Progress Payment Rules Under the DBCA in Victoria

What it is

Section 40 of the Domestic Building Contracts Act 1995 (Vic) limits what a Victorian builder may demand at each stage of a major domestic building contract. It does that with a table printed in the section itself, fixing a maximum percentage of the price against each named stage.

The numbers get misattributed constantly. They are not in the regulations. They sit in section 40(2) of the Act.

The stages and the percentages

Section 40(1) defines four stages. Base stage shifts with floor type: for a concrete floor it is when the floor is completed, for a timber floor it is when the footings are poured and the base brickwork is built to floor level. Frame stage is when the frame is completed and approved by a building surveyor. Lock-up is external wall cladding and roof covering fixed, flooring laid, external doors and windows fixed, even temporarily. Fixing stage is when the internal cladding, architraves, skirting, doors, built-in shelves, baths, basins, troughs, sinks, cabinets and cupboards are fitted and fixed in position.

Section 40(2) then sets the caps. Which row applies depends on how far the contract runs:

Type of contract	Base	Frame	Lock-up	Fixing
Build to lock-up stage	20%	25%
Build to fixing stage	12%	18%	40%
Build all stages	10%	15%	35%	25%

Most builders only ever quote the bottom row. The other two exist, and they carry different numbers.

On a build-all-stages contract the arithmetic closes at 100. A 5 per cent deposit applies where the price is $20,000 or more. Add 10, 15, 35 then 25 across the four stages and 10 per cent is left to fall due on completion. That final 10 per cent is a residue of the table, not a prescribed stage payment of its own.

They are ceilings, not entitlements

Section 40(2) says the builder must not demand or recover or retain more than the listed percentage at the completion of the stage. Two things follow.

First, the figure is a maximum. A contract may set lower stage percentages. It may not set higher ones.

Second, the trigger is completion of the stage. A builder who invoices frame stage while the frame is still going up is not merely claiming early. Under section 40(2) that builder is demanding money it must not demand, exposed to 50 penalty units. Consumer Affairs Victoria puts the same point from the owner side: the client pays for completed stages.

Section 40(5) hands the court a remedy. Where a charge under section 40(2) or 40(3) is proven, the court may order the builder to refund some or all of what the owner has paid. That power sits on top of any penalty.

Contracts the table does not cover

Not every major domestic building contract fits a row. For those, section 40(3) applies instead: the builder must not demand or receive any amount or instalment that is not directly related to the progress of the building work. Same 50 penalty unit exposure.

Opting out and what regulation 13 really says

Section 40(4) lets the parties agree that subsections (2) and (3) do not apply, but only in the manner set out in the regulations. That manner is regulation 13 of the Domestic Building Contracts Regulations 2017, which says nothing about percentages. It requires two things inside the contract:

• a warning in the form of Form 1 in Schedule 1, signed by the building owner before the owner signs the contract
• a clause in the form of Form 2 in Schedule 1, signed by both the building owner and the builder before they sign the contract

Miss either form and the opt-out fails. The section 40(2) caps snap back over whatever schedule the contract actually contains, and every claim above a cap becomes a demand the builder must not have made. The owner remedy is section 40(5): a refund order.

How this differs from NSW

NSW does not do this at all. Section 8A of the Home Building Act 1989 (NSW) prescribes kinds of progress payment rather than percentages. A NSW payment is authorised if it is a specified amount or percentage payable on completion of a stage described in clear and plain language, or a payment for work already performed or costs already incurred which may include a margin, supported by invoices or receipts and payable on an as-invoiced basis, or a payment authorised by the regulations. NSW tells you the shape. Victoria tells you the number.

That is what catches interstate builders. A NSW-style as-invoiced schedule dropped into a Victorian major domestic building contract is not a soft breach of convention. It is a schedule section 40 does not authorise unless the regulation 13 forms were signed first.