A Victorian major domestic building contract must not include a compulsory arbitration clause, a caveat on the building site land, or a waiver or negation of implied warranties, according to Consumer Affairs Victoria’s Preparing a major domestic building contract guidance, dated 8 July 2025. The guidance sets the threshold amount for a major domestic building contract at $10,000 and says contracts over $10,000 must include the five-day cooling-off clause (figures checked 1 October 2026). It also requires the expression “practical completion” to be deleted and replaced with “complete in accordance with the plans and specifications”.
What are the three prohibited clauses?
Consumer Affairs Victoria groups these three items as illegal contract terms:
| Prohibited clause or term | What it means | What to check |
|---|---|---|
| Compulsory arbitration clause | The contract requires disputes to proceed through arbitration. | Remove any wording that makes arbitration compulsory. |
| Caveat on the building site land | The regulator describes a caveat as a warning of some right or interest in the land title. | Do not include a caveat over the building-site land. |
| Waiver or negation of implied warranties | The wording excludes or negates implied warranties. | Do not waive or negate them; the contract must set out the implied warranties. |
These are distinct from conditional restrictions on pricing methods, which also need checking.
Why must “practical completion” be replaced?
Consumer Affairs Victoria gives a direct drafting instruction: delete “practical completion” and insert:
complete in accordance with the plans and specifications
The change matters because a practical-completion label can leave the endpoint of the builder’s obligation less explicit. The replacement connects completion to the agreed contractual documents, giving the builder, client and contract administrator a clearer basis for deciding whether the required work has been completed.
The plans and specifications therefore need enough detail to do their job. When applicable, they should contain enough information to obtain a building permit, and the client’s special requirements and finishes should be recorded there. Unknown fixtures and fittings should be clearly identified as provisional sum or prime cost items.
What should be checked before the client signs?
Use a structured pre-contract check rather than relying on the template wording alone.
- Give the client the guide: A copy of the Domestic Building Consumer Guide must be provided before the client signs.
- Confirm registration: Building and Plumbing Commission registration is required when the contract is more than $10,000, or when the work involves restumping, reblocking, demolishing or removing a home regardless of its value.
- Check the core terms: The contract must be in writing and clear English, set out all terms in full, describe the work, identify the parties and addresses, and include the builder’s registration number.
- Check money terms: State the contract price, legal deposit and progress payments clearly. The contract must also state its effective date, which is when both parties signed it.
- Check mandatory consumer terms: Include clear advice about the five-day cooling-off period, define key words and phrases, set out implied warranties, and contain the Approved checklist.
- Check scope and insurance: Include applicable plans and specifications, identify how permits will be obtained, and set out domestic building insurance details when the contract is more than $16,000. The client must also receive the certificate of currency for applicable work worth more than $16,000 on their property.
- Check the programme: State start and finish dates, allowable delays and the process for extensions of time. Any liquidated damages amount must be clear.
Are rise-and-fall and cost-plus clauses also restricted?
Yes. Although they are not part of the three outright prohibitions above, Consumer Affairs Victoria sets additional conditions:
| Pricing term | Restriction |
|---|---|
| Cost escalation or “rise and fall” | Available only where the contract price is more than $500,000 and the Director of Consumer Affairs Victoria approves the clause. Likely cost increases caused by inflation, wage increases and similar factors must be included in the contract price. As at the check date above, the regulator says the Director has not approved any cost escalation clauses. |
| Cost-plus | A cost-plus method must not be used for a contract less than $1 million. The investigative exception for renovating an existing house is limited to establishing the contract price; the builder must provide a fair and reasonable estimate and then use a fixed-price contract for the remaining work. |
These points are general information, not financial or legal advice. Before signing, check the current Consumer Affairs Victoria regulator page and, where insurance forms part of the arrangement, the relevant policy’s PDS.
Sources
FAQ
What value triggers a major domestic building contract?
Consumer Affairs Victoria states that the threshold amount is $10,000. Its checklist separately refers to contracts over $10,000 for registration and the five-day cooling-off clause.
Does the arbitration prohibition cover every arbitration clause?
The regulator specifically identifies a compulsory arbitration clause. Its guidance does not resolve every possible optional arbitration arrangement, so the actual dispute-resolution clause should be checked rather than assumed to be permitted.
Why can’t the contract use “practical completion”?
Consumer Affairs Victoria directs builders to delete that expression and use “complete in accordance with the plans and specifications”. The replacement ties completion directly to the agreed contractual scope.
When can a rise-and-fall clause be included?
Only where the contract price is more than $500,000 and the Director of Consumer Affairs Victoria approves it. The regulator’s current guidance says no cost escalation clauses have been approved.
When can cost-plus work be used?
A cost-plus method must not be used for a contract less than $1 million. The limited exception is investigative work needed to establish the price when renovating an existing house; the remaining work must then be covered by a fixed-price contract.