Changes to the Domestic Building Contracts Regulations
20 July 2017
Adrian Clifford, Special Counsel, Melbourne
Effective from 1 August 2017 there will be a number of changes to regulations under the Domestic Building Contracts Act 1995 (Vic) (Act).
Major Domestic Building Contracts
Major domestic building contract is now defined as a domestic building contract where the contract sum is more than $10,000 (previously $5,000).1
If the contract sum for preliminary work is less than $10,000, the parties no longer need to enter into a major domestic building contract. However, the parties should still document their agreement in writing. That agreement must comply with the requirements in Part 2 of the Act including notice of escalation clauses and limits on the amount of deposit.
If the contract sum for preliminary work is more than $10,000, the parties must still enter into a major domestic building contract. However, the major domestic building contract does not need to incorporate plans and specifications which contain enough information to enable the obtaining of a building permit.2
Cost Plus Contracts
Cost plus contracts for domestic building work are now only permitted:
- where the contract is entered into after 1 August 2017 and reasonably estimated to exceed $1,000,000 (previously $500,000);3
- where the contract is a domestic building contract for public construction and the Crown or a public entity is a party to the contract; or
- where the work involves the renovation, restoration or refurbishment of an existing building and it is not possible to calculate the cost of a substantial part of the work without carrying out some domestic building work.
If parties enter into a cost plus contract in any other circumstances:
- the builder may be liable for penalties; and
- the builder may be unable to enforce the contract against the owner. However, the Tribunal may award the builder the cost of carrying out the work plus an allowance for a reasonable profit if the Tribunal considers that it would not be unfair to the owner to do so.
1 Regulation 6 of the Domestic Building Contracts Regulations 2017 (Vic) (Regulations).
2 Regulation 11(2) of the Regulations.
3 Regulation 10(b) of the Regulations.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.