I am rebuilding my home after a disaster. What do I need to know when hiring contractors?
Last Updated 29 February 2024
Last Updated 29 February 2024
This resource is for people in New South Wales (NSW) who:
Own a home that was damaged or destroyed by a disaster; and
Are hiring contractors to rebuild or repair your home.
This resource provides general information on what to keep in mind when hiring contractors to repair or rebuild your home after a disaster. It explains when a needs to be licenced, when you need to enter a written contract with a contractor, and what that contract needs to contain. It also provides information on consumer protections in place in case work done by a contractor is defective or unsatisfactory.
Types of contractors you might hire include:
Builders
Plumbers
Electricians
Project managers
Structural landscapers
Other tradespeople
Before hiring a contractor to perform work on your home, you should always check that they are licenced to perform the work they are being hired to do. It is the law in NSW that all contractors require a licence to perform any residential building work unless an exemption applies.
Some examples of work that require a contractor to be licenced include:
The best way to check whether a contractor is licenced in NSW is to search the details of the contractor on the NSW Fair Trading website. The contractors listing will show you important information including whether they hold an active licence and the category of work they are licenced to perform.
You can access the search here: Verify licence – the place to look up and verify NSW licence and registration information
Alternatively, you can phone Fair Trading on 13 32 30 and provide the builder or contractor’s name and licence number. Fair Trading will then confirm whether they are correctly licenced.
While there are some situations in which contractors can be exempt from the law that requires them to hold a licence, it is safest to assume that any contractor that you are hiring requires a licence.
This is because if a contractor performs work unlicenced and a relevant exemption does not apply, then they may face significant penalties and you may not be covered by consumer protections that would otherwise protect you in the event of any building defects. It is also important to make sure that the contractor has the appropriate qualifications to perform the work you want done. You can read more about the consumer protections available to homeowners in the section “What consumer protections are in place to protect homeowners?” below.
If a contractor is unlicenced and claims to be exempt from the requirement to be, seek clarification from NSW Fair Trading or legal advice before proceeding.
The law in NSW requires all residential building work (except for emergency residential building repairs) to be performed under a written contract if:
the contract price exceeds $5,000 (including GST); or
the price is unknown at the time that the contract is entered into, but the reasonable market cost of the labour and materials exceeds $5,000 (including GST).
When calculating whether the contract price exceeds $5,000, it is important to include the cost of services performed by the contractor prior to commencing any construction. Examples of prior services include:
conducting a site inspection of the property;
undertaking demolition works;
obtaining a soil report;
creating designs, plans, or specifications; and
Submitting documents to the relevant authorities for approvals, such as a Local Council or certifier.
You might not need a written contract in these urgent circumstances. Residential building repairs are considered emergency residential building repairs if:
the work poses a risk or danger to the property or the health and safety of people if not repaired promptly; and
such repairs could not be performed promptly if time was spent entering a contract first.
If these two criteria are met, a written contract is not required.
If residential building work is being continued after the immediate emergency has ceased, it is the responsibility of the contractor to ensure that a written contract is entered into (if the value of the repairs being performed exceeds, or is likely to exceed, $5,000).
There is certain information that must be contained in every contract for residential building works. The information required depends on the value of the works being performed.
Where a homeowner and a contractor enter a contract for work valued between $5,000 – $20,000 or (if the contract price is not known) the reasonable market cost of the labour and materials involved is valued between $5,000 – $20,000, the contract must:
Be in writing;
Be dated and signed by, or on behalf of, each party to the contract;
Include the names of the parties, including the name of the holder of the contractor licence as shown on the contractor licence;
Include the contractor licence number;
Contain a sufficient description of the works being performed under the contract;
Contain all plans and specifications for the works, including a clause which states that all plans and specifications for work to be performed (including any variations to those plans and specifications) are taken to form part of the contract;
Include the contract price (if known);
Contain a clause that states that all work done under the contract will comply with:
Contain a clause that states that the contract may limit the contractor’s liability for failure to comply with the Building Code of Australia, all other relevant codes, standards and specifications that the work is required to comply with, and the conditions of any relevant development consent or complying development certificate if the failure relates solely to:
Where a homeowner and a contractor enters a contract for work that exceeds $20,000 in value, or (if the contract price is not known) the reasonable market cost of the labour and materials involved exceeds $20,000, the contract must:
Be in writing;
Be dated and signed by, or on behalf of, each party to the contract;
Include the names of the parties, including the name of the holder of the contractor licence as shown on the contractor licence;
Include the contractor licence number;
Contain a sufficient description of the works being performed under the contract;
Contain all plans and specifications for the works, including a clause which states that all plans and specifications for work to be performed (including any variations to those plans and specifications) are taken to form part of the contract;
Include the contract price (if known). Noting:
Contain any statutory warranties applicable to the works (see section X);
Include the cost of insurance cover (which is required);
Contain a visible statement setting out the cooling-off period that applies to the contract. Noting:
Detail any progress payments payable under the contract;
Contain a statement that the contract may be terminated in the circumstances provided by the general law and that this does not prevent the parties agreeing to additional circumstances in which the contract may be terminated;
Contain a clause that states that all work done under the contract will comply with:
Contain a clause that states that the contract may limit the contractor’s liability for failure to comply with all other relevant codes, standards and specifications if the failure relates solely to:
Contain the checklist of 17 items to assist the homeowner in understanding the building contract before it is signed. This checklist can be accessed here: https://www.fairtrading.nsw.gov.au/housing-and-property/building-and-renovating/preparing-to-build-and-renovate/contracts/contract-checklist
Contain information that explains the operation of the Building and Construction Industry Security of Payment Act 1999 (NSW) and the Building and Construction Industry Security of Payment Regulation 2020 (NSW)
Contain the security of payment guide, which can be accessed here: https://www.fairtrading.nsw.gov.au/trades-and-businesses/construction-and-trade-essentials/security-of-payment/recent-changes-to-security-of-payments.
