Client selection: red flags to check before you sign a building contract

Every builder has taken a job they should have walked away from. Usually the warning signs were there before the contract was signed: a client who would not commit to a scope in writing, a budget that did not match the brief, or a vague answer about who actually owned the property. By the time those issues turn into a dispute, you have already spent money on mobilisation, materials and labour.

Client selection is not about being suspicious of everyone. It is about recognising the patterns that predict how a job will run, and pricing or declining the risk before it becomes your problem. The contract you sign is the record that will be used if the relationship breaks down, so the time to test the client is before you sign, not after.

This article deals with vetting clients before the contract. It does not cover how to manage a difficult client once work has started, or how to resolve a dispute after practical completion. Those are separate problems with separate controls.

Why client selection is a commercial control, not a personality judgement

Most builders think of risk management as site safety, insurance and programming. Client behaviour is just as material. A client who changes their mind repeatedly, disputes inclusions or delays payments can wipe out the margin on a job long before the work is finished. Under the NSW contract framework, the written agreement and the documents attached to it govern what is included, what counts as a variation and how disputes are handled. That means the client’s willingness to engage with the paperwork before signing tells you a great deal about how they will behave later.

The commercial reality is that disputes are expensive even when you are right. They consume time, delay final payment and damage your reputation if they become public. The cheapest dispute is the one you never have, because you either did not take the job or you priced and documented it properly from the start.

If you are new to the NSW system, the guide to how NSW builder CPD works explains the compliance context that sits behind this kind of decision-making. The point here is simpler: client selection is a business decision you make before the contract exists.

Refusing to commit to scope in writing

A client who will not put the scope in writing is the clearest early warning sign. They may say they are “easy going”, that they trust you, or that the details can be sorted out later. In practice, a client who avoids committing to a written scope is either unsure what they want or is keeping their options open to argue later about what was included.

Under the NSW contracts guidance, home building work above the relevant threshold must be covered by a written contract that complies with the Home Building Act, and the contract must set out the scope of work, the contract price and other required matters. The threshold and the specific requirements change from time to time, so check the current NSW Government guidance on contracts for home building work before you rely on a figure. The principle is stable: the written scope is what protects both parties.

What to do on a job: before you prepare a contract, ask the client to confirm the brief and inclusions in writing. If they will not, treat that as a signal that variations and inclusions will be contested. You can still proceed, but you should price the job with a clear allowance for documentation and administration, and you should not start any work until the contract is signed.

Unrealistic budget or programme expectations

A common red flag is a budget that cannot deliver the brief the client has described. Sometimes the client genuinely does not know what construction costs. That is manageable, because a written cost conversation early will reset expectations. The problem is the client who hears your advice and insists anyway that it can be done for their number.

The same applies to programme. If a client has a fixed date in mind that is not achievable given approvals, materials or access, and they will not accept your written advice about it, you are being set up to carry the blame for a delay that was foreseeable. The related article on delays and extension of time in NSW explains how time issues are managed once a contract is running, but the point here is that you should identify the mismatch before you sign.

What to do: put your cost and programme advice in writing, even in a short email, and ask the client to confirm they understand it. If they reject it in writing, you have a record. If they ignore it, you have a warning. Either way, you can decide whether to price the job with a contingency or decline it.

Failing to confirm who has authority to approve work

You need to know who is legally entitled to make decisions and sign on behalf of the owner. This sounds obvious, but it is a frequent source of disputes. A property may be owned by a company, a trust or multiple parties. A spouse or family member may act as the main point of contact without having any authority to vary the contract. A tenant may be managing the project without the owner’s knowledge.

If the person you deal with cannot bind the owner, variations they agree to may not be enforceable, and instructions they give may be reversed. The contract must be with the correct legal entity, and the person signing must have authority to do so.

What to do: before signing, confirm the ownership of the property and who will sign the contract. Ask for evidence if there is any doubt, such as a title search or a company extract. If the client is acting for someone else, get written confirmation of their authority. If other parties need to consent, get that consent in writing before you start.

History of disputes with previous builders

How a client talks about previous builders is informative. Almost every client will have a story about a trade who let them down, and some of those stories will be true. The red flag is a pattern: multiple previous disputes, a refusal to accept any responsibility, or a description of every previous builder as incompetent or dishonest.

You can ask directly, and you can ask for references from previous projects. Not every client will provide them, and that is not automatically disqualifying, but evasion or hostility to the question is a signal. If the client has withheld payment from a previous builder, ask why and listen carefully to the answer. If the reason is a genuine defect or incomplete work, that is useful information. If the reason is a disagreement about scope that was never documented, you can expect the same issue to arise with you.

