Funding of works before signing a contract

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Forums Repairs and maintenance Funding of works before signing a contract

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  • #395916

    Hi Amanda

    I remember learning a long time ago that an OC mustn’t sign a works contract unless the funds required to pay in full are available to them. This has always made sense to me for a few reasons, particularly the risk of an OC signing a works contract and then owners withholding levy payments that might affect payment to the contractor.

    I went looking in our legislation and a few other places and I can’t find anything about it. I’m about to read the fine print on a Fair Trading works contract to see if there are any clues in there.

    Is this legislated or is there perhaps some case law on it?

    Thank you


    Amanda Farmer

    Hi StrataSpeak,

    My understanding is that this is a common requirement of the home owners warranty insurer: contracts for residential building work over $20K require home owners warranty insurance (now called the Home Building Compensation Fund). That insurance is organised by the contractor. I understand – only through experience and can’t refer you to any legislation – that the HBCF insurer often will not provide the certificate of insurance to the contractor unless there’s evidence that the contract price, or most of it, is secured.

    Strata managers in here may have some more insight into this…

    As far as I am aware, there is nothing in our NSW strata law that requires the contract price to be held in trust (or available via a strata loan, for example) before works commence. Of course, something like that may be written in to the contract (often for the reason above) and if it is, an OC must ensure it’s not in breach of that contract term.



    Hi StrataSpeak & Amanda,

    I too believe it is a common law requirement, though there may be something within the Building and Construction Industry Security of Payments Act 1999 about this (though to be honest I have not researched it before giving this answer!).

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