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Deposits and progress payments
The maximum deposit a contractor is allowed to request is based on the value of the works undertaken.
Deposits
If you’re asked to pay more than the maximum deposit amount, query it with the contractor first. If they persist, you are not obliged to pay more (and this may be a red flag).
If you pay more than the lawful deposit, you will not be entitled to recover the excess you have paid in the event you need to make a claim under the Queensland Home Warranty Scheme for refund of deposit.
The maximum deposit for works valued at $3,300 or less is 20%.
The QBCC recommends you should never pay more than a 20% deposit before work commences, and do not pay the full price until you have checked that all agreed work has been completed.
The maximum deposit for these contracts (level 1) is 10% of the contract price.
The maximum deposit for these contracts (level 2) is 5% of the contract price.
Exception to maximum deposits
A deposit of up to 20% is allowed in limited circumstances where substantial customised building work or prefabrication is performed away from the building site and this work represents more than 50% of the total contract price (including labour, materials and GST).
Examples of off-site work may include, but is not limited to, made-to-measure:
- kitchen modules/cabinetry
- windows
- sheds
- pergolas
- cladding.
Progress payments
Progress payments are incremental payments made at certain stages or intervals of the project.
Before signing a building contract, it’s important to discuss progress payments with your contractor so you understand how much you will be required to pay and when. Uncertainty about when a progress payment is due or the amount payable commonly causes disputes.
Payments at defined stages
It is recommended that progress payments are linked to clearly defined construction stages, so it is easier for you to inspect the work and confirm whether a stage has been completed as described in the contract.
For all contracts valued at more than $3,300, the number (and timing) of progress payments is negotiated between you and the contractor. However, all progress payments must be relative to the amount of work completed.
For example, the contractor can't claim more than 50% of the contract price, including the deposit, until at least 50% of the work onsite has been completed.
Payments at regular intervals
If the contract states that payments will be made at regular intervals (e.g. every month), rather than particular construction stages, it is important for the contractor to support their payment claims with detailed evidence of the amount and value of work performed during the period covered by the claim.
Ensure you are covered
Never make a progress payment that is more than the amount outlined under the contract, or make the progress payment before the due date outlined under the contract, as this will reduce the protection available to you under the Queensland Home Warranty Scheme.
The law limits payouts under the Queensland Home Warranty Scheme. To ensure you will be fully covered by the scheme if things go wrong:
- don't pay more than the maximum deposit allowed by law
- don't pay in advance (i.e. stick to the payment schedule)
- get realistic quotes
- agree to a fixed-price contract, not a cost-plus contract or a construction management contract.