As of 1 August 2017, the following changes to the Victorian Domestic Building Contract Regulations will occur:
- The monetary threshold for a Major Domestic Building Contract will increase from $5,000 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 progress payment Schedule 1 is updated to reflect the change to Form 1 and Form 2.
NEW – Domestic Building Contracts Regulations 2017
The Victorian Government has developed the Domestic Building Contracts Regulations 2017. This will replaced the current Domestic Building Contracts Regulations 2007. The new regulations will take effect on Saturday 22 April 2017 except for the matters listed below which will take effect by 1 August 2017. Whilst much of the new regulations replace existing regulations, there are significant changes to the following:
1. Major Domestic Building Contracts
The Domestic Building Contracts Act 1995 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 Domestic Building Contracts Act 1995 has defined that a major domestic building contracts is required for carrying out domestic building works worth more than $5,000.
From 1 August 2017, the regulations will increase this amount to $10,000. This means that from 1 August 2017, a building is only required to use a major domestic building contract if the building works are $10,000 or more.
2. Preliminary Agreements
A preliminary agreement is a contract between a builder and an owner to make arrangement to cover the cost 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 than an architect or registered draftsperson. If the value of work is no more than $5,000 then a simple preliminary can be used. With the increase in the threshold from 1 August 2017, the preliminary agreement can be used for such arrangements where the price for the preparation of plans and specifications is no more than $10,000.
From 1 August 2017, if the price for preparation of plans and specifications exceeds $10,000 then a major domestic building contract will be required. However, the new regulations 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.
3. Cost Plus Contracts
In Victoria, a cost plus contract may only be used for domestic building work in limited circumstances. One such circumstance is that a cost plus contract may be used if the work to be carried out involves 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.
Another 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 ($1 million) and any contracts signed from this date must comply with this new restriction.
4. New Progress Payment Forms
The new Domestic Building Contracts Regulations have changed these forms and by 1 August 2017 all existing progress payment forms will need to be replaced.