Construction FAQs
Q: What should I look out for when reviewing a building contract?
When reviewing a building contract, you should:
- Look for anything that appears abnormal or inconsistent.
- Check that the builder is properly registered.
- Review the number and content of any special conditions.
- Ensure the schedule is properly completed.
- Insert a reasonable defects liability period.
- Include sufficient liquidated damages (LD) for late completion.
- Avoid excessive prime cost (PC) or provisional sum (PS)
- Be cautious if the numbers in the contract seem unrealistic—this can be a warning sign.
Constructing a dwelling is a lengthy process, and the building contract operates on a daily basis for several months. We strongly recommend clients carefully read through their contract and become familiar with it, so that they know when to seek legal advice if issues arise.
Q: What are Prime Cost (PC) and Provisional Sum (PS) items?
These are items whose exact costs cannot be determined at the time of signing the building contract.
Although they are usually included in the contract price, the final amount may vary depending on actual costs—this means the total contract price can increase or decrease.
In most single residential dwelling contracts we’ve seen, PC and PS items are usually minimal or absent.
Because they can change the final contract price, it is advisable to avoid them where possible.
Q: What should I do if my builder delays completion?
Under standard HIA contracts, if the works are not completed within the agreed building period, the owner is entitled to claim liquidated damages as specified in the contract.
The appropriate steps depend on the client’s preference, the cause of the delay, how much work remains, and how long it will take to complete.
Practically speaking, many clients worry that claiming liquidated damages before taking possession may cause further conflict or delay. Legal advice should be sought before taking this step.
Q: Can I terminate the building contract if there are defects?
Not usually. Possession is generally handed over only after the construction is complete. During the final inspection, the owner should provide a list of defects for rectification.
A right to terminate typically arises only when:
- The builder suspends work without a valid reason;
- The builder is in substantial breach of the contract; and
- A 14-day written notice has been given.
Q: What if defects appear during construction?
If the owner is obtaining finance, the financier may conduct inspections for valuation purposes—but these do not guarantee that the building is free from defects.
We recommend owners engage an independent project manager or superintendent, supported by contract clauses allowing them to determine progress and approve claims.
This helps ensure the works are carried out according to the plans, drawings, and required workmanship standards.
Q: What is a subcontractor?
Builders often do not perform all the work themselves—they engage subcontractors for specific tasks.
For example, a concreter might be hired to supply and pour concrete.
Legally, the owner’s contract is with the builder, not the subcontractor.
The builder remains responsible for ensuring the subcontractor’s work quality and payment.
Q: Should I go to VCAT or Court for a building dispute?
If the dispute is a domestic building dispute, it must first go through the Domestic Building Dispute Resolution Victoria (DBDRV) before proceeding to VCAT.
If the dispute is not covered by the Domestic Building Contracts Act 1995 (Vic), it can go to Court—depending on the amount claimed.
Under section 54 of the DBC Act, a domestic building dispute is one between an owner and a builder, subcontractor, architect, or engineer, relating to:
- The construction, renovation, or alteration of a home;
- Landscaping, paving, or fixtures associated with a home;
- Provision of utilities (lighting, heating, ventilation, water, etc.); or
- Demolition or removal of a home.
For more information on procedures and costs, see Litigation FAQs.
Q: What is the SOP Act and how does it relate to me?
The Building and Construction Industry Security of Payment Act 2002 (Vic) (SOP Act) ensures that those carrying out construction work or supplying goods and services under a construction contract are paid promptly.
It mainly applies to commercial building contracts and agreements between builders, subcontractors, and suppliers.
To invoke the SOP Act:
- The contract should be properly prepared;
- Invoices must clearly state:
“This is a payment claim made under the Building and Construction Industry Security of Payment Act 2002 (Vic).”
If correctly handled, the SOP Act can lead to a binding adjudication determination, enforceable by the Court—usually faster and less expensive than traditional court proceedings.
Pricing (for reference)
- HIA or MBA standard contract review
(excluding plans, drawings, and specifications):- Verbal advice: ~$990.00
- Written advice: ~$2,200.00
(based on minimal special conditions — typically no more than two pages)
- VCAT application or defence:
Assessed case by case.
