Can My Builder Charge for Variations I Didn't Approve? (Victoria)

Variation disputes are one of the quickest ways a Victorian build goes off the rails: the builder says "it was necessary", the owner says "I never approved it", and the final account becomes a battleground.

In Victoria, the answer depends on what kind of project it is. For domestic building, Parliament has imposed strict procedures in the Domestic Building Contracts Act 1995 (Vic) (DBCA) that can prevent a builder from recovering variation costs unless the paperwork is done properly (or VCAT grants relief in limited circumstances). For commercial construction, the contract terms and (often) adjudication under the Building and Construction Industry Security of Payment Act 2002 (Vic) (Security of Payment Act) will usually drive the outcome.

Quick Answer

• Domestic (home builds/renovations): generally, a builder cannot charge for variations unless the DBCA variation notice and signed approval requirements are met (DBCA s 37; DBCA s 38). VCAT can sometimes allow recovery where there are exceptional circumstances or significant or exceptional hardship and it would not be unfair to the owner (DBCA s 37(3)(b); DBCA s 38(6)).
• Commercial: the builder's entitlement is usually determined by the contract (variation direction/valuation clauses). If there is a payment dispute, adjudication under the Security of Payment Act may be available, including for claimable variations (Security of Payment Act s 10A; VBA guidance).

Step 1: Identify Whether This Is a Domestic or Commercial Dispute

This classification changes everything: forum, procedure and leverage.

Residential / domestic building

• Most home builds and renovations are governed by the DBCA (major domestic building contracts have additional statutory formality requirements).
• Variation disputes typically move through BPC/DBDRV conciliation (DBDRV is now administered under the Building and Plumbing Commission) before any VCAT proceeding (Consumer Affairs Victoria; building.vic.gov.au guidance).
• VCAT is the usual forum for domestic building disputes (often in the Building and Property List), including variation recovery issues.

Commercial construction

• The DBCA variation regime usually does not apply.
• Variation rights and valuation typically depend on the contract (for example, superintendent directions, written variation directions, or notice requirements).
• Security of Payment adjudication is commonly used to keep cash flowing, including where the "variation" label is disputed, but only for claimable variations (Security of Payment Act s 10A; VBA guidance).

Domestic Builds: What the Law Requires (and Why Unapproved Variations Are Risky)

The DBCA imposes a statutory "paper trail" for variations. If it is not followed, the builder's recovery can be barred unless VCAT grants relief.

Builder-initiated variations (DBCA s 37)

If the builder wants to change the plans/specifications, the builder must give a written notice setting out (among other things) the reason, the impact on permits, time, and the cost/price effect (DBCA s 37(1)).

The builder must not give effect to the variation unless the owner gives a signed consent attached to that notice, except in a narrow Building Act notice/order scenario (DBCA s 37(2)).

Even if the work is done, the builder is generally not entitled to recover money for that variation unless it complied and can establish the variation was necessary due to unforeseeable circumstances, or VCAT is satisfied there are exceptional circumstances or hardship and it would not be unfair to the owner (DBCA s 37(3)). If recovery is allowed, it is the cost plus a reasonable profit (DBCA s 37(4)).

Owner-requested variations (DBCA s 38)

If the owner asks for a change, the owner must give the builder a notice describing it (DBCA s 38(1)).

The builder can only proceed without the full signed paperwork if the builder reasonably believes the variation will not require a permit change, will not cause delay, and will not add more than 2% to the original contract price (DBCA s 38(2)).

In other cases, the builder must give the owner either a notice stating the impacts (permit/time/cost) or a refusal notice, within a reasonable time (DBCA s 38(3)–(4)).

The builder must not give effect to an owner-requested variation unless the owner gives a signed request attached to the builder's notice (unless the 2% exception applies) (DBCA s 38(5)).

Again, recovery is generally barred unless the builder complied or VCAT grants relief for exceptional circumstances/hardship and no unfairness (DBCA s 38(6)–(7)).

"But the contract says the builder can direct variations"

Be cautious. Contract special conditions do not automatically sidestep the DBCA's statutory variation requirements. Recent commentary on Stewart v Sherridon Pty Ltd [2024] VCC 1023 emphasises that a builder still needs to comply with DBCA ss 37/38 for a valid variation, notwithstanding special conditions (HWL Ebsworth analysis).

When Can a Builder Still Recover for an Unapproved Domestic Variation?

Even where the paperwork is defective, the DBCA gives VCAT a discretion to allow recovery if the threshold tests are met. This is not automatic, and it is typically evidence-heavy.

