Terminating a builder’s contract is a serious step that can have lasting legal and financial consequences. Whether you’re a homeowner facing delays or a builder dealing with non-payment, ending the contract incorrectly can expose you to claims for breach or damages.
Most Australian residential projects use Housing Industry Association (HIA) or Master Builders Association (MBA) contracts. These contracts set out clear rules for when and how termination can occur.
In this article, our experienced construction lawyers explain how to lawfully terminate a builder’s contract, what constitutes a substantial breach, and the correct procedure to follow under a typical HIA contract.
Key Takeaways
You can only terminate a builder’s contract for valid legal reasons, such as serious breach or repudiation.
HIA contracts have strict notice requirements before termination can take effect.
Wrongful termination may be treated as repudiation and expose you to a damages claim.
Both homeowners and builders should seek legal advice before issuing a termination notice.
A qualified construction lawyer can review your contract, issue compliant notices, and protect your legal rights.
Understanding the HIA Building Contract
The HIA building contract is one of the most widely used residential contracts in Australia.
It governs:
The builder’s and owner’s rights and responsibilities
Procedures for delays, extensions of time, and variations
Payment schedules and progress claims
Dispute resolution and termination procedures
Each version of the HIA contract (Owner-Builder, Fixed Price, Cost Plus, etc.) includes specific clauses on breach and termination that must be followed exactly to be legally effective.
When Can a Builder’s Contract Be Terminated?
There are only limited grounds on which either party can terminate a building contract:
1. Termination by the Homeowner
A homeowner may terminate if the builder:
Fails to commence or complete the works within the agreed timeframe
Performs defective or non-compliant work
Suspends work without a valid reason
Demands payment not yet due
Becomes insolvent or bankrupt
The homeowner must issue a written Notice of Breach under the HIA contract, giving the builder at least 10 business days to remedy the issue before termination.
2. Termination by the Builder
A builder may terminate if the homeowner:
Fails to make progress payments when due
Prevents site access or causes delays
Fails to provide instructions or approvals needed for construction
Commits another substantial breach of the contract
Builders must also issue a written notice giving the owner an opportunity to rectify the breach.
Builders should also review our guide on how to terminate a construction contract for practical advice on ending contracts correctly when you’re in the contractor role.
Step-by-Step: The Correct Termination Procedure
Under most HIA contracts, the termination process should follow these steps:
Identify the Breach: Confirm the issue qualifies as a substantial breach under your contract.
Issue a Notice of Breach: Clearly describe the breach, the required corrective action, and the timeframe (usually 10 business days).
Allow Time to Remedy: The other party must have the full period to fix the breach.
Issue a Notice of Termination: If the breach remains unremedied, serve a written notice stating the termination takes effect immediately.
Secure the Site and Evidence: Document the state of the works with photos and written records.
After Termination: Once a contract is validly terminated both parties are released from future obligations. The innocent party may claim damages or rectification costs and the owner can hire a new builder to complete the works. The builder may recover payment for completed work and materials.
Following this process precisely helps ensure the termination is legally valid and enforceable.
Remember: Disputes over post-termination claims are typically resolved through negotiation, mediation, or tribunal proceedings such as NCAT, QCAT, or VCAT.
To understand how responsibility for defects can impact contract termination, see our article on defects liability in construction contracts.
Risks of Wrongful Termination
Terminating without proper grounds or notice may be seen as repudiating the contract – meaning you are in breach. The consequences can include:
Liability for the other party’s losses or lost profit
Tribunal or court proceedings
Costly re-engagement of another builder
Damage to your credit or reputation
That’s why professional legal advice is essential before taking any termination action.
Alternatives to Termination
Before ending a builder’s contract, consider practical alternatives that may preserve the relationship and avoid litigation:
Negotiate a revised completion date or payment plan
Engage an independent building inspector to assess defects
Use mediation under the dispute resolution clause
Seek legal advice to issue a show-cause notice rather than terminate immediately
Often, early legal guidance prevents escalation and saves significant costs.
Frequently Asked Questions
Can I terminate a HIA contract without giving notice?
No. The HIA contract requires written notice and a reasonable opportunity for the other party to fix the breach before termination.
What counts as a substantial breach?
Examples include non-payment, abandonment of work, defective construction, or breach of statutory requirements such as the Home Building Act 1989 (NSW).
Can I terminate if the builder is taking too long?
Yes – if the delay is unreasonable and not covered by a valid extension of time. Always check your contract’s extension clauses before acting.
What happens if I wrongfully terminate?
The other party can claim damages, including lost profit or completion costs. You may also be ordered to pay legal and tribunal fees.
Should I get legal advice before terminating a builder’s contract?
Absolutely. Construction contracts are complex, and a lawyer ensures your notice complies with HIA procedures and preserves your right to recover losses.
