A fixed-price contract is only as fixed as its wording. The headline number on the front page matters, but what protects you is what sits behind it: the inclusions, the way payments are staged, how allowances are handled and what happens when something changes. NSW law sets minimum content for residential building contracts, and knowing that content makes any quote easier to read, from ours or anyone else's.
Everything below on contract rules comes from the NSW Government page on contracts for residential building work, last updated 29 April 2026. It is general information, not legal advice, and the page itself suggests getting legal advice before changing a standard contract.
When you must have a written contract
A builder must give you a written contract if the price is over $5,000 including GST, or if the price is unknown but the reasonable market cost of labour and materials is over $5,000. There are two tiers:
- $5,000 to $20,000: a small job contract. It must be dated and signed, name the licence holder and licence number, describe the work, attach any plans or specifications and include a clause that the work will comply with the Building Code of Australia and the conditions of any development consent or complying development certificate.
- Over $20,000: a large job contract, which has to carry a lot more, including a progress payment schedule, a termination clause, a cooling-off statement and a checklist of 17 items.
Extensions and larger renovations often land in the large job tier. Our home renovation cost guide gives a feel for why.
What "fixed price" means in practice
The contract price has to be shown prominently on the first page. If the price can change, or is not known, the contract has to carry a warning that says so and explains why. That is the first thing to look for. Without that warning the price is presented as fixed, so it should only move through changes you agree to in writing.
Two things can still move a fixed price without anyone doing anything wrong: prime cost items and variations.
Prime cost items
Some things cannot be priced exactly before work starts, usually because you have not chosen them yet. A stove, a tapware range or special fittings are the usual examples. The contract lists these as prime cost items, and the builder allows a price that covers their expected cost.
The NSW page gives a simple instruction for keeping this small: choose fittings and appliances before you sign, and list brand names and models where you can, so the prices in the contract are accurate. The fewer prime cost items in a quote, the closer the total is to the final bill. When you compare two quotes, count them. A low total with a long list of allowances is not the same as a higher total with the choices already made.
Variations
A variation is a change to what was agreed. It might come from a council requirement, from something unforeseen once the work is open, or from you deciding on something different. Variations must be in writing, attached to the contract and signed by you and the builder or their nominated supervisor or agent. The document has to explain the cost implications and the effect on the overall contract price, and the calculation should be shown rather than just a dollar figure. Before the variation work starts, the builder should give you a written description, any plans or specifications, the extra cost and any extra time.
There is one exception. If there is likely to be danger to someone or damage to property, there may not be time to put it in writing first, and the written variation can follow after the work is done.
How payments are staged
Contracts over $20,000 must have a progress payment schedule, and the law limits it to these types:
- Fixed stage payments. Specified amounts or percentages of the contract price, paid when described stages are finished. The stages have to be described in clear, plain language.
- Cost-plus payments. Payments made as work is done and costs are incurred, which can include a margin, at intervals set in the contract or as invoiced. Claims must be supported by invoices, receipts or other documents.
- A mix of the two.
Cost-plus suits work where the scope genuinely cannot be fixed, for example when a wall has to be opened before anyone knows what is inside. It shifts some of the cost risk to the owner, which is why the paperwork requirement is there. A fixed-price contract with fixed stage payments puts more of that risk with the builder, and it is why the scope has to be pinned down properly before signing.
Whichever type is used, the NSW page says progress payments should match work actually done, not time on the job, and the dollar value on each stage should be realistic. A first stage that asks for far more than the work completed to date is a reason to ask questions.
Deposits and insurance
The maximum deposit under NSW home building law is 10 per cent of the contract price. For work valued over $20,000, the builder must give you a certificate of cover under the Home Building Compensation Scheme, and it is illegal for the contractor to ask for a deposit or any other payment under the contract until the cover is taken out and the certificate is given to you. The page advises checking that the certificate is valid with the insurer or through the HBC Check on the Service NSW website.
Cooling-off, warranties and the licence check
For contracts over $20,000 the contract must state a cooling-off period of five clear business days after you are given a copy. The builder must also give you a copy of the signed contract within five business days of signing.
Statutory warranties apply whether or not they are written into the contract: six years for major defects and two years for all other defects, running from the date the work is completed. They cover things like work done with due care and skill, in accordance with the plans and specifications, with suitable and new materials, and within the time stated or a reasonable time.
Before signing, look the builder up on the NSW licence check. The licence has to be in the name of whoever is making the contract. A licence held by an individual does not cover that person's company, so if a company is signing, the company needs to be licensed.
Reading a quote against all of this
When quotes arrive, set them side by side and check:
- Is the price on the first page, and is there any warning that it can change?
- How many prime cost items are there, and are the allowances realistic for what you want?
- Are payments tied to described stages of work, and does each amount look fair for that stage?
- Is the deposit 10 per cent or less, and is the insurance certificate provided before any payment?
- Are plans and specifications attached, so the inclusions are written down?
Our post on how to choose a home builder in NSW covers the wider checks, and the owner-builder vs licensed builder post explains why the licence and insurance side matters.
How we put it together
For renovations and extensions, we look at the house first, settle the scope and put the result in a fixed-price proposal with the design, engineering and approval included. Selections made before signing keep the allowances short. If you would like a proposal on that basis, see our home renovations and home extensions pages, then send the details through the contact page or call 0434 037 851.
Common questions
- How much deposit can a builder ask for in NSW?
- No more than 10 per cent of the contract price. If the job is over $20,000 and needs home building compensation cover, the builder cannot ask for a deposit or any other payment under the contract until the cover is in place and you have been given the certificate.
- Do I need a written contract for a renovation in NSW?
- Yes, if the price is over $5,000 including GST, or if the price is unknown but the reasonable cost of labour and materials is over $5,000. Jobs between $5,000 and $20,000 need a small job contract, and jobs over $20,000 need a large job contract with more required content.
- What is a prime cost item in a building contract?
- A prime cost item is something you will choose after signing, such as a stove or special fittings, so it cannot be priced exactly beforehand. The contract lists it with an allowance that covers the builder's expected cost. If your final choice costs more than the allowance, the difference is yours to pay.
- Can I change my mind after signing a large building contract?
- For work valued over $20,000 the contract must state a cooling-off period of five clear business days after you are given a copy. Changes to the work after that point are variations, and they must be in writing and signed by both you and the builder.
Want a hand with this at your place? Get a free quote or call 0434 037 851.