Why the Contract Matters More Than You Think
A good building contract protects both sides. It gives you certainty about what you are paying for, when the work will be done, and what happens if the scope changes. It gives your builder certainty about what they are delivering, how they will be paid, and what is within the agreed scope.
Without a proper contract, disagreements become arguments. With one, you know exactly how they will be resolved. No surprises.
In NSW, a written contract is legally required for any residential building work over $5,000 (including labour and materials). For work over $20,000, additional requirements apply, including mandatory insurance. These are not suggestions. They are legal obligations under the NSW Home Building Act 1989.
If your builder does not offer a written contract, that is not a shortcut. That is a red flag.
Standardised Contracts: The Gold Standard
Not all building contracts are created equal. Some builders write their own. Some use contracts drafted by their solicitor. And some use standardised contracts from industry bodies like the Housing Industry Association (HIA) or Master Builders Association (MBA).
If you are working with a smaller or independent builder, a standardised HIA or MBA contract is the gold standard.
What makes them better
We recommend HIA and MBA contracts because they have been developed over decades. They are reviewed by legal professionals, updated regularly to reflect changes in legislation, and designed to be fair to both parties. They include every clause that NSW law requires, plus additional protections that a custom contract might leave out.
They cover:
- Clear definitions of the work being performed
- A structured payment schedule tied to milestones (not dates)
- A formal variations process that requires written approval
- Statutory warranties as required by NSW law
- Dispute resolution pathways
- Cooling-off periods
- Insurance requirements
A builder who uses an HIA or MBA contract is telling you something important: they take the administrative side of building as seriously as the physical work. They are not cutting corners on paperwork any more than they would on waterproofing. That consistency is what builds trust.
What if your builder uses their own contract?
It is not automatically a problem. Larger building companies sometimes use bespoke contracts drafted by construction lawyers. These can be perfectly sound, but you should have them reviewed independently before signing.
What matters is that the contract includes everything on the checklist below. If it does not, ask why. If the answer is not satisfactory, that tells you something.
NSW Legal Requirements: What the Law Says
Before we get to the full checklist, here is what NSW law specifically requires.
For work between $5,000 and $20,000
- A written contract signed by both parties before work begins
- The contract must include the builder’s name, licence number, and ABN
- A description of the work to be done
- The contract price (or how it will be calculated)
- The builder must provide a copy of the signed contract to the homeowner within 5 business days
For work over $20,000
Everything above, plus:
- A detailed scope of work and specifications
- A payment schedule that cannot require more than 10% as a deposit
- A start date and a completion date (or a formula for calculating them)
- A 5 business day cooling-off period from the date the homeowner signs
- Home Building Compensation Fund (HBCF) insurance is mandatory
- Statutory warranties as defined in the Home Building Act 1989
These are the minimums. A good contract goes further.
The Complete Building Contract Checklist
Work through this list before you sign. If anything is missing, ask your builder to address it before the contract is finalised.
1. Parties and licence details
Your contract should clearly identify:
- The full legal name of the builder (or building company)
- The builder’s NSW contractor licence number
- The builder’s ABN
- Your full name as the homeowner
- The property address where the work will be performed
You can verify any builder’s licence in under a minute on the NSW Fair Trading licence checker. Do this before you sign.
2. Scope of work
This is the most important section of the contract. It defines exactly what your builder is responsible for delivering.
The scope should include:
- A detailed written description of all work to be performed
- Reference to attached plans, drawings, or specifications
- A clear statement of what is included and what is excluded
- Material selections and specifications (or allowances where selections are not yet finalised)
- Who is responsible for obtaining any required approvals (DA, CDC, or complying development)
If the scope is vague, such as “renovate bathroom as discussed,” it is not good enough. Every element of the work should be described in enough detail that a third party could read the contract and understand exactly what is being built.
