Contract Termination Rights for Builders in WA

What it is

Termination is where a WA builder is most exposed, because the Home Building Contracts Act 1991 (WA) hands the builder almost nothing. The Act's termination machinery in section 19 runs one way. It applies where a party may terminate under section 4(5), section 10(4), section 14(3) or Schedule 1. Every one of those is an owner's right and none of them is the builder's: the first three follow a builder's failure, and the fourth follows a price increase the owner declines to wear.

The builder's grounds live in the contract. WA law leaves them there.

The contractual grounds

A WA home building contract has to write its own default and termination regime. There is no statutory completion date, no statutory extension of time mechanism and no statutory list of default events. Whatever the contract says still has to survive section 15(1)(b), which prohibits provisions that are unconscionable, harsh or oppressive, and section 28, which voids any arrangement that modifies the Act to the owner's disadvantage.

The one statutory exit the Act protects

Section 15(3) is the exception worth knowing. A contract provision must not be called in question as unconscionable, harsh or oppressive by reason only that it entitles the builder to give written notice before work starts requiring the owner to satisfy the builder that the owner has title to the land and, by production of evidence in writing, that the owner can pay the contract price.

If the owner fails to satisfy the builder within 10 working days of receiving that notice, section 15(3)(c) protects a clause letting the builder terminate the contract or the variation by written notice given within a further 10 working days.

Read that precisely. The Act does not confer the right. It shelters a contract clause that confers it. A WA builder whose contract lacks the clause has no such exit.

Notice to remedy and the repudiation trap

This is where WA builders lose. A contractual right to terminate for owner default almost always runs through a notice to remedy that specifies the default, allows a stated period to fix it and states the consequence of not fixing it.

Skip that step, shorten it or issue it for a default that has not happened, and there is no valid termination. There is an unjustified purported termination, and that is itself repudiation. The builder who gets the notice wrong hands the owner the right to accept the repudiation and sue for the cost of finishing with someone else.

Section 29(2) keeps the common law live: the Act does not limit or derogate from any civil remedy at law or in equity.

What the builder can recover

Where a contract is terminated under section 4(5), 10(4) or 14(3) or Schedule 1, section 20 lets either party complain to the Building Commissioner for an adjustment of rights. The builder can claim for materials supplied, for home building work or other services performed and for costs incurred, and the Act expressly names overhead expenses and loss of profit.

Schedule 1 clause 4(c) adds a narrower entitlement. Where the owner terminates because a permitted price increase exceeded 5 per cent of the contract price, the owner must compensate the builder for reasonable costs incurred up to termination.

Escalation to the State Administrative Tribunal

Termination disputes start with the Building Commissioner at Building and Energy, which lists termination payments among the home building work contract matters carrying a limit of generally three years from when the contract was entered into or from when the cause of dispute arose. A notice of proposed complaint must reach the other party at least 14 days before lodgement.

The Building Commissioner can refer or transfer the matter to the State Administrative Tribunal. An application to review a decision of the Building Commissioner must be made within 28 days.

Where Home Indemnity Insurance stops

Home indemnity insurance responds only where a relevant circumstance exists in relation to the builder. Building and Energy states those as an individual builder who dies, disappears or becomes insolvent, a corporate builder that ceases to exist or becomes insolvent, and a builder whose registration is cancelled or not renewed for failing the prescribed financial requirements.

A solvent, registered builder who simply walks off site is none of those things. The owner has no home indemnity insurance claim at all. They have a contract claim against a builder that is still trading, and they have to run it themselves. That gap is the sharpest practical fact in WA termination.