VCAT "hardship" and "exceptional circumstances" relief

Under both s 37 and s 38, VCAT may permit recovery if it is satisfied there are exceptional circumstances or that the builder would suffer significant or exceptional hardship, and it would not be unfair to the owner (DBCA s 37(3)(b); DBCA s 38(6)).

A Court of Appeal decision discussed in industry commentary describes "hardship" as a holistic assessment including the builder's financial position and profit margin (Sparke Helmore summary of Jolin Nominees Pty Ltd v Daniel Investments (Aust) Pty Ltd [2022] VSCA 209).

Practical reality: VCAT will look for evidence

Whether you are the owner resisting payment or the builder seeking payment, expect VCAT to focus on:

• What exactly changed (scope, specification, quantity, design)?
• Who requested or directed it, and when?
• What was said about price and time before it was done?
• What documents support the change (emails, texts, site meeting minutes, marked-up drawings)?
• Was the change genuinely necessary to comply with permits/regulatory requirements?
• Is the price claimed properly evidenced and reasonable (for example, costing breakdown, invoices, margin)?

Commercial Projects: Unapproved Variations Are Usually a Contract and Proof Problem

On commercial projects, it is common to see disputes about whether work was:

• a true variation (change in scope),
• latent conditions or delay/disruption (often contentious and may be excluded from fast-track payment regimes), or
• work already within the contractor's original scope.

The contract often requires written directions, notices within strict timeframes, and a valuation methodology. Missing those steps can be fatal, but outcomes vary by contract wording and facts.

Security of Payment Act: claimable variations (not all variations)

Where the Security of Payment Act applies, it does not allow every "variation" to be claimed in adjudication. Only claimable variations can be included (Security of Payment Act s 10A).

• Agreed variations are claimable where both parties agree on all key elements (work/scope/entitlement/value/time for payment) (VBA guidance).
• Some disputed variations can be claimable, but thresholds apply based on contract value and whether the contract provides a dispute resolution method (VBA guidance).

Important domestic carve-out

The Security of Payment Act generally does not apply to domestic building work for a consumer building owner, unless that owner is in the business of building residences and the contract is entered into in that course (VBA guidance). That means domestic variation disputes are usually fought in the DBCA/BPC/VCAT pathway, not adjudication.

If You Are an Owner: What To Do When You Receive a Variation Claim You Did Not Approve

• Stop and triage: is this domestic or commercial, and what does your contract say about variations?
• Ask for the paperwork: variation notice, signed approvals, and cost/time impacts (domestic: DBCA compliance is central).
• Do not "approve by silence": confirm in writing what you do and do not agree to, and why.
• Separate scope from price: you may accept a change is necessary but dispute the valuation.
• Preserve evidence: site instructions, texts, emails, marked-up drawings, photos, and progress claims.
• Domestic pathway: consider BPC/DBDRV dispute resolution and conciliation (DBDRV is administered within BPC) before VCAT (Consumer Affairs Victoria).

If You Are a Builder: How to Protect Your Ability to Recover Variation Costs

• Do the statutory notices early: domestic projects require DBCA-compliant notices and signatures (DBCA s 37; DBCA s 38).
• Price and programme transparency: state cost and time impacts up front (and document any assumptions).
• Don't rely on "special conditions" alone: ensure your process aligns with the DBCA (see discussion of Stewart v Sherridon) (HWL Ebsworth analysis).
• Keep clean records: the hardship/exception pathway in VCAT is not a substitute for proper contract administration.
• Commercial projects: map each claimed variation to a written direction or other contractual trigger, and consider Security of Payment strategy (including whether the item is a claimable variation) (Security of Payment Act s 10A).

Where Do You Resolve a Variation Dispute in Victoria?

Domestic (residential) disputes: BPC/DBDRV → VCAT

Victorian Government guidance notes that most variations require a signed variation notice, and points parties to BPC dispute resolution services and then VCAT if needed (building.vic.gov.au guidance).

DBDRV is now part of the Building and Plumbing Commission (BPC) and can issue dispute resolution orders for domestic disputes not resolved by agreement (Consumer Affairs Victoria).

Commercial disputes: contract dispute resolution, adjudication, and courts

Commercial variation disputes may proceed through contractual dispute resolution (superintendent/expert determination/mediation/arbitration), Security of Payment adjudication, or litigation depending on the contract and the relief sought.

Frequently Asked Questions