Fixed-price building contracts in NSW: deposit, HBCF and provisional sums

A fixed price is only as firm as the contract behind it. Here is what NSW rules say, and what to look for.

Small jobs contracts and full contracts

The NSW Government says work worth less than $20,000 needs a small jobs contract, which must be dated and signed by each party. Work over $20,000 needs a full home building contract, which adds items such as the statutory warranties, the cost of Home Building Compensation (HBC) cover and a checklist prescribed by Building Commission NSW.

The deposit cap

For work valued at $5,000 or more, the maximum deposit is 10% of the contract price. Do not pay more than that, and do not pay any deposit before you have seen the HBC insurance certificate, where it applies.

Home Building Compensation Fund cover

HBC cover is required for residential building work over $20,000, including GST. The contractor must hold it before taking any money, including a deposit. The Home Building Compensation Fund, managed by icare, is a safety net for NSW home owners faced with incomplete or defective work. You can check a certificate on Service NSW using the HBC Check.

Provisional sums and PC items

A fixed price can still move if it relies on allowances. A provisional sum is an allowance for work whose cost is not yet known. A prime cost (PC) item is an allowance for a fitting or fixture you will choose later. Builders who keep these to a minimum, as some Illawarra builders say they do, give you a price that is closer to the final cost. Ask for every allowance to be listed, with its amount.

What to ask before you sign

1. Is the price fixed, and which allowances are in it?
2. What is the deposit, and is it within 10%?
3. Where is the HBC cover certificate?
4. What is the scope, in writing, with a cost breakdown?

A fixed-price home builder in Wollongong should answer all four before you sign anything.

Common questions