Cracking the code: 5 Confusing building contract terms explained

29th September 2025

Finance & Budgeting Pre-Construction Design & Trends Legal & Contracts First Home Buyer During Construction Post-Construction

Confused by terms like prime costs, provisional sums, or liquidated damages? This episode breaks down five of the most misunderstood building contract clauses so you can sign with confidence.

Cracking the Code: 5 Confusing Building Contract Terms Explained

Understanding your building contract can feel overwhelming, especially when faced with unfamiliar terms and pages of fine print. In this episode of the Home Building Hub Podcast, hosts Colin Bischof and Darren Brennan break down five confusing building contract terms that trip up many new home buyers.

Whether you’re about to sign with a volume builder, planning a knockdown rebuild, or just trying to make sense of the jargon, this guide explains what those tricky phrases really mean - in plain English.

1. Prime Costs and Provisional Sums

These are two of the most misunderstood terms in Australian building contracts.

Prime Costs

• Definition: Allowances for items you haven’t chosen yet (for example, taps, tiles, or fixtures).

• Where you’ll see it: Common in contracts where selections are still to be made.

• Tip: Ask your builder for clarity on what’s included and confirm that any prime cost items reflect realistic prices.

Provisional Sums

• Definition: Estimated costs for works not yet fully defined, such as excavation or rock removal.

• Why it matters: The actual cost may vary, but it must not exceed 20% more than the amount listed in the contract.

• Example: A provisional sum of $10,000 can only increase to a maximum of $12,000.

• Tip: Where possible, request fixed prices for uncertain items to reduce budget blowouts.

2. Payment Schedules

Your building contract outlines when and how much you’ll pay at each construction stage.

• Common stages include Deposit, Base, Frame, Lock-up, Fix, and Final.

• Payments are made after each stage is completed, not monthly.

• Builders typically follow HIA (Housing Industry Association) schedule formats, such as Schedule 1 or Schedule 2, which differ only by percentage splits.

Tips for Smooth Payments

• Forward your stage invoices to your lender immediately to avoid delays.

• Check with your bank or broker that the payment schedule aligns with their requirements.

• If you’re using a government home buyer scheme or first home loan deposit scheme, confirm that your lender accepts your builder’s schedule before signing.

3. Special Conditions

Special conditions are custom clauses added to your building contract - and they can be some of the most important terms to understand.

What They May Cover

• Land settlement or finance conditions

• Sunset clauses (time limits for completing the build)

• Start and completion dates

• Rock or site conditions

Why You Should Pay Attention

• These clauses can override standard contract terms.

• They often contain legal jargon that’s easy to overlook.

Tips

• Copy the special conditions section and use an AI tool or building consultant to translate them into plain English.

• Always seek independent legal advice if something seems unclear.

• Remember, most builders won’t alter the contract terms provided by industry bodies like HIA or Master Builders - but you should still understand them before signing.

4. Build Timeframes

Every building contract includes a set number of construction days - for example, 220 business days. However, these days usually exclude weekends, public holidays, and the Christmas shutdown period.

Things to Know

• The clock usually starts once construction begins (for example, when the slab is poured).

• Builders can claim extensions of time for weather delays, variations, or client-driven delays (like waiting for a private inspection report).

• If the builder exceeds the timeframe without valid reason, you may be entitled to liquidated damages - typically around $250 per week.

Tips for Homeowners

• Don’t give notice to end your lease too early. Allow a buffer in case of delays.

• Communicate regularly with your builder about the estimated completion date.

• Remember, small delays near handover (for example, appliance delivery or landscaping) are common and often unavoidable.

5. Utility Connection Costs

A frequent misunderstanding among new home buyers is assuming all utility connections are included in the contract.

The Reality

• Most builders only connect services to the pit at the front of your property.

• You are responsible for:

- Final connections for power, gas, water, and NBN

- Usage costs during construction

- Any account setup fees charged by utility providers (often around $300 each)

Tips

• Always request a full breakdown of Siteworks and Connection Allowances.

• Ask your builder what’s excluded - especially for rural or knockdown rebuild sites where services might be further from your block.

• Budget for possible extra costs such as gas connection fees, which can exceed $2,000 in some cases.

Key Takeaways

• Understand your allowances: Know the difference between prime costs and provisional sums.

• Check your payment schedule: Ensure it aligns with your lender’s requirements.

• Read the fine print: Special conditions can override standard terms.

• Ask about build timeframes: Know when the clock starts and what liquidated damages apply.

• Budget for connections: Utility setup and usage costs are usually on you.

Glossary of Terms

Prime Cost: An allowance for an item not yet selected (for example, tiles or fittings).

Provisional Sum: An estimated cost for work not fully defined (for example, excavation).

Special Conditions: Additional clauses unique to your contract.

Liquidated Damages: Compensation paid by the builder for late completion.

HIA Contract: Standard building contract issued by the Housing Industry Association.

FAQs

1. Can I remove provisional sums from my contract?

Not always, but you can ask your builder for fixed-price alternatives where possible.

2. What happens if my builder exceeds the timeframe?

You may be entitled to liquidated damages unless valid extensions of time are approved.

3. Are utilities included in my contract price?

Usually not. You’ll likely need to pay for final connections and account setup fees.

4. Should I get my contract reviewed by a lawyer?

Yes, if you’re unsure about any terms or conditions. Legal advice can protect you from misunderstandings later.

5. When do progress payments start?

After each construction stage is complete and your builder issues an invoice.

Listen to the Full Episode

🎧 Watch or listen to the full discussion here:

Cracking the Code: 5 Confusing Building Contract Terms Explained

About the Home Building Hub Podcast

The Home Building Hub podcast, hosted by industry experts Colin Bischof and Darren Brennan, is Australia’s premier resource for new home buyers. With weekly episodes featuring special guests, the podcast provides objective, high-quality insights into the home building process - completely free and without sales pitches. From understanding financing options to navigating the complexities of building a new home, each episode is packed with actionable advice and tips. Explore more episodes at http://www.homebuildinghub.com.au and join our growing community of informed home buyers.

Disclaimer

This article was generated by AI based on a transcript of our podcast episode and may contain inaccuracies or omissions. Whilst we’re all about providing value to you, this article should not be considered as legal or financial advice. It contains general information only and is based on the content discussed during the podcast episode. This information is relevant to the episode’s release date and may not be applicable at the time of reading. Always seek independent professional advice tailored to your personal situation before making any legal or financial decisions.