In any residential building project, it is common for changes to the original plans or specifications to arise. But what happens when the builder and homeowner can not agree on the terms of a proposed variation?

In most of the standard home building contracts in Australia, if mutual agreement cannot be reached on a variation, then the original terms of the contract remain binding, and the proposed variation is not enforceable. Builders and homeowners must understand the consequences of this situation and the options available to manage disagreements during construction.

Common Consequences of Non-Agreement

When a builder and homeowner fail to reach agreement on a variation, it may result in the following consequences:

  • The builder cannot proceed with the proposed variation work.
  • The builder may suspend work while negotiations continue.
  • The builder must continue with the original scope of work as set out in the contract.

Managing Disagreements During Construction

Builder’s General Right to Suspend Work

Builders are generally allowed to suspend the works under a home building contract, but only when there are valid grounds for such suspension. Common valid grounds for suspension, although may vary from contract to contract, generally include that when the homeowner failed to make payment to the builder in accordance with a valid payment scheduled by the due date or that the homeowner otherwise becomes in breach of the homebuilding contract. But the builder must give timely written notice specifying their intention to suspend and the supporting reasons. 

Variation Work Suspension Limitations

If a variation is proposed but not agreed upon, or if a homeowner verbally agrees or requests a variation but fails to sign the variation document, a builder has the right to pause or suspend the works, but the suspension generally limits to only the portion of work affected by that variation. 

In Tanous -v- Zielinska [2000] NSWSC 789, the Supreme Court of NSW decided that the only consequence of the absence, if there had been an absence, of a variation in writing signed by the homeowner and the builder would be the entitlement of the builder not to complete the subject variation until it was signed by the homeowner. But this principal does not automatically grant the builder the right to suspend the entire works under the contract. Further, the builder’s right to suspend the verbally agreed variation works can be subject to the contract terms. 

In Uszok v Henley Properties (NSW) Pty Limited [2007] NSWCA 31, the Court of Appeal also confirmed the decision that subject to contract terms and the circumstances, the builder is allowed to suspend the building work if the homeowner verbally requests a variation but fails to sign a variation form.

Key Considerations

  1. Risk of Non-Payment

Builders who go ahead with variation work without a clear agreement expose themselves to non-payment and legal disputes. Even if the homeowner verbally agrees or seems agreeable, a lack of mutual clarity can result in the builder being left unpaid.

  1. Suspension Rights Are Limited

Builders should not suspend the entire project over a variation dispute. Only the specific work affected by the variation can be paused. The remainder of the work must continue as scheduled under the original contract, unless there are further valid grounds set out in the contract which specifically allow the builder to temporarily suspend the works entirely, such as non-payment by the homeowner. 

  1. Homeowners Can Decline Variations

Just as builders can decline to perform unapproved variations, homeowners are within their rights to:

  • refuse proposed variations;
  • declare no further variations will be accepted; and
  • hold builders to the original scope of work if no agreement is reached.

This gives homeowners control over budget and project scope, especially important where cost overruns are a concern.

When a variation can’t be agreed upon, the best course of action is to pause, reassess, and continue only within the boundaries of the original contract. Unilateral action, especially by builders, can lead to serious financial and legal consequences. Open communication, clear documentation, and respect for contract procedures remain essential to resolving variation disputes smoothly.

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.