Owner Builder Contracts

As an owner builder, the law requires that a written contract be entered into that complies with the law whenever a builder / contractor is engaged by the owner builder to carry out residential building work that exceeds $5,000 in value.

It is therefore important for an owner builder to carefully select the most appropriate type of home building contract to use in such circumstances. Some contracts are longer and more detailed than others, and a general tip is the larger the project, and the more money and risk involved – the more detailed the contract should be.

The main types of standard residential building contracts are as follows:

New Home Construction Contract - This type of contract is for the construction of a brand new home (or a brand new duplex or dual occupancy) under a fixed contract price. If the work is to be done on a 'do and charge' or cost-plus basis, this type of contract is not appropriate. This type of contract also assumes that the owner builder will not be living on the site when the project is being carried out.

Renovations and Additions Contract - This type of contract is for the alteration, addition or renovation of an existing residential building under a fixed contract price. If the work is to be done on a 'do and charge' or cost-plus basis, this type of contract is not appropriate. This type of contract also assumes that there is an existing structure on the site, and that the owner builder may continue live on the site (or part of the site) when the project is being carried out.

Cost-plus or 'do and charge' Contract - This type of contract is for any type of residential building work, where there is no fixed contract price. As the name of this contract suggests, the owner builder will pay the builder / contractor the cost of the building works, plus a pre-determined margin / fee over and above that cost, under this type of contract.

Small Construction Works Contract - This type of contract is for all types of residential building work, which:

(a) has a fixed contract price which is $20,000 or more; and

(b) involves 'smaller scale' building work (generally up to approximately $80,000 in value).

Minor Construction Works Contract - This type of contract is for all types of residential building work which has a fixed contract price, and involves minor building work that does not exceed $20,000 in value.

Kitchen and Bathroom Contract - This type of contract is appropriate where the owner builder is engaging a supplier to manufacture a kitchen and/or bathroom unit and install it for the owner builder, all under one contract. This contract should only be used if there is a fixed contract price.

It is important that whenever an owner builder is preparing to start their residential project, that the right building contract is used. In addition to using the right building contract, an owner builder should also make sure that the building contract complies with the Home Building Act 1989 (NSW), or the contract may be null and void.

By using the most appropriate building contract for the project to be undertaken, an owner builder will be able to minimise the risk of a payment dispute arising at a later point in time.