Most homeowners read their building contract once, feel slightly overwhelmed by the language, and sign it. I understand why: the contracts are long, the language is dense, and you're excited to get started. But a building contract is a legal agreement that will govern how you spend hundreds of thousands of dollars over the next year or more.
This is worth reading carefully. And if you can't interpret what a clause actually means in practice, it's worth getting someone to explain it to you before you sign, not after.
Here are the five clauses I see causing the most damage to Illawarra homeowners.
The scope of works is the most important part of your contract. It defines what the builder is required to build for the contract price. If it's vague — and many are — anything that isn't explicitly included becomes a potential variation.
PC items (provisional cost allowances) are a related issue. When a contract says "kitchen joinery: PC $18,000," that's the builder's allowance for that item. If the joinery you select costs $32,000, the difference is a variation.
Every building contract gives the builder the right to issue variations for additional work or changed conditions. That's reasonable, as construction involves genuine unknowns. What's not reasonable is a variation clause so broad that the builder can issue variations for things they should have anticipated and priced correctly in the first place.
The most dangerous variation clauses give the builder the right to proceed with a variation and invoice for it, even if you haven't approved it, if you haven't responded within a certain number of days.
Your contract will specify a completion date, or a completion period from the date of commencement. What it will also specify is the events that entitle the builder to extend that date, and in many contracts, this list is very long.
Without meaningful liquidated damages provisions (a fixed daily or weekly amount the builder pays you for late completion) a builder has very little financial incentive to deliver on time.
Your progress payments should release funds when work is actually complete, not when the builder says it's complete. The most common example is the "lock-up" or "enclosed" stage payment, often triggered when the building is weather-tight — but "weather-tight" doesn't mean the structural work is complete.
The final payment is the most important of all. Once you release it, your practical leverage over the builder's willingness to rectify defects drops significantly.
Practical completion is the point at which your builder says the project is complete and claims their final payment. The contract's definition of practical completion matters enormously.
The defect liability period (typically 13 weeks in residential contracts but sometimes less) is the period after practical completion during which the builder must return and fix defects.
What to do before you sign
Read the contract. All of it. This is non-negotiable regardless of anything else you do.
Identify every clause that transfers risk to you or gives the builder broad discretion. For each one, understand what the practical effect is if it's triggered in the worst case.
If there are clauses you're not comfortable with, negotiate. Most builders will accept reasonable amendments to standard contract terms. A builder who refuses any negotiation on contract terms before they've started work is showing you something about how they'll behave when there's a dispute mid-construction.
Builder Select includes a full contract clause review. We go through your proposed contract, flag the clauses that need attention, and help you negotiate before you commit to anything.