Rise And Fall Clauses In Victoria And WA: What Your Contract Cannot Do

CAN YOUR BUILDING PRICE CHANGE AFTER SIGNING?Victoria and WA: check cost-escalation clauses with your adviser.

You get a builder's price on a new home or a duplex. It looks fixed. Then you read the special conditions and find a clause that lets the price move if materials or labour cost more by the time work starts.

Whether that clause is lawful, void, or something you can negotiate depends on where the project is and how much the contract is worth. Two states sit at opposite ends of that question, and the difference is worth understanding before you sign.

The deal question: is the price actually fixed?

In a fixed price contract, the builder carries the cost risk between signing and completion. A rise and fall clause moves part of that risk back to you. In Western Australia the Act defines it as a provision under which a price stipulated for the performance of home building work may change to reflect changes in the costs of labour, including related overhead expenses, or materials, or both, to be incurred by the builder.

That is not the same as a variation, which changes the scope, or a provisional sum or prime cost item, which is an allowance for something that cannot be precisely costed when you sign. All of them can move your final number, and a good contract review separates them.

Western Australia: prohibited in the covered band

The Home Building Contracts Act 1991 (WA) is direct. Section 13 provides that a builder must not enter into a contract that contains a rise-and-fall clause, with a penalty of $10,000, and that a rise-and-fall clause in a contract is void.

The Act's own definition excludes some clauses, and the exclusions are narrow. A provision is not within the definition only because it allows the builder to increase the stipulated price to reflect further costs actually imposed on or incurred by the builder as a direct consequence of a written law of the State or the Commonwealth, or on account of a tax, duty or other charge increase under such a law after the contract date, or because of a delay in commencement beyond 45 working days that is caused solely by the owner's failure to comply with a contract condition, or that occurs without failure by either party.

The WA Government factsheet puts the practical effect simply: rise and fall clauses are prohibited, meaning the price agreed between the parties should as far as possible be fixed and final, and a clause is not considered to be a rise and fall clause if it allows the builder to pass on costs incurred as a result of increased taxes or duty.

Scope matters here. The factsheet states that the Act applies where the value of the fixed price contract is between $7,500 and $500,000. The departmental guidance for registered building services providers repeats the prohibition and notes that deposits and progress payments cannot exceed 6.5 per cent of the total cost before the work commences, that later progress payments must be for work actually performed or materials already supplied, and that variations must be in writing, dated and signed by both parties before the variation work starts. Above the top of that band, the prohibition on rise and fall clauses is not the provision being applied to your contract.

Victoria: a restriction that depends on the price, and a change not yet operative

Victoria currently takes a different approach. Consumer Affairs Victoria publishes that illegal terms include a cost escalation or rise and fall clause unless the contract price exceeds $500,000, that the onus is on the builder to calculate into the contract price any likely rise in costs caused by inflation, wage increases and the like, and that if a builder wants to include a cost escalation clause the Director of Consumer Affairs Victoria must approve it — and the director has not yet approved any cost escalation clauses.

That last sentence is the one to hold onto. A clause type requiring the director's approval, where no approvals have been given, is not a clause you should expect to rely on.

An amendment has been passed. The Domestic Building Contracts Amendment Act 2025, Act number 36 of 2025, substitutes sections 15(2) to (7) of the Domestic Building Contracts Act 1995 (Vic). Under the substituted provisions a builder would not be able to enter into a domestic building contract containing a cost escalation clause if the contract price is less than $1,000,000 or a higher prescribed amount; such a clause would be void unless the builder first gave the building owner a prescribed notice; the builder would be taken to have warranted that the increased cost was calculated with due care and skill; a builder could not increase the total contract price under cost escalation clauses by more than 5 per cent; and the builder would have to give the owner copies of invoices or other prescribed documents evidencing the increase, with no entitlement to recover money under the clause unless the section had been complied with.

But it is not yet the operative rule for most contracts. Section 2 of the amending Act provides that Part 1 and Division 3 of Part 8 commence on the day after Royal Assent, and that the remaining provisions come into operation on a day or days to be proclaimed, and if a provision does not come into operation before 1 December 2026, it comes into operation on that day.

So there are two positions running in Victoria at once: a passed amending Act whose main cost escalation provisions commence by proclamation or no later than 1 December 2026, and the position Consumer Affairs Victoria publishes today. This is exactly the distinction that matters in a contract review. An amendment that has passed is not the same as a rule now in force, and a summary that treats it as already operating will misstate your position.

What changes on the builder's side of the table

Where a rise and fall clause is prohibited, void or unavailable, the builder's exposure does not disappear. It moves. Watch for how it reappears:

• Provisional sums and prime cost items. Low allowances for site costs, rock removal, soil treatment, electrical connections or driveways shift cost to you through variations. The WA Act separately prohibits understating prime cost items and provisional sums, and the Victorian amending Act introduces a warranty concerning provisional sums.
• Long gaps before commencement. The longer the gap between your price and the start of work, the more a builder needs protection. That is why delay-based adjustments exist and why they are drafted narrowly.
• Change-of-law and tax adjustments. These are legitimate in both regimes, and they are not inflation protection.

None of this is dishonest by itself. It is risk allocation, and your job as the deal-maker is to see where the risk has been placed and price it.

The trap: reading a passed amendment as current law

Both traps are about time. The first is treating a passed but not-yet-commenced amendment as the rule you can rely on today, which can lead you to accept or reject a clause on the wrong basis. The second is assuming the rule follows your project rather than your contract. In Western Australia the Act applies to a contract value band, and above the top of that band the prohibition on rise and fall clauses is not doing the work you might assume it is. In Victoria the restriction has thresholds of its own and a major domestic building contract obligation that starts at a much lower value.

In both states the correct answer is the same: read the actual contract against the actual current Act for the actual jurisdiction, and do it before you sign rather than after the first claim arrives.

The site test a student would run, in order

1. Identify the state and territory where the work is being carried out, not where your entity is registered.
2. Identify the contract value band and which Act's protections apply to it.
3. Check the commencement status of any recent amendments to that Act as at the date you intend to sign.
4. List every clause that can move the price and classify each one: variation, provisional sum, prime cost item, cost escalation, change of law, or delay adjustment.
5. Test the allowances behind them with a quantity surveyor rather than accepting the headline price.
6. Ask your lender and accountant what an uncapped or contingent increase does to your drawdown, your valuation and your interest cover.

What this does to the offer

For a deal-maker, the contract question is a feasibility question. If your margin survives only while the build price is fixed and the programme is short, then the risk of escalation is unpriced in your model. Price the realistic version: reasonable allowances, a contingency for cost movement, a programme that reflects approval and titling time, and a finance facility that can absorb a drawdown change.

Where the numbers only work with the best case, the honest move is to change the numbers or walk — not to sign a contract and hope the clause never gets used.

Practical next steps

You are not expected to solve this yourself. A property or construction lawyer reads the contract, confirms which Act applies and advises on every clause that can move the price. A quantity surveyor tests whether the allowances are realistic for your design and your site. A finance broker or lender confirms the effect of a contingent increase on your loan, your valuation and your interest cover. An accountant or tax adviser confirms how any increased cost is treated. Between them they give you the evidence to negotiate or walk, and the decision remains yours.

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