The deposit ceiling
No NSW residential building contract permits a deposit above 10% of the contract price — small job or large job. And on work over $20,000 the insurance certificate comes to you before the deposit leaves your hands.
Before you sign with anyone
What NSW law says before you sign with a builder.Deposits, contracts, licences, insurance, variations and warranty — the rules, with sources
Why we published this
Most of these rules protect you from us.
R&Q Interiors is a licensed Sydney builder, and this page sets out the obligations NSW law puts on builders — including on us. We publish it because a homeowner who knows the rules is easier to build for, not harder: the arguments that wreck projects are nearly always about something that was never written down.
Every figure below is a statutory fact, and each answer links to the government source so you can check it yourself rather than take a builder’s word for it. Ask us for any of it. Ask every other builder you are quoting, too — a builder who gets uncomfortable when you mention the 10% deposit cap has told you something useful.
The rules
Nine things NSW law settles for you.
How much deposit can a builder ask for in NSW?
A maximum of 10% of the contract price. Under NSW home building law a contractor cannot request a deposit of more than 10 per cent, and that cap applies to both small jobs contracts ($5,000 to $20,000) and large jobs contracts (over $20,000). A builder asking for 20%, or for "a deposit to lock in your spot" above that cap, is asking for something the law does not allow. For work over $20,000 there is a second rule attached to the deposit: the builder must give you the certificate of home building compensation cover before accepting any money from you at all, the deposit included.
Source: NSW Government — Contracts for residential building work
Does a building contract have to be in writing in NSW?
Yes, once the price is over $5,000 including GST — and also when the price is not yet known but the reasonable market cost of labour and materials will exceed $5,000. Between $5,000 and $20,000 the law calls it a small jobs contract. Over $20,000 it is a large jobs contract, which must carry more: insurance details, a progress payment schedule and a cooling-off period. A renovation, extension or new home is almost always in the second category.
Source: NSW Government — Contracts for residential building work
Does my builder need a licence, and how do I check it?
Anyone who carries out, advertises or contracts for residential building work in NSW valued at more than $5,000 in labour and materials including GST must hold a contractor licence. Doing that work unlicensed carries penalties of $22,000 for an individual and $110,000 for a company. Search the number on the NSW public register and check three things: that it is current, that the class covers your work, and that the name on the licence matches the name that will be on your contract. That last check is the one that catches the most problems.
Can I change my mind after signing a building contract?
For a large jobs contract — over $20,000 — you have a cooling-off period of five clear business days after you are given a copy of the signed contract. Clear business days do not count weekends, public holidays, or 27 to 31 December, so a contract signed just before Christmas gives you considerably more calendar time than five days. Use it to read the exclusions, the provisional sums and the prime cost allowances rather than the headline price.
Source: NSW Government — Contracts for residential building work
Can a builder charge me for a variation we only agreed verbally?
NSW law requires that any agreement to vary the contract, or to vary the plans and specifications for work under it, be in writing and signed by both the homeowner and the contractor. The document authorising the change also has to explain the cost implications. A conversation on site is not a variation. If a builder tells you a change is "only small, we will sort it at the end", that is the point to ask for it in writing — for your protection and theirs.
Source: NSW Government — Contracts for residential building work
What is the difference between a fixed-price and a cost-plus contract?
A fixed-price contract sets a price for a defined scope of work. A cost-plus contract has no guaranteed final cost: you repay the builder the verified direct and indirect costs, plus an agreed fee or margin. NSW law treats the second type as riskier for the homeowner and regulates it accordingly. Where the price is not fixed, the contract must contain a warning saying so along with an explanation of the effect of the price-variation provision, and that warning has to sit next to the price where a price is stated. Progress claims under a cost-plus contract must be supported by invoices, receipts or other verifying documents — a lump-sum claim with nothing behind it is not a valid claim. Good practice, which R&Q Interiors follows, is a non-binding estimate before work starts and costs tracked against that estimate as the job runs. Both contract types are still subject to the 10% deposit cap and the written-contract requirement.
Source: NSW Government — Contracts for residential building work
Can a builder ask for payment before the work is done?
Progress payments have to correspond to work actually completed, not to time that has passed on the calendar. Every contract over $20,000 must include a payment schedule, structured either as fixed payments on completion of specified stages, as payments against costs incurred with invoices to support them, or a combination of the two. A request for the next stage payment when that stage has not been built is not a valid progress claim.
