Rules for Dealing with Builders in NSW: How to Protect Yourself

Building is one of the most stressful things you will do as a property owner. Most disputes do not start with a bad builder — they start with a client who stopped paying attention.

The good news: most building problems are avoidable. Not by luck, but by following a consistent set of rules from the moment you start talking to a builder to the day the defects period closes.

A building dispute in NSW arises when a property owner and builder cannot agree on matters such as the quality of work, variations, progress payments, delays, or defects. Building disputes are protracted and expensive — the rules below exist to help you avoid them.

CLS Legal has been advising property owners on building contracts and disputes in NSW since 2010.

1. Research the builder — check references, ASIC history, and solvency before you commit.
2. Get the contract right — fixed price, detailed scope, liquidated damages, and a proper defects clause.
3. Supervise the works — keep a diary, take photos, confirm discussions in writing.
4. Enforce the contract — check progress claims, respond to Security of Payment notices immediately, and do not pay in advance.
5. Manage the defects period — record every defect in writing, photograph before and after, know your expiry date.

If you are about to sign a building contract and want a solicitor to review it first — call CLS Legal on (02) 9279 0919. Most disputes are preventable at the contract stage.

Rule 1 — Research the Builder Properly

Before you sign anything, do your homework.

• Get quotes from more than one builder. Compare like for like — same scope, same specifications, same inclusions.
• Ask for multiple references on jobs similar to yours. Visit those jobs if you can. Use one as your benchmark for the standard of work you expect.
• Find out who will be the most senior person on site day-to-day. Ask how long the builder has worked with that person, and ask for references from jobs that person specifically supervised.
• Check every reference you are given. Actually call them.
• Ask for a list of the builder’s usual subcontractors and how long each relationship has been in place. Contact some subcontractors directly and ask what working with the builder is like.
• Ask for evidence of solvency.
• Run an ASIC search on the building company and its directors. Look for failed companies, winding-up applications, or other signs of financial difficulty.

Rule 2 — Get the Building Contract Right

The standard printed building contracts are written for builders, not owners. The NSW Fair Trading Building Contract for work over $5,000 is more balanced — but still have your solicitor review it before you sign.

The key terms to insist on:

Fixed price. Never agree to a costs-plus contract. It gives the builder no incentive to control costs — you absorb every overrun. Insist on a fixed price.

Benchmark property. Nominate a completed property — ideally one the same builder finished — as the minimum standard for your job. Include it as a special condition in the contract.

Design and construct vs construct only. If you are on a construct-only contract, the building work should not commence until all design and approval work is complete. Starting earlier creates variations.

Detailed scope of works. The more complete the scope, the fewer the variations. Vague specifications cost money.

Latent conditions. Fixed price contracts do not cover conditions discovered once work starts — unexpected ground conditions, contamination, buried services. For larger jobs, commission a geotechnical report and Stage 2 Environmental Report before you commit. Investigative reports upfront are far cheaper than surprises mid-build.

Variations clause. Builders make their margin on variations. The contract must be specific about how variations are approved, documented, and priced. Know the procedure and enforce it every time.

Access provision. The contract hands possession of the property to the builder. Include a clause giving you reasonable access to inspect and document progress throughout the works.

Payment schedule. Payment milestones must match your funding arrangements. If you have a lender, confirm their requirements before agreeing to the schedule.

Financial buffer. Have at least 20% more funds available than the contract price. Never start building works without a reserve.

Prime cost items. Specify the brands and specifications for all PC items in the contract. Research their costs before signing — open-ended PC items become expensive.

Liquidated damages. A liquidated damages clause sets a daily dollar amount the builder owes you for every day the works run late past the agreed completion date. Without one, proving your losses from delay is difficult and expensive. The contract must also define what counts as an acceptable delay — time extensions for inclement weather and public holidays may be reasonable, but monetary compensation for those delays is not.

Occupation certificate. Make final payment conditional on the builder obtaining the occupation certificate. Do not release the final payment without it.

Practical completion clause. If a major defect appears after the certificate of practical completion is issued, include a clause suspending the consequences of that certificate — including the final payment — until the defect is rectified.

Defects warranty period. Insist on a minimum of 26 weeks. The clause should also require defects to be rectified within a set timeframe by experienced staff — not whoever happens to be available.

Keep a contract checklist. List all important dates, milestones, and obligations in your contract. Know when things fall due.

In plain terms: Your building contract is your main protection. A well-drafted contract with clear variation, payment, and defects clauses prevents most disputes before they start.

Before you sign — have your contract reviewed by a solicitor. It is far less expensive than a dispute.