Renovation cost blowouts in Victoria: what a builder can and cannot charge you

Property & tenancy · VIC

Victorian law has an unusually sharp answer to undocumented extras: a builder who varies the work without the written process is, by default, not entitled to be paid for it. Know the paper trail the Act demands — it is your main protection when the price starts moving.

The rule that surprises everyone

Under the Domestic Building Contracts Act 1995 (Vic), a builder is "not entitled to recover any money in respect of a variation" unless the formal written process was followed (ss 37(3), 38(6)) — with only a narrow exception where VCAT finds exceptional circumstances and no unfairness to you. Undocumented extra work is, as a default legal position, the builder's commercial risk, not your debt.

Consumer Affairs Victoria adds a second shield in plain words: "You do not have to pay for variations that are ordered to deal with issues that the builder should have identified before starting work."

The paper trail the Act demands

Builder-initiated changes (s 37): written notice stating what the variation is, why, its effect on the whole job, any permit impact, delay, and the cost effect on the contract price — and the builder must NOT proceed without your signed consent attached to that notice.

Owner-requested changes (s 38): you give notice of what you want; the builder responds with the formal cost/delay notice (or refuses with reasons); work proceeds only on your signed request. One convenience valve: if the builder reasonably believes your change needs no permit amendment, causes no delay and adds no more than 2% to the original contract price, they may simply do it without the formal exchange.

The exit ramp at 15%

Section 41 gives the OWNER a right the builder does not have: you may end the contract if the price has risen 15% or more since signing, or the work is running past one and a half times the contracted duration — where the cause was something the builder could not reasonably have foreseen. Increases caused by your own variation requests and by prime cost/provisional sum items do not count toward the 15%.

The two line items that legally move the price

CAV's checklist is blunt: avoid prime cost items and do not agree to provisional sum items where you can. They are the two mechanisms (besides variations) that let the final bill legitimately exceed the quote. Where they are unavoidable, the Act puts guardrails around them: estimates must be calculated with reasonable care (s 21), each item needs its own written schedule with a cost breakdown (s 22), and the builder must show you the actual invoices (s 23).

Also worth knowing: any contract clause that lets the price rise must carry a Director-approved warning next to the price — without it, the clause only operates to let the price go DOWN (s 33). And cost-escalation clauses ("prices rise if materials rise") are void in contracts of $500,000 or less (s 15).

Cost-plus contracts — a different animal

A builder generally must not use a cost-plus contract (pay-what-it-costs-plus-margin) except where regulations allow — CAV states the general threshold is contracts over $1 million — or for renovation work whose cost genuinely cannot be estimated without opening things up. A cost-plus contract must still contain a fair and reasonable estimate of the total, and a builder who does not comply cannot enforce the contract against you (s 13).

What to do with this

1. Never authorise a change verbally. "Can you email me the variation notice first?" is a complete sentence. 2. Number and file every variation — the final price should be traceable as contract + V1 + V2 + … 3. If the price is drifting without paperwork, put your objection in writing early; ss 37-38 do their work best before the money is handed over, and s 16 separately bans a builder demanding money above the contract price without authority under the Act. 4. Check whether cumulative rises are approaching the 15% mark — that is a decision point, not just a grievance.

General information about Victorian law, not advice about your contract. If a dispute over variations is already live, the BPC's free conciliation service is the mandatory first step — and a construction lawyer's read of your specific paper trail is worth more than any general guide, including this one.

This is legal information, not legal advice.