select tiles that are $100 per square metre, there will be an additional cost to you.

If you have already made selections for items included as ‘prime cost’ items, you should let your builder know at the contract stage so they can make sure the allowances are reasonable for your selections. Example: if a contract has a provisional sum of $10,000 for an item, and the total cost of the item is $15,000, this is the amount you will be required to pay.