3. Contract price
The contract price should be stated clearly and should specify:
- The total contract price (including GST)
- Whether the price is fixed or cost-plus
- What is included in the price and what is not
- Any provisional sums or prime cost items (these are allowances for items not yet selected, like tiles or tapware)
- How provisional sums will be reconciled at the end of the project
For a detailed explanation of how fixed-price and cost-plus contracts work, and which one suits your situation, see our guide to fixed-price vs cost-plus contracts in Sydney.
4. Payment schedule
The payment schedule should be tied to milestones, not dates. This is how standardised HIA and MBA contracts structure it, and it protects you.
Check for:
- Deposit: maximum 10% of the contract price (NSW law for contracts over $20,000) or $1,000, whichever is greater
- Progress payments tied to completion of defined stages (for example: slab, frame, lock-up, fit-off, completion)
- A final payment (retention) due only after practical completion and a defects inspection
- Clear terms about when each progress claim is due and how long you have to pay
Never pay ahead of work completed. If a builder asks for 50% upfront, that is a serious red flag.
5. Start date and completion date
The contract should include:
- A start date (or a formula for determining it, for example, “within 10 business days of all approvals being granted”)
- A completion date (or a practical completion date)
- Any provisions for extensions of time (weather delays, supply chain issues, variations)
- What happens if the builder does not meet the completion date without a valid reason
6. Variations process
Variations are changes to the original scope after the contract is signed. They happen on almost every project, particularly in renovations where unexpected conditions are found behind walls or under floors.
Your contract should specify:
- Variations must be agreed in writing before the work is carried out
- The builder must provide a written quote for the variation, including the cost and any impact on the timeline
- You must approve the variation in writing before the builder proceeds
- Verbal agreements are not binding
This is one of the most important protections in the contract. Without a formal variations process, costs can escalate without your consent.
7. Warranties and defects liability
Under the NSW Home Building Act 1989, licensed builders must provide statutory warranties:
- Major defects: 6-year warranty from the date of completion
- Non-major defects: 2-year warranty from the date of completion
Your contract should reference these statutory warranties. It may also include a defects liability period, typically 13 weeks after practical completion, during which the builder is obligated to return and fix any defects you identify.
8. Insurance
For work over $20,000, your builder must hold Home Building Compensation Fund (HBCF) insurance. This protects you if your builder dies, disappears, or becomes insolvent before the work is complete or the warranty period expires.
Check for:
- A certificate of HBCF insurance issued before work begins
- Public liability insurance
- Workers compensation insurance (if the builder has employees)
Ask for copies of all insurance certificates. A professional builder will provide them without hesitation.
9. Dispute resolution
No one wants to think about disputes when they are about to start a project. But having a clear process in the contract makes them far less likely to escalate.
Your contract should include:
- A step-by-step dispute resolution process (typically: discussion, then mediation, then NSW Civil and Administrative Tribunal if needed)
- Timeframes for each step
- How costs of dispute resolution are shared
Standardised HIA and MBA contracts include well-established dispute resolution clauses. This is another reason they are preferred.
10. Cooling-off period
For contracts over $20,000 in NSW, you have a 5 business day cooling-off period from the date you sign the contract. During this time, you can withdraw from the contract without penalty (although the builder may retain a small amount for costs incurred).
Your contract should clearly state this right. If it does not, the cooling-off period still applies by law, but it should be in writing.
11. Plans and specifications
Any plans, drawings, engineering reports, or specifications referenced in the contract should be physically attached or clearly identified:
- Architectural plans or sketches (signed and dated)
- Engineering specifications (if applicable)
- Material specifications and selections schedule
- Colour and finish selections
If selections are not yet finalised, the contract should include provisional sum allowances with a clear process for reconciliation.
Red Flags: When the Contract Is Not Good Enough
Pay attention if you see any of the following:
- No written contract offered - this is a legal requirement for work over $5,000. Walk away.
- Vague scope - if the work is described in one paragraph, it is not detailed enough to hold anyone accountable.
