A contractor has finished the job and now wants full payment. But the tiles are uneven, the paint is peeling, the plumbing leaks, or the installation does not match the quote. You refuse to pay. The contractor threatens legal action.
You are not obliged to pay for defective work, but you must handle the situation correctly to avoid liability. This guide explains your rights, the steps to take, and how to defend yourself if the contractor escalates.
Your Legal Position: You Do Not Have to Pay for Defective Work
Under Australian Consumer Law, services must be rendered with due care and skill, fit for the specified purpose, and delivered within a reasonable time if no time was agreed.
If the contractor has breached these guarantees, you are entitled to:
- Refuse payment until the defects are fixed
- Require the contractor to remedy the breach at no extra cost
- Claim compensation for loss or damage caused by the defective work
This applies whether you hired the contractor as a consumer or as a small business. You are not withholding payment unlawfully if the work genuinely does not meet the contract or the consumer guarantees.
Construction work: If the invoice is for construction work, it may be a payment claim under your state’s Security of Payment Act. You must answer it with a payment schedule within 10 business days (NSW, Vic, ACT, Tas) or 15 (Qld, WA, SA), giving every reason for paying less, or you can become liable for the full amount.
Document the Defects Immediately
Before you communicate with the contractor, gather evidence:
- Photographs and videos — date-stamped, showing the defective work from multiple angles
- Quotes from other tradespeople — written quotes to rectify the defects
- Copies of the original contract or quote — what was promised versus what was delivered
- Correspondence — emails, texts, or messages where you raised concerns during the job
- Invoices or payment records — what you have already paid, if anything
This evidence will be critical if the dispute escalates. Tribunals decide on evidence, not assertions.
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Notify the Contractor in Writing
Send the contractor a formal written notice explaining:
- The specific defects or breaches
- What you require them to do (fix the defects, redo the work, or reduce the price)
- A reasonable deadline (typically 7–14 days)
This is called a notice to remedy breach. It gives the contractor a chance to fix the problem before you escalate further. It also creates a paper trail showing you acted reasonably.
Do not rely on phone calls. Written notice protects you.
Claim Done can generate a notice to remedy breach in minutes, tailored to your specific defects.
Withhold Payment (But Do It Correctly)
You are entitled to withhold payment for defective work, but only the portion that relates to the defect. If the contractor completed 80% of the job properly and 20% is defective, you cannot withhold the entire invoice.
Best practice:
- Pay for the work that was completed to standard
- Withhold the amount reasonably attributable to the defects
- Keep the withheld amount ready to pay once defects are fixed
If you withhold the entire payment when only part of the work is defective, the contractor may have grounds to claim the balance in a tribunal.
Get Quotes to Rectify the Defects
If the contractor refuses to fix the defects, obtain written quotes from other qualified tradespeople to complete or correct the work. These quotes serve two purposes:
- They quantify your loss — the cost to remedy the breach
- They provide independent evidence that the work is genuinely defective
If the contractor takes you to a tribunal, you will need them to prove your defence and any counterclaim.
What If the Contractor Threatens Legal Action?
Contractors often issue threats when payment is withheld. Most are bluster. But some contractors do file claims. If that happens, you need to respond properly.
If You Receive a Tribunal Application
The contractor may file a claim in the relevant state or territory tribunal (NCAT, VCAT, QCAT, SAT, SACAT, TasCAT, ACAT, or NTCAT).
You will receive a notice of the hearing date. Do not ignore it. If you fail to appear, the tribunal may decide the case without you.
Your Defence
Your defence will rely on:
- Breach of contract — the contractor did not deliver what was agreed
- Breach of consumer guarantees — the work was not carried out with due care and skill
- Set-off or counterclaim — you are entitled to withhold payment or claim the cost of rectification
You will need to file a written response and attend the hearing with your evidence.
Claim Done’s tribunal defence pack (Tribunal Response) drafts four documents from the evidence you describe: a response summary, a defence position statement, a chronology and an evidence list. It does not make a counterclaim. Flat fee, no subscription.
What to Bring to the Tribunal Hearing
Tribunals are less formal than courts, but you still need to present your case clearly:
- Your written defence — filed in advance
- Photographs and videos — printed or on a tablet, date-stamped
- Quotes to rectify the defects — from independent tradespeople
- The original contract or quote — showing what was agreed
- Correspondence — emails, texts, notices you sent
- Witness statement — your own sworn statement setting out the facts
Speak plainly. Explain what was promised, what was delivered, and why the work is defective. Let the evidence do the work.
Can You Counterclaim?
Yes. If the contractor sues you for payment and you have evidence of defective work, you can file a counterclaim for:
- The cost to rectify the defects
- Any consequential loss (e.g., damage to property caused by the defective work)
- Any payments you already made for work that was not completed to standard
The tribunal will hear both claims together. If your counterclaim exceeds the contractor’s claim, you may end up with an order in your favour.
What If the Contractor Threatens a Builder’s Lien or Caveat?
In some states, contractors can lodge a lien or caveat over your property if they claim unpaid fees. This is rare in residential work and typically applies to commercial construction under security of payment legislation.
If a contractor threatens this:
- Check whether the legislation applies to your contract
- Do not panic — a caveat does not transfer ownership; it is a claim that must be proven
How Claim Done Helps
Claim Done helps you prepare the documents you need to respond to a contractor dispute:
- Notice to remedy breach — formally notify the contractor of defects and require them to fix the work
- Legal response — reply to a letter of demand from the contractor
- Tribunal defence pack — a response summary, defence position statement, chronology and evidence list if the contractor files a claim (a witness statement is a separate service)
Each service is a flat fee. Documents are generated in about 5 minutes based on the evidence you describe. You file them yourself.
Next Steps
You do not have to pay for defective work. Document everything, notify the contractor in writing, and respond properly if they escalate.
If the defects are minor and the contractor is willing to fix them, give them the chance. If the defects are serious, the contractor is uncooperative, or you receive a tribunal application, prepare your defence with evidence and file it on time.
Prepare a legal response to a contractor's demand or start your tribunal defence pack now.
Frequently Asked Questions
Can I withhold payment if only part of the work is defective?
Yes, but only withhold the portion that relates to the defect. If 80% of the work is acceptable, pay that amount and withhold the balance until defects are fixed. Withholding the entire payment when only part is defective may give the contractor grounds to claim the balance.
What if the contractor threatens to take me to court?
Most small contractor disputes go to a state tribunal, not court. If you receive a tribunal application, file a written defence on time and bring your evidence to the hearing. Do not ignore it — the tribunal can decide the case without you.
Do I need a lawyer to defend a tribunal claim?
No. Tribunals are designed for self-represented parties. You can prepare your own defence and present your evidence.
Can I claim the cost of hiring someone else to fix the defects?
Yes. If the contractor refuses to remedy the breach, you can hire another tradesperson and claim the cost as damages. Get written quotes and keep receipts. This is called the cost of rectification and is recoverable under Australian Consumer Law.
What if the contractor lodges a caveat on my property?
Caveats are rare in small residential contracts and typically require a valid legal interest in the property. Most residential disputes under common tribunal thresholds do not give rise to a caveatable interest.
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What happens when you put the builder on formal notice
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