CHANGES TO DOMESTIC BUILDING CONTRACT REGULATIONS

As of 1 August 2017, the following changes to the Domestic Building Contract Regulations will occur:

• The monetary threshold for a Major Domestic Building Contract will increase from $5000 to $10,000
• The minimum value of a Cost Plus Contract will increase from $500,000 to $1 million and
• builders will need to ensure that a progress payment schedule 1 is updated to reflect change to Form 1 and Form 2 (updated MBA & HIA contracts will be available for sale – just check with them closer to the time

NEW Domestic Building Contracts Regulations 2017

• The Victorian Government has also just made the Domestic Building Contracts Regulations 2017 which will replace the current Domestic Building Contracts Regulations 2007.
• The new regulations took effect on Saturday 22nd April 2017 except for the matters outlined below which will take effect by 1 August 2017. Whilst much of the new regulations replace existing regulations there are four significant changes.

Major domestic building contracts

• The Domestic Building Contracts Act 1995 (“the Act”) provides that a major domestic building contract is subject to many special requirements. These include but are not limited to the checklist, the consumer guide, using prescribed progress payments, documenting variations, and the need for foundations data.

For 22 years the Act has defined a major domestic building contract as a contract where the contract price for carrying out the domestic building work is more than $5,000.

From 1 August 2017 the regulations will increase this amount to $10,000. This means that from that date a builder is only required to use a major domestic building contract if the contract price is $10,000 or more.

Preliminary Agreements

A preliminary agreement is a contract between a builder and an owner to make arrangement to covers the costs associated with work to enable a domestic building contract to be signed.

Often a preliminary agreement will be a domestic building contract as it includes the preparation of plans and specifications by a person other an architect or registered draftsperson. If the value of this work is no more than $5000 then a simple preliminary agreement can be used.

From 1 August 2017 if the price for preparation of plans and specifications exceeds $10,000 then a major domestic building contract will still need to be used. The new regulations do however clarify that it is not necessary to include plans and specifications for building work in such a contract as the contract will be for the purpose of preparing these documents.

Cost plus contracts
In Victoria a cost plus contract may only be used for domestic building work in limited circumstances. One circumstance is that a cost plus contract may be used if the work to be carried out 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.

The other circumstance is where it is reasonably estimated that the work will cost $500,000 or more. From 1 August 2017 this amount will be increased to $1,000,000 and any contracts signed from that date must comply with this new restriction.

New Progress Payment forms
The new regulations have changed these forms and by 1 August 2017 these forms need to be replaced.