Common variations in home building contracts may include altering materials, upgrading finishes, or responding to unforeseen site conditions. However, unless carefully managed and properly documented, variations can lead to disputes over payment and delays in project completion. One of the most common legal issues that arises is whether a homeowner is obligated to pay for a variation that was not agreed to in writing before the work began. In most cases, the answer is no, but there are important exceptions.
This article outlines the legal principles and practical considerations relating to undocumented variations, including how homeowners can protect their rights and builders can avoid costly mistakes.
Written Requirements
Most residential building contracts, particularly those covered under the Home Building Act 1989 (NSW) require that variations be documented in writing and signed by both the builder and the homeowner before the variation work commences.
To be valid and enforceable, a variation should include a clear description of the variation work; the price, and the change to the project completion date. Without the written record, a builder may have no contractual entitlement to payment for the additional work done, even if it has been completed.
Homeowner’s Right to Refuse Payment
Under these contractual requirements, homeowners are well within their rights to refuse payment for any variation. However, it was held in Dyjecinska v Step-Up Renovations (NSW) Pty Ltd [2024] NSWSC 159 (the Dyjecinska Case) that the owners’ refusal must be based on valid grounds, not merely technical defects.
The case law have outlined a few valid grounds for refusing the payment for undocumented variations, some common grounds are as follows:
- that the variations did not comply with the statutory requirement and the builder has breached statutory obligations;
- that the variation was not agreed to in writing, was not signed by both parties, and was undertaken without approval; and/or
- that the work falls within original scope but is being charged as a variation.
Homeowners may go further and:
- clearly state that no further variations will be accepted;
- reject any proposed variation from the builder; and
- insist on full compliance with the contract’s variation procedures.
This right provides an important safeguard against “scope creep” and uncontrolled cost increases during construction.
Exceptions to the Written Requirement
Homeowners, although they can legally reject the payment for the undocumented variations based on valid grounds, they should be aware that there are exceptions to the verbal or undocumented variations.
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Emergency Situations
In limited cases, variations may be undertaken without written agreement where there is a threat to personal safety, imminent risk of property damage, or a need for immediate action that cannot wait for formal documentation.
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Quantum Meruit Claims
In the leading case, Pavey & Matthews Pty Ltd v Paul [1987] HCA 5, a builder may be entitled to reasonable compensation when the builder can demonstrate that the homeowner knew of and accepted the variation work, the work was outside the original scope of contract, and it would be unjust for the homeowner to retain the benefit of the work without payment.
Key Considerations
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Documentation and Record-Keeping
Builders should keep clear and contemporaneous records of all variation discussions and agreements. Unclear, missing, or convoluted documentation can severely undermine the enforceability of variation claims.
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Payment Timing
Variation payments are typically due at the next progress payment stage following completion of that variation work, unless the contract specifies otherwise. Some contracts tie payment to specific milestones, so builders and owners should refer to their individual contract terms.
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Legal Compliance and Statutory Variations
Homeowners cannot unreasonably refuse variations that are required by law, and necessary to meet regulatory or statutory requirements. Some contracts also allow for deemed variations, where changes are considered agreed upon due to specific conduct or procedural triggers.
In conclusion, homeowners generally have the right to refuse payment for undocumented variations. Builders who proceed with changes without written approval do so at their own risk. Proper documentation and adherence to the contract’s variation provisions are essential for avoiding misunderstandings, payment disputes, and legal action.
Feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our social media accounts.
DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.
