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What are progress payments for domestic buildings?

An Overview on Progress Payments for Residential and Domestic Buildings

When addressing the question of progress payments in the residential and domestic construction industry, the Domestic Building Contracts Act 1995 (Vic) regulates the framework of progress payments, and the limits on progress payments. Builders and building owners often engage in legal disputes regarding completion of stages, and when progress payments should be made.

In this article, we address the frequently asked questions involving progress payments between building owners, builders, and developers:

What is the Domestic Building Contracts Act 1995 (Vic)?

The Domestic Building Contracts Act 1995 (Vic) is Victoria’s principal domestic building legislation with prescribed purposes and objectives to regulate the contractual relationships between building owners and builders when carrying out domestic building work.

The Act’s main purposes are described in thematic terms:

PurposesDescription of Purposes
RegulationTo regulate contracts for the carrying out of domestic building work.
ResolutionTo provide for the resolution of domestic building disputes and other matters by the Victorian Civil and Administrative Tribunal (“VCAT”).
InsuranceTo enable building owners to have access to insurance funds in domestic building work under a major domestic building contract is incomplete or defective.

The Act’s objectives are described in thematic terms:

ObjectivesDescription of Objectives
Proper StandardsTo provide for the maintenance of proper standards in the carrying out of domestic building work in a way that is fair to both builders and building owners.
ResolutionTo enable disputes involving domestic building work to be resolved as quickly, as efficiently, and as cheaply as is possible having regard to the needs of fairness.
InsuranceTo enable building owners to have access to insurance funds if domestic building work under a domestic building contract is incomplete or defective.

Read More: “What is the Domestic Building Contracts Act 1995?” provides an overview to the Domestic Building Contracts Act 1995’s format and layout.

What is a home?

To explore building stages under progress payments, the framework is contextualised by first defining the statutory term, home.

In the Domestic Building Contracts Act 1995 (Vic), home, has a prescribed statutory meaning. In broad terms, a home means any residential premises, and includes any part of a commercial or industrial premises that is used as a residential premises, but does not include:

  • a caravan, or any vehicle used as a residence;
  • any residence that is not intended for permanent habitation
  • a rooming house;
  • a motel, residential club, residential hotel or residential part of a licensed premises;
  • a nursing home, hospital, or accommodation associated with a hospital;
  • any residence that the domestic building regulations prescribes is not a home.

What is a major domestic building contract?

A major domestic building contract has a prescribed statutory meaning. In summary, a major domestic building contract is a domestic building contract in which the contract price for the carrying out of domestic building work is more than $10,000. 

The terms, domestic building contract, and domestic building work, are also prescribed statutory meaning in the Domestic Building Contracts Act 1995.

In other related topics, we explore the domestic building contract, major domestic building contract, and domestic building work. Those topics include:

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How are building stages defined?

Before exploring the topic of progress payment, the statutory requirements for progress payments requires completion of building stages. The Act defines four stages that is involved in the construction of residential buildings. The four stages are: base stage, frame works, lock-up stage, and fixing stage.

What is Base Stage?

The Act has multiple definitions of Base Stage depending on the type of construction involved with a home at base stage. The types of construction that may change the definition when base stage has been completed, include timber floor, timber floor and no base brick, suspended concrete slab floor, concrete floor, exterior walls and roof constructed before the floor is constructed.

In broad terms, the meaning of base stage depends and is based on the type of construction involved. The different meanings are thematically summarised:

Types of Base StageSummary Description of Base Stage
Timber FloorWhen there is construction of a home with a timber floor, base stage means when the concrete footings for the floor are poured, and the base brickwork is built to floor level.
Timber Floor with no Base BrickworkWhen there is construction of a home with a timber floor with no base brickwork, base stage means when the concrete footings for the floor are poured, and the base brickwork is built to floor level.
Suspended Concrete Slab FloorWhen there is construction of a home with suspended concrete slab floor, base stage means when the concrete footings are poured.
Concrete FloorWhen there is construction of a home with a concrete floor, the stage when the floor is completed.
Exterior Walls and RoofsWhen there is construction of a home for which the exterior walls and roof are constructed before the floor is constructed, the stage when the concrete footings are poured.

What is Frame Stage?

Frame stage is defined, according to statute, to mean when a home’s frame is completed and approved by a building surveyor.

What is Lock-Up Stage?

Lock-up stage is defined, according to statute, to mean when a home’s external wall cladding, and roof covering is fixed.

What is Fixing Stage?

Fixing stage is defined, according to statute, to mean when all internal cladding, architraves, skirting, doors, built-in shelves, baths, basins, troughs, sinks, cabinets and cupboards of a home are fitted and fixed in positions.

What are the limits on progress payments?

Generally, a builder should not demand, recover or retain under a major domestic building of a type listed in Column 1 (Type of Contract) of the table more than the percentage of the contract price listed in Column 2 (Percentage of Contract Price) at the completion of a stage referred to in Column 3 (Stage).

Type of ContractPercentage of
Contract Price
Stage
Contract to build to lock-up stage20%
25%
Base Stage
Frame Stage
Contract to build to fixing stage12%
18%
40%
Base Stage
Frame Stage
Lock-Up Stage
Contract to build all stages10%
15%
35%
25%
Base Stage
Frame Stage
Lock-Up Stage
Fixing Stage

If a major domestic building contract is arranged differently to the prescribed limitations for progress payments as set out in the Domestic Building Contracts Act 1995 (Vic), then generally, a builder should not demand, or receive any amount that is not directly related to the progress building work.

In the event that the major domestic building contract describes a non-compliant manner for progress payments contrary to legislative requirements, then there may be adverse consequences, including imposition of potential penalties and refund.

Can changes be made to limits on manner of payment for progress payments?

In summary, changes can be made to the manner for payments on progress payments. The prescribed limitations will not apply if the parties to the major domestic building contract agree that the progress payment limitations do not apply, and the manner of agreement is in accordance with the Domestic Building Contracts Regulations 2017.

Read More: For more information about domestic building regulations, “What is the Domestic Building Contracts Regulations 2017?” draws an overview on the regulations’ format and layout.

Notes and Further Information

When examining domestic building work and progress payments, other related topics include construction and buildings. Those topics include:

Domestic Building Work | Domestic Building Contracts Act 1995 | Domestic Building Contracts Regulations 2017 | Domestic Building Contract | Major Domestic Building Contract | Variation (Owner) | Variation (Builder) | Domestic Building Insurance | Variations (General) | Termination | Repudiation | Causation |

If you are looking for legal expertise and have any questions, connect with an author or a member of our building and construction team.

Do you need legal advice? Call us on (03) 5331 1244 to get in touch and arrange an appointment with one of our lawyers.

You can also connect with us by filling out your details and telling us about your information for legal advice below:

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Authored by:
Ben Franklin, Managing Partner (LIV Accredited Specialist – Property Law), &
Matthew Tran, Lawyer.

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