- Large upfront deposit - NSW law caps deposits at 10% (or $1,000, whichever is greater) for contracts over $20,000. If someone asks for 30% or 50% upfront, do not proceed.
- No variations process - this means any change to the scope can be charged at any price with no approval.
- No insurance certificates provided - if they cannot show you current insurance, they may not have it.
- Pressure to sign immediately - a legitimate builder will give you time to read the contract and seek advice if you want to.
- No licence number on the contract - check this first, every time.
- The contract says “as per verbal agreement” - nothing should be left to verbal agreement. Everything should be in writing.
Before You Sign: A Quick Summary
Before you sign any building contract, make sure you can check off every item on this list:
- Builder’s licence number verified on NSW Fair Trading
- Detailed scope of work with plans attached
- Contract price clearly stated (including GST)
- Payment schedule tied to milestones (not dates)
- Deposit no more than 10% (for contracts over $20,000)
- Written variations process
- Statutory warranties referenced
- HBCF insurance certificate provided (for work over $20,000)
- Public liability and workers comp insurance confirmed
- Dispute resolution process included
- 5 business day cooling-off period stated
- You have read the entire contract and understand every clause
If you are working with a builder who uses an HIA or MBA standardised contract, most of these will already be covered. That is exactly the point.
Frequently Asked Questions
What should be in a building contract?
A building contract should include the full names and licence details of both parties, a detailed scope of work with plans and specifications attached, the contract price (including GST), a payment schedule tied to milestones, start and completion dates, a written variations process, statutory warranty provisions, insurance details (including HBCF for work over $20,000 in NSW), a dispute resolution process, and a 5 business day cooling-off period for contracts over $20,000. Standardised contracts from the Housing Industry Association (HIA) or Master Builders Association (MBA) include all of these by default.
Where can I get a building contract?
Your builder should provide the contract. Professional builders in NSW typically use standardised contracts from the Housing Industry Association (HIA) or Master Builders Association (MBA), which are the industry gold standard. These contracts are designed to comply with NSW law and protect both parties fairly. The NSW Government also provides basic home building contract templates for work between $5,000 and $20,000 and for work over $20,000, available through the NSW Fair Trading website. If your builder provides their own custom contract, consider having it reviewed by a solicitor before signing.
What are the warranties for home building in NSW?
Under the NSW Home Building Act 1989, licensed builders must provide statutory warranties on all residential building work. Major defects are covered for 6 years from the date of completion. Non-major defects are covered for 2 years. A major defect is one that causes (or is likely to cause) the inability to live in or use the building for its intended purpose, or the destruction or threat of collapse of the building. These warranties apply automatically. They do not need to be written into the contract, but they should be. For work over $20,000, the builder must also hold Home Building Compensation Fund (HBCF) insurance, which protects you if the builder cannot complete the work or honour the warranty.
What are the 4 types of construction contracts?
The four main types of building contracts used in residential construction in Australia are: (1) Fixed price contracts, where the total price is agreed upfront and the builder carries the risk of cost increases. (2) Cost-plus contracts, where you pay the actual cost of materials and labour plus a builder’s margin, and you carry the risk of cost increases. (3) Lump sum contracts, which are similar to fixed price but typically used for larger projects with a single agreed amount. (4) Time and materials contracts, where you pay for the builder’s time at an agreed rate plus the cost of materials. For most home renovations in Sydney, a fixed-price contract with a standardised HIA or MBA template provides the best protection for homeowners. For more detail on which type suits your project, see our guide to fixed-price vs cost-plus contracts in Sydney.
Need Help Understanding Your Contract?
At LikeSilk Building (Licence 274849C), we use HIA standardised contracts on every project across Sydney’s North Shore. We are a family-run building business, and we do not see the contract as paperwork to rush through. We see it as the foundation of the entire experience. A clear contract means no surprises, predictable progress, and a genuine partnership from start to finish.
If you are planning a renovation and want to work with a builder who puts as much care into the contract as the construction, get in touch. No obligation, just a straightforward conversation about how we work.
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