Source: NSW Government — Contracts for residential building work
What insurance should my builder have, and when?
Residential building work over $20,000 including GST requires cover under the NSW Home Building Compensation Fund, and the certificate has to be in your hands before the builder takes any money from you — including the deposit. Ask to see the certificate of insurance for your specific job, not a general statement that the company is insured. Separately, ask for certificates of currency for public liability and workers compensation, both in the name of the entity on your contract, with expiry dates that cover your build.
What happens if my builder goes broke halfway through the job?
This is exactly what home building compensation cover exists for. If your builder gave you an HBCF certificate and then becomes insolvent, dies, disappears, or has their licence suspended for failing to comply with an NCAT or court money order made in your favour, you may be able to claim. Those events are what the scheme calls trigger events — the cover responds to them, not to a general disagreement about quality. If a builder has disappeared and cannot be located, Building Commission NSW can issue a letter confirming it, which is submitted with the claim. Time limits apply to claims, so contact icare early rather than waiting.
Source: icare — Making an HBCF claim
What warranty do I have after the builder leaves?
Statutory warranties under NSW home building law run for 6 years from completion for major defects and 2 years from completion for all other defects. Completion means the date the work is complete under your contract, or practical completion if the contract does not define it. There is one extension worth knowing: if you discover a breach in the final 6 months of a warranty period, you get an extra 6 months after that period ends to start proceedings. These warranties apply by force of law — they are not something a builder grants you, and they are not reduced by anything written into a contract.
Source: NSW Government — Contracts for residential building work
The short version
If you remember four things, remember these.
Where the law switches on
Above $5,000 including GST the work needs a licensed contractor and a written contract. Above $20,000 it also needs HBCF cover, a progress payment schedule and a cooling-off period.
Every variation, without exception
A variation has to be written and signed by both sides, with the cost consequence spelled out. Nothing agreed only in conversation on site is enforceable by either of you.
Years of statutory warranty
Six years for major defects, two for everything else, running from completion — granted by legislation, not by the builder, and not reducible by a contract clause.
Fixed price or cost plus — which contract should your job use?
R&Q Interiors offers both, and recommends one. Most projects should be fixed price. Cost plus exists for the jobs where pretending the scope is knowable would be the dishonest option.
| Fixed price | Cost plus | |
|---|---|---|
| What you agree to | A price for a documented scope of work | The verified cost of the work, plus an agreed fee or margin. There is no guaranteed final cost |
| When it is the right choice | Whenever the scope can be documented before work starts — which is most projects | When the scope genuinely cannot be known up front: heritage work, remediation, and structures that only reveal themselves once opened |
| Who carries the unknowns | The builder, who prices that risk into the number — so certainty has a cost | You, at actual cost — so you are not paying a risk premium, but the number can move |
| What NSW law adds | Standard contract requirements | A written warning that the price is not fixed, plus an explanation of the price-variation provision — sitting next to the price where one is stated |
| Proving a progress claim | Against completed stages in the payment schedule | Must be supported by invoices, receipts or other verifying documents |
| Deposit cap | 10% | 10% — the cap applies either way |
| How we run it | Fixed scope, set programme, variations priced and signed before work proceeds | Non-binding estimate first, then costs tracked against that estimate with the documents attached, weekly |
Source: NSW Government — Contracts for residential building work
Where does a dispute actually go?
If something goes wrong, the path is not a shouting match on site. Raise it in writing with the builder first and give them a genuine opportunity to fix it — that record matters later. If it does not resolve, Building Commission NSW handles home building complaints, and NSW Civil and Administrative Tribunal (NCAT) hears home building disputes and can make money orders. Home building compensation cover is a separate mechanism again, and responds only to the trigger events described above.
Every figure on this page was checked against the linked NSW government sources in September 2026. This page is general information about NSW home building law — it is not legal advice, and it does not cover every situation. The linked government sources are authoritative; this page is not. For advice on your own contract, contact Building Commission NSW or a solicitor.
R&Q Interiors (R & Q Pty Ltd) — NSW Builder Licence 378767C, ABN 99 620 764 829, HIA member, building in Sydney since 2017.