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.