There are several forms of contract that a homeowner can use when entering into a written contract with a contractor for the performance of residential building work.
NSW Fair Trading provides free building contract templates that homeowners and contractors can use. There are two templates. Which one you use will depend on the value of the work being performed.
A home building contract for work exceeding $5,000 and up to $20,000 in value can be accessed here.
A home building contract for work exceeding $20,000 in value can be accessed here: https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0010/389854/Home_building_contract_more-than-$20,000.pdf
A contractor may use a standard form contract that they have purchased from an industry association.
Many industry associations other than NSW Fair Trading publish standard form contracts that purport to comply with the Home Building Act. These contracts are often worded heavily in favour of the contractor. You should be wary of any form of contract proposed by a contractor and, if unsure, insist that the contractor uses the template contracts provided by NSW Fair Trading.
A homeowner or contractor can use a bespoke contract. A bespoke contract is a one that is not based on a standard form contract and has been drafted specifically for the particular project it relates to.
It is important that any agreement to vary the contract, or to vary the plans and specifications for work to be done under the contract, must be in writing and signed by, or on behalf of, each party to the contract.
Other things to know before signing a contract
A licenced builder or contractor must give the homeowner a signed copy of the contract no later than 5 business days after entering into it.
A contract must not include arbitration as a form of dispute resolution. Any clause that requires arbitration to resolve a dispute will be invalid.
A contract must not include clauses that gives the contractor any interest in the homeowner’s house or land. Any clause that does so will be invalid.
The maximum deposit that can be requested by a contractor for residential building work is 10% of the contract price.
If a company or partnership is signing the contract, the company or partnership must have a licence in the company or partnership’s name. They cannot sign a contract as a company or partnership if the licence is in the name of an individual, even if the individual is a member of the company or partnership.
A contractor must not undertake residential building work under a contract unless:
A contractor may not demand or receive payment for residential building work unless a certificate of insurance has been provided to the homeowner.
There are a number of consumer protections, also known as statutory warranties, that operate to protect homeowners in the event that work performed by a licenced builder or contractor is defective or unsatisfactory.
These consumer protections apply whenever residential building is performed by a licenced builder or contractor who has entered into a contract with a homeowner. They will apply even if they are not actually written down in the contract itself.
The consumer protections provide that:
Builders and contractors also owe homeowners a duty of care. This duty of care allows homeowners to make a claim for monetary compensation in the event that any construction defects in the residential building work led to economic losses. If you have identified defects in the work performed by a licenced builder or contractor, you can read our resource “I am rebuilding my home after a disaster. Where do I start if I have a problem with my builder?” for more information.
These consumer protections only apply for a certain length of time.
For claims related to a breach of a statutory warranty:
For major defects a homeowner has 6 years from the completion of the work
For all other defects a homeowner has 2 years from the completion of the work.
If you discover a statutory breach within the last 6 months of the warranty period (stated above), then you have another 6 months to lodge the building claims with NCAT.
For claims related to the supply of building goods or services a homeowner has 3 years from the date of the last supply or from the date the contract was entered.
A major defect is defined in the Home Building Act 1989 (NSW) as a defect in a major element of the building due to defective design, workmanship or materials (or use of certain building products), or a failure to comply with the National Construction Code structural performance requirements. Certain defects may be prescribed by regulations as major defects.
Additionally, a defect will be a major defect if it is likely to cause:
the inability to inhabit or use the building (or part of the building) for its intended purpose;
the destruction of the building or any part of the building; or
a threat of collapse of the building or any part of the building.
Typically, non-major defects are defects that are easily repairable and that do not impact the building’s structural integrity.
It can be challenging to work out whether a defect is major or non-major and you might need help from an expert. You can read the section “Where to get help” below for more information.
NSW Fair Trading aims to achieve fairness for homeowners by providing information on the types of contractor licencing, providing contract templates, and by offering dispute resolution services for disputes between a homeowner and contract. See their website for more information on how they can help: https://www.fairtrading.nsw.gov.au/__data/assets/pdf_file/0010/389854/Home_building_contract_more-than-$20,000.pdf
LawAccess is a free government service that provides legal information and referrals, including to Legal Aid NSW, for people with a legal problem in NSW. See their website for more information on how they can help: https://www.lawaccess.nsw.gov.au/
Justice Connect assists eligible individuals, small businesses, community organisations and farms and other primary producers who have been impacted by disasters.
You can apply online for free legal help: Apply for help – Justice Connect. This is the quickest and most efficient way to check if you’re eligible and start the process of being matched with a lawyer. Once we receive your application, a member of our team will be in touch to guide you through the next steps.
You might be eligible for free legal help from our lawyers. Making an online application is the quickest and best way to apply for free legal help.
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This resource was last updated on 29 February 2024. This is legal information only and does not constitute legal advice. You should always contact a lawyer for advice specific to your situation. Please view our disclaimer for more information.