Hiring a builder for your home or investment property is a major decision, and in New South Wales it comes with important legal obligations. Under Building and Construction Law, most residential building work valued at over $5,000 (labour and materials) requires the builder to hold a valid NSW contractor licence. Yet unlicensed building activity remains one of the most common issues affecting homeowners. Knowing how to identify, manage, and take action against an unlicensed builder is essential to protecting your rights, your finances, and the integrity of your property.

Why Licensing Matters in NSW

Licensing requirements in NSW exist to ensure that anyone performing residential building work has the appropriate skills, qualifications, and insurance coverage. A licensed builder must carry Home Building Compensation (HBC) cover for projects valued at $20,000 or more, and they must comply with the NSW Home Building Act 1989.

Unlicensed builders, on the other hand, often operate without proper insurance, formal qualifications, or oversight. This increases the risk of:

• Poor workmanship
• Unsafe building practices
• Contract disputes
• Incomplete projects
• Cost blowouts

 If proven, a contract signed under duress may be declared void or voidable.

Most importantly, unlicensed builders cannot legally enter into a building contract for residential work above the legal threshold—meaning the homeowner may be left with limited recourse if things go wrong.

How to Check a Builder’s Licence

Before engaging any tradesperson or builder, NSW Fair Trading recommends that homeowners verify the contractor’s licence. You can do this quickly through:

• The NSW Fair Trading licence check
• Asking the builder to provide their physical licence or digital licence via the Service NSW app

A licensed builder will have no issue providing this information. If they hesitate, offer excuses, or refuse, it’s a major red flag.

Common Signs a Builder Might Be Unlicensed

While some unlicensed builders try to appear legitimate, there are noticeable warning signs, including:

• No written contract provided for work over $5,000
• Requests for large upfront payments (illegal in NSW)
• Inability to show HBC insurance for works over $20,000
• Extremely low quotes compared to other builders
• Pressure to pay cash or “off the books”
• Avoiding documentation, invoices, or receipts

If you're seeing any of these behaviours, it’s important to proceed with caution.

What to Do If You Suspect You’re Dealing with an Unlicensed Builder

If work has not yet started, the safest option is simply not to proceed. There is no obligation to enter into an agreement with a contractor whose licence status is unclear.

If work has already begun or is completed, follow these steps:

Gather All DocumentationCollect any contracts, emails, text messages, invoices, or payment records. Even if the builder is unlicensed, this documentation is useful for reporting the issue and resolving disputes.

Stop Further PaymentsUnder NSW law, unlicensed builders are not legally permitted to demand payment for residential work that requires a licence. If you paid them already, you may still have avenues for recovery depending on the circumstances.

Report the Builder to NSW Fair TradingNSW Fair Trading investigates unlicensed building activity and has the authority to issue penalties, fines, and prohibition orders. Reporting helps protect other homeowners from similar misconduct. You can lodge a complaint via NSW Fair Trading’s website or contact their enquiry line for guidance.

Obtain an Independent Building InspectionA licensed building consultant can assess whether the work carried out is structurally sound, compliant with the Building Code of Australia, and free from defects. This assessment is crucial if the matter escalates to a tribunal or court.

Seek Legal AdviceUnlicensed building disputes often involve breaches of the Home Building Act, consumer protection laws, and contractual obligations. A solicitor specialising in Building and Construction Law can help you:

• Understand your rights
• Recover money paid
• Pursue compensation for defective or incomplete work
• Prepare for proceedings before NCAT (NSW Civil and Administrative Tribunal)

 Legal guidance ensures you take the right steps and avoid actions that could weaken your case.

Penalties for Unlicensed Builders in NSW

Unlicensed building work is a serious offence. NSW Fair Trading can issue significant penalties, including:

• Fines of over $22,000 for individuals
• Even higher penalties for corporations
• Prohibition orders preventing future work
• Criminal charges in cases of repeated or severe offences

In addition, unlicensed builders cannot enforce contracts, meaning they generally cannot legally pursue homeowners for payment.

How to Protect Yourself When Hiring a Builder

The best protection is prevention. Follow these steps for future building projects:

• Always check the builder’s licence before signing anything.
• Request a detailed written contract for any work over $5,000.
• Ensure HBC insurance is issued for work over $20,000.
• Avoid paying large deposits—NSW law caps them at 10% for most projects.
• Obtain multiple quotes to compare qualifications and pricing.
• Keep all communication in writing.

A proactive approach reduces the risk of falling victim to unlicensed operators.

Suggested External Links:

• NSW Fair Trading Licence Check
• NSW Fair Trading – Building Laws
• NSW Home Building Compensation Fund
• NCAT – Home Building Division

Handling an unlicensed builder in NSW can be stressful, but Building and Construction Law provides strong protections for homeowners.

By understanding your rights, gathering evidence, and seeking the right professional guidance, you can navigate the situation with confidence and minimise financial loss.

If you're dealing with an unlicensed builder or need guidance on your rights under NSW Building and Construction Law,

Contact New South Lawyers today for practical, expert legal advice.