Key Questions to Ask When Reviewing Your Building Contract

The payment schedule is arguably the most critical financial aspect of any construction contract. Essential questions include whether deposit amounts comply with statutory limits, if progress claims align with genuine work completion, and what documentation is required before each payment. Homeowners must understand exactly when payments are due, how much is payable at each stage, and what work must be completed before each payment becomes due. It's equally important to clarify what happens if a payment is late or missed altogether, including any interest charges or consequences for both parties. Review the payment schedule meticulously and ask your builder to explain any terms that seem unclear or ambiguous. Ensure that payment stages align with genuine progress milestones, not arbitrary dates. Be particularly cautious of front-loaded payment schedules that require large upfront payments before substantial work is completed.

The scope of work section outlines the specific tasks, responsibilities, and standards that the builder must complete. Key questions to clarify include whether site preparation is included, who handles waste removal, and whether preliminary items like temporary fencing are specified. It's absolutely essential that homeowners have crystal-clear understanding of what work will be done, how it will be executed, who will be responsible for each element, and what standards apply. Any vague, ambiguous, or unclear language in this section must be clarified and amended before signing the contract. Insufficient detail in the scope of work creates opportunities for disputes about what was included in the original contract price and what constitutes a variation requiring additional payment.

During virtually every construction project, changes to the original plans occur. Important questions include how variation costs are calculated, what documentation is required before variations proceed, and whether you have the right to reject unreasonable variation claims. Change orders (also called variations) are formal written agreements that document changes to the scope of work, project timeline, or contract price. Homeowners must ensure their contract includes a clear, detailed process for submitting, approving, and documenting change orders. Understand the associated costs for variations, how they're calculated, and your rights to reject unreasonable variation claims. Never allow variation work to proceed without signed written documentation of the scope and price. Verbal agreements about variations create dangerous disputes that are difficult to resolve.

The completion date and liquidated damages provisions outline the deadline for completing the project and the financial consequences if that deadline is not met. Liquidated damages are predetermined amounts that the builder agrees to pay for each day or week of delay beyond the agreed completion date. Review this section carefully to ensure you understand the realistic completion timeline, the circumstances that would entitle you to liquidated damages, and whether the penalty amount is reasonable and enforceable. Be aware that builders often include extension of time clauses that allow deadline extensions for various reasons. Ensure these extension provisions are fair and don't allow indefinite delays without consequence.

Understanding the insurance and liability provisions in your contract is critical to ensuring you're protected if accidents, damages, or defects occur during or after construction. Essential questions include whether the builder holds current home warranty insurance, what public liability coverage limits apply, and who is responsible if uninsured damage occurs. Review the contract carefully to identify what types of insurance the contractor is required to carry, including public liability insurance, contract works insurance, and home warranty insurance. Confirm that the builder has provided valid proof of insurance with adequate coverage limits. Check whether the contract includes a waiver of subrogation, which prevents insurance companies from seeking damages from the other party after a claim. Understand your own insurance obligations and ensure there are no gaps in coverage that could leave you financially exposed.

Most residential building contracts include warranties and guarantees that define the builder's ongoing responsibilities after practical completion. Critical questions include what defects are covered under warranty, how long warranty periods apply to structural versus non-structural elements, and what process applies for making warranty claims. These provisions outline what defects are covered, for how long coverage applies, and what remedies are available if defects appear. Review these provisions meticulously to understand exactly what is covered and what is excluded, the duration of different warranty periods for structural versus non-structural elements, and the process for making warranty claims. Ensure all warranties and guarantees are documented in writing with specific detail about coverage scope and duration. Be aware of statutory warranty periods under your state's building legislation, which apply regardless of what the contract says.

Having a clear understanding of how disputes will be resolved and what termination rights exist is essential preparation for potential problems. Key questions include whether disputes must go through mediation before tribunal proceedings, under what circumstances you can terminate the contract, and what happens to your deposit if termination occurs. Ensure the contract includes a structured dispute resolution clause outlining the process for resolving disagreements, such as negotiation, mediation, or arbitration before litigation. Look for fair termination provisions that give you the right to terminate the contract if the builder fails to meet specified requirements, abandons the work, becomes insolvent, or commits serious breaches. Equally, understand the circumstances under which the builder can terminate and what financial consequences apply. Ensure termination provisions protect your deposit and allow you to recover costs of rectification or completion by another builder.

Confirm that the contract clearly specifies that the contractor is responsible for obtaining all necessary permits, approvals, and certifications required for the project. Check whether the contract states who will pay for permits and whether the contractor must provide proof of all permits and approvals before commencing work. This is crucial because building without proper permits can result in stop-work orders, fines, and requirements to remove completed work.

If the contract does not include clear provisions about permits and approvals, this represents a significant risk that must be clarified and documented in writing before signing. Verify that the builder understands all applicable building codes, planning requirements, and local council regulations. Ensure there's a clear process for handling any permit delays or approval rejections, including impacts on the construction timeline and contract price.