What is a preliminary building agreement?

What does a preliminary building agreement cover?

A preliminary building agreement covers the groundwork a custom home needs before anyone can sign a fixed building contract. The Housing Industry Association publishes a NSW preliminary agreement for this stage. It describes the work as preliminary and non-building work done in preparation for the building contract. Examples include preparing plans, engineering details, approvals and the applications needed before a building contract can be signed.

Builders use one because designing, engineering and pricing a house costs real money long before construction starts, while you need enough information to decide whether to go ahead. A preliminary agreement puts that early work on a paid footing, with a defined scope and a clear end point.

How is it different from the building contract?

The building contract governs the construction itself, so NSW law sets out what it must contain. For work over $20,000 the NSW Government requires a large job contract with the plans and specifications attached and the contract price shown on its first page. It must also include a five business day cooling-off period and a progress payment schedule tied to stages of work or costs incurred.

The same rules cap the deposit at 10% of the contract price. For work over $20,000 your builder must also give you a certificate of insurance under the Home Building Compensation scheme. The government advises you to see it and check it before paying any deposit. Any variation to the contract or its plans must then be in writing and signed by both of you.

A preliminary agreement comes before the building contract rather than replacing it. That contract still has to meet the NSW requirements that apply to it. Ask which of these protections cover the work in your preliminary agreement itself and read both documents with the same care.

What should you check before you sign one?

Read a preliminary agreement as closely as the building contract, because it decides what you pay for and what you walk away with if you stop. Before you sign, check these points:

• the exact work included, such as plans, engineering, consultant reports and approval applications
• the fee, when it is payable and whether any of it is credited against the contract price if you go ahead
• what you receive if you decide not to proceed and whether you may use the drawings and reports with another builder
• when you can expect a fixed price and the building contract itself
• the builder's licence, which you can confirm through the NSW Government's online licence check

Ask how the money you pay under the preliminary agreement is treated once the building contract is signed, so the two documents fit together. If any clause is unclear, get advice before you sign rather than after the work has begun.

How design and build handles the early work at SHORE

At SHORE Design + Build the work before construction is part of one continuous process. If you are not ready to commit, we can start with feasibility and planning on its own. That tests what a site can yield, what the planning controls allow and whether a CDC or a DA is likely before you buy the block or set the brief.

From there our registered architect designs the home while our builders price the concept as it takes shape, so the cost is visible at each stage. Once the working drawings, specifications and schedules are complete, you receive a fixed lump-sum contract price. To see how each stage leads to the next, explore design and build in Sydney with us.