What to do: ask the question early, before you spend time pricing. If the client is evasive, consider whether the job is worth the risk. If you proceed, make sure your contract documentation and variation process are meticulous.

Pressure to start before documents are finalised

A client who wants you to start “while the paperwork is sorted” is asking you to carry risk without a contract. This can happen for innocent reasons, such as a delay in finance approval or a certifier’s response, but the effect is the same: you are working without the protections the contract provides.

Under the NSW home building framework, certain documents must be in place before work starts, including the contract and any required insurance or approval documents. Starting early can also expose you to penalties and can complicate insurance. The specific requirements depend on the job and the current rules, so check the NSW Government guidance on contracts for home building work if you are unsure.

What to do: hold the line. Do not mobilise, order materials or book trades until the contract is signed and any required documents are in place. If the client pressures you, explain that starting early puts both of you at risk, and put that advice in writing.

Site access and existing conditions the client will not address

Some client-side risks are physical rather than behavioural. Access may be restricted, services may be uncharted, or the client may refuse to allow necessary investigations before work starts. These issues are not red flags about the client’s character, but they are red flags about the job, and they need to be resolved or priced before you sign.

Before you dig, you should have the relevant plans and be aware of the process for locating underground services. Before You Dig Australia provides the free referral service for locating underground infrastructure, and you should use it as part of your pre-construction planning. If the client will not allow sufficient time or access for this, you are being asked to accept an unknown risk.

What to do: walk the site with the client, agree access arrangements and working hours, and document any constraints. If existing conditions are unknown, price an allowance or make the unknown conditions a provisional sum with clear assumptions. Do not accept a fixed price for work you cannot inspect.

How to price the risk when you decide to proceed

Walking away is not always the right answer. Some clients are difficult because they are anxious or inexperienced, not because they are acting in bad faith. The question is whether you can price and document the job so that the risk is manageable.

If you proceed, you can protect yourself in several ways. Make the scope and inclusions as detailed as possible, with clear assumptions and exclusions. Use a contract that complies with the current NSW requirements and attach the documents that set out the scope, price and process. Build in a realistic allowance for administration and variations. Set out the process for variations, including that no variation work proceeds without written agreement. Confirm payment terms and progress claim procedures in the contract. And keep a written record of every significant conversation, even if it is just a follow-up email.

If you cannot get those protections in place, the job is not worth taking. The margin on a small job is rarely enough to cover a dispute.

Worked example: a granny flat in western Sydney

A builder in western Sydney is approached to build a granny flat. The client is friendly and says the job is straightforward: a standard design, no changes, and they want it finished before a family event. The builder prepares a preliminary scope and a price. The client says the price is higher than they expected and asks the builder to “leave out the site works” to bring the number down, saying the site works can be sorted later.

The builder asks for the scope in writing and for confirmation of who owns the property. The client says the property is in their spouse’s name and that they will handle everything. They also mention that a previous builder “ripped them off” and that they had to take him to court. When the builder asks for details, the client becomes vague and says it was all about variations that were never agreed.

The builder recognises the pattern. The client is unwilling to document the scope, wants to exclude work that will be necessary, cannot confirm authority to sign, and has a history of a dispute about undocumented variations. The builder decides not to proceed. A few months later, the builder hears that the client has engaged someone else and that the job has already gone to a formal dispute over the same issues.

The lesson is not that every client with a past dispute is a bad client. It is that the combination of red flags here made the job a poor commercial risk. The builder avoided the cost of a dispute, which would have been far greater than the margin on the job.

What to do when the red flags are there but you still want the job

Sometimes the job is attractive enough to pursue despite the warnings. If you decide to proceed, treat the risk as a cost. Increase your contingency. Tighten your variation process. Confirm every instruction in writing. Be prepared to enforce the contract if payment is withheld. And keep the job under review: if the client’s behaviour deteriorates, you can still manage it, but you should not be surprised by it.

If the client refuses to accept the contract terms or the documentation you need, that is a decision point. You cannot manage a client who will not engage with the process. In that case, the right answer is usually to decline the job and move on.

If a dispute does arise, the NSW Government’s guidance on avoiding building disputes and the formal resolving building disputes process explain the steps that follow. But the best time to deal with a dispute is before it starts. That means selecting your clients as carefully as you select your trades.

Questions builders ask

• Client Communication
• Contracts
• Disputes
• Risk

Published 16 September 2026. General information for builders, not legal, financial or engineering advice for a specific job. Check current requirements with the relevant regulator or standard before relying on them.