Can a builder increase a fixed price contract after signing?

What does NSW law say about a fixed contract price?

For residential work worth more than $20,000, the contract must show the price prominently on its first page. If that price can change, the contract must also carry a warning that explains how. The NSW Government's guide to building contracts lists both requirements, so the ways a price can move should be visible before you sign.

Once the contract is signed, the builder is held to those terms. The NSW Government's advice on building delays and price increases is direct on the point. Under most contracts a builder cannot change the price unless there is a variation to the work. On contracts over $20,000 the price cannot rise at all without a clause that allows it. Higher material or labour costs alone do not give the builder a right to charge more.

Variations are the usual reason a price changes

A variation is a change to the work or materials described in the contract. It might come from your own request, a council requirement or a site condition that an experienced builder could not reasonably have foreseen when the contract was signed.

Variations must be in writing and signed by you and the builder. Before the varied work starts, the builder should give you a description of the work, any plans or specifications, the extra cost and any extra time it needs. The NSW Government also expects the cost to be shown as a calculation, so you can see how the new figure was reached. The one exception is urgent work to avoid danger to someone or damage to property, where the written variation can follow the work.

If the variation is needed because of the builder's own fault, you do not pay for it. The Building Commission NSW home building contract for work over $20,000 writes that rule into its variations clause. It also lets the builder pass on a change in the cost of its home building compensation cover, disclosed as a separate amount.

Allowances and price rise clauses

Some parts of a fixed price are allowances rather than final costs. A provisional sum is an estimate for work the builder cannot price exactly, while a prime cost item is an allowance for a fitting you have not chosen yet. Under the Building Commission contract both are adjusted up or down once the real cost is known, with the builder's stated margin on any excess. Other contracts can work differently, so check how yours calculates the adjustment. Our new home selections checklist explains how those choices move the final figure.

Some contracts also include a price rise clause, sometimes called an escalation or rise and fall clause, which lets the builder pass on cost increases during the build. If your contract has one, the NSW Government suggests you may be able to negotiate the increase and recommends professional advice before you do.

What to do if your builder asks for more

Start with the contract. Find the clause the builder relies on and ask for the request in writing, with the calculation behind it and the effect on the completion date. A genuine variation should normally reach you as a signed notice before the work is done, well ahead of the progress claim that bills it.

Keep paying the progress payments your contract sets for completed work. Do not make extra payments outside the contract, because the NSW Government warns that payments beyond the authorised progress payments may not be recoverable under home building compensation cover. If you cannot agree, an independent construction lawyer can review the clause and Building Commission NSW offers a free dispute service.

How we set a fixed price at SHORE

The best protection against a rising price is a design that is resolved before the contract is signed. At SHORE Design + Build our builders price the design at each stage as our architect develops it. Once we have prepared the working drawings, specifications and schedules, you receive a fixed lump-sum contract price for the documented home.

During construction we hold walkthroughs while a change is still a conversation rather than a variation, so decisions are made with their cost in view.