The Building Work Contractors Act 1995 (SA) requires that a building work contract has certain elements.

Building Indemnity Insurance

Section 34 of the Building Work Contractors Act 1995 (SA) requires builders carrying out domestic building work (where the contract price is over $12,000 and development approval is required) to hold a policy of insurance in relation to that building work [see also Building Work Contractors Regulations 2011 (SA) reg 4]. A copy of the certificate of insurance must be supplied to the building owner and to the relevant authority at the time of applying for planning approval [Planning, Development and Infrastructure (General) Regulations 2017 (SA) reg 36]. Building work cannot commence without the insurance being in place [reg 36(2)].

Building indemnity insurance covers a building owner for defective building work up to an amount of $150,000 in cases where the builder dies, disappears (or is otherwise unable to complete the work) or becomes insolvent [s 35].

Other Requirements of a Building Work Contract

The formal requirements for a domestic building work contract where the value of the work is over $12,000 are set out in section 28 of the Building Work Contractors Act 1995 (SA) and include the following:

1. Be in writing and be legible

2. Set out all the terms of the contract

3. Details about the builder, such as the licence number

4. Signed by both the building owner and the builder.

A signed copy of the contract along with the prescribed notice under section 28(f) of the Building Work Contractors Act 1995 (SA) (which includes important information about the contract) must be given to the building owner as soon as possible following signing. This is called a Form 1 – Your Building Contract: Your Rights and Obligations.

A building contract will include certain terms which describe how the contract price is calculated. These terms include:

The contract should include a start and finish date, or at least an estimate of the number of days that it will take to complete the work.

If the value of the work is less than $12,000, it is still a good idea to have a written contract so that both the building owner and the builder are aware of their rights and obligations.

If a contract contains terms that are harsh or unconscionable, a party to the contract may apply to the Magistrates Court for appropriate relief [s 38].

A building work contract cannot purport to exclude the effect of the Building Work Contractors Act 1995 (SA) and its provisions, and any term to that effect is void [s 42].

Cooling Off

A building owner has 5 clear business days after the making of the contract in which to terminate the contract. The Act requires a building owner to provide a builder with written notice of the intention not to be bound by the contract, and the contract is considered to be terminated at the time the notice is posted or served [s 36].

If a building owner wants to terminate the contract, before the end of the 5 day period, they must:

The building owner may also terminate the contract prior to completion if the builder has not complied with the relevant provisions of the Act [see s 36 (5)(b)]. In this case, legal advice should be sought prior to cooling off, because there may be ramifications in relation to any unpaid work or legal costs incurred.

Progress Payments

Progress payments are interim payments for the building work, made over the life of the contract, and are usually expressed as a percentage of the total contract price.

A builder must not demand or request payment unless it is a genuine progress payment in respect of work already performed under the contract [s 30].

The building owner is not obliged to make the payment in the absence of a written request by the builder for the progress payment [s 30 (3)].

Certain advance payments are authorised under the Building Work Contractors Regulations 2011 (SA):

1. A deposit of $1,000 if the value of the work is under $20,000

2. A deposit of 5% of the value of the work if it is over $20,000

3. Certain preliminary work including:

a. The premium for building indemnity insurance; or

b. Third party costs for professional services such as engineering, drawing or surveying.

Contract Variations

A building owner should read the contract carefully to find out how the contract might be varied. Building a home can take some time, and unforeseen circumstances can affect many aspects of the contract including price and completion date.

Usually the contract can only be varied if both parties agree in writing, although minor changes may occur without the owners consent. Remember that variations may result in increased costs, and a building owner should ensure that there are sufficient funds to cover changes. Attach copies of the variations to the contract for future reference.

Statutory Warranties under the Building Work Contractors Act

Section 32 of the Building Work Contractors Act 1995 (SA) implies certain statutory warranties into every building work contract. These include:

There is a strict time limit of 5 years on the commencement of court proceedings from the completion of the building work for a breach of the statutory warranty [s 32(5)]. Court proceedings would be brought in the Magistrates Court or District Court depending on the amount claimed.

The statutory warranties are passed on to subsequent owners of the property [see Building Work Contractors Act 1995 (SA) s 32 (6)].

It is important for the building owner to talk to the builder as soon as they notice any problem. Many issues can be resolved quickly before they escalate if the building owner is prepared to talk to the builder.

If a building owner is unable to resolve the matter by negotiation with the builder, they should seek legal advice. A building owner can also contact Consumer and Business Services for assistance, which may assist in negotiations with the builder, or if necessary convene a conciliation conference under section 8A of the Fair Trading Act 1987 (SA).

Compliance with technical details and rules under the Planning, Development and Infrastructure Act

Under the Planning, Development and Infrastructure Act 2016 (SA) building work must be performed in accordance with the approved technical details, particulars, places, drawings and specifications and must comply with the Building Rules and any other requirements imposed during the approval process [s 216]. If it can be demonstrated that a builder breached these provisions, a building owner can make an application to the Environment, Resources and Development Court for an order that the builder remedy the breach of the Planning, Development and Infrastructure Act 2016 (SA) [s 202(1)]. In the first instance all applications are referred to conferencing under section 16 of the Environment, Resources and Development Court Act 1993 (SA) [s 204(2)] except where the matter is referred to a building referee under s 206 of the Planning, Development and Infrastructure Act 2016 (SA).

A commissioner to whom a matter is referred under section 202 will determine the matter as a building referee. A building referee will, subject to the rules of the ERD Court, have the power of an arbitrator under the Commercial Arbitration Act 2011 (SA).

The Court has the power to order the builder to make good the breach within a specified period or to pay the building owner costs, expenses or compensation for loss or damage [Planning, Development and Infrastructure Act 2016 (SA) s 214(6)]. The Court may also order that a building (or any part of a building) be altered, reinstated or rectified in a specified manner, that a party to the dispute remove or demolish a building, make any other determination or grant any other remedy or relief as the Court thinks fit [s 205(1)]. If an application is unsuccessful and the Court is satisfied that the builder has not breached the Act, the applicant may be required to pay the builder for any loss or damage, and legal costs [s 214(16)]. As such an applicant should not be brought lightly and without legal advice.

There is a strict time limit of 10 years on the commencement of court proceedings from the completion of building work for damages for economic loss or rectification costs resulting from defective building work under the Planning, Development and Infrastructure Act 2016 (SA) or repealed Development Act 1993 (SA) [s 159(1)].

For some more information about this remedy under the Planning, Development and Infrastructure Act 2016 (SA), refer also to Local Government and Planning, Planning and Development, Defective building work.

Building Work Contractors Act or Planning, Development and Infrastructure Act

As mentioned above, it is important for a building owner to talk to the builder as soon as they notice any problem. Many issues can be resolved quickly before they escalate if the building owner is prepared to talk to the builder.

If a building owner is unable to resolve a matter by negotiation with a builder, they should seek legal advice about their options, including whether to pursue further negotiations, conferencing or court proceedings with the builder on the basis of the statutory warranties under the Building Work Contractors Act 1995 (SA), the requirement to comply with technical details and building rules under the Planning, Development and Infrastructure Act 2016 (SA), or some other basis such as pursuant to Australian Consumer Law. Different time limits may apply.

In relation to the Australian Consumer Law, please refer to Consumer Protection.