Final Payments Explained

What Triggers the Final Payment

In most Victorian building contracts, the final payment is triggered when the builder claims that completion has been reached. This is a contractual milestone, rather than a statement that the home is defect-free. Section 42 of the DBCA defines completion having occurred under a major domestic building contract when:

• the work carried out under the contract has been completed in accordance with the plans and specifications set out in the contract; and
• the homeowner is given either the Occupancy Permit or the Certificate of Final Inspection.

If there are defects or incomplete works, this necessarily means that the project has not reached the completion stage, and thus the final payment is not due.

In any event, the builder must not demand final payment until the owner has been given either the Occupancy Permit or the Certificate of Final Inspection.

When the Owner Must Pay the Final Claim

After completion is reached, the contract usually requires the owner to pay the final amount within a relatively short timeframe and typically within 7 days. This period begins once the builder issues the relevant notice. However, it’s vital to know that the final payment is not due unless the project reaches the completion milestone.

Importantly, homeowners should not take possession of the site early, which also includes acts of possession (such as changing locks). This can have dire financial consequences and should only be done with legal advice.

What Happens if There are Defects
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If the process if a pre-handover inspection (or PCI inspection) is employed and defects exist, they are typically recorded on a defects list. The owner can agree to pay the final payment even if there are defects. But a word of caution – once the builder has their final payment, it can be very difficult to have them return to finish defects as all leverage is gone.

The Homeowner’s Leverage Before vs After Final Payment

Before final payment is made, the homeowner still has real leverage because the builder has not yet received the full contract price and remains financially incentivised to resolve outstanding issues. Once final payment is made, that leverage reduces significantly, and defects that were once urgent can become matters of follow-up rather than priority.

The Consequences of not Paying the Final Amount

If a homeowner refuses to pay the final amount without a valid contractual basis, the builder may be entitled to take formal steps such as charging interest, issuing breach notices, or alleging that the owner is delaying settlement. This can escalate matters quickly and create additional risk for the homeowner, even if defects are present. If you’re unsure as to your rights, you should consult a construction lawyer.