A builder asking for the next payment before the previous stage is actually finished isn't just poor form — in NSW, deposit and staging rules exist in law specifically to stop your money from funding someone else's unfinished job.
The deposit limit that matters most
For NSW residential contracts valued over $20,000, the maximum deposit a builder can legally request is 10% of the contract price. This exists specifically to limit how much of your money is at risk before any actual work has started — a request for a much larger upfront sum is a direct red flag against this rule.
How the rest of the payments should be structured
Beyond the deposit, payments should be tied to specific, defined milestones — clear descriptions of what must be physically completed to trigger each payment, not just calendar dates. Standard industry contracts structure this as progress claims linked to project stages such as base/foundation, frame, lock-up (walls, roof, windows, doors), fixing (internal linings, cabinetry), and practical completion.
Why milestone clarity protects you specifically
A vague milestone description ("progress payment 3") gives a builder room to claim a stage is complete when it isn't. A specific, physically verifiable milestone ("frame complete and passed frame inspection") gives you a clear, objective standard to check against before paying — and gives you real leverage to withhold payment if the work genuinely isn't there yet.
What to do before releasing each payment
- Compare the payment claim against the specific milestone description in your contract — has that exact stage actually been completed?
- Physically inspect the work yourself, or arrange an independent inspection for larger or more technical milestones (framing, waterproofing, structural work).
- Request supporting documentation for any provisional sum or prime cost item adjustments — supplier invoices and quotes, not just a stated figure.
- Confirm any approved variations are correctly reflected in the payment claim, and that unapproved ones are not included.
- Only release payment once you're satisfied the milestone is genuinely met — a contract's payment schedule protects you only if you actually verify against it each time.
What happens if you're asked to pay early
If a builder pressures you to pay ahead of a genuinely completed milestone, this is worth treating seriously rather than accommodating to "keep things moving." Money paid ahead of actual progress can be used to cover costs or debts unrelated to your specific project — precisely the risk that milestone-based payment structures and mandatory home warranty insurance both exist to reduce. Document the request in writing and hold the line on paying against verified, completed work.
What this means practically
- In NSW, a deposit above 10% for a contract over $20,000 is a straightforward warning sign, not just an inconvenience.
- Vague milestone descriptions in a contract weaken your ability to verify and withhold payment — push for specific, physically checkable stages before signing.
- Always physically verify (or have someone verify) that a milestone is actually complete before releasing the corresponding payment.
- Resist pressure to pay ahead of genuine progress — this is exactly the scenario milestone-based payments and mandatory insurance are designed to prevent.
Sources
- Contracts Specialist — Demystifying HIA Building Contracts, deposit limits and payment structure: contractsadministrator.com.au
- Contracts Administrator — Mastering Home Construction Contracts in NSW: contractsadministrator.com.au
Related Kibbo Tools
- Progress Payment Checklist — verify each milestone is genuinely complete before releasing payment.
- Renovation Payment & Cost Tracker — track your full payment schedule against your budget.