What Is an Authority to Commence Construction Letter?

An authority to commence construction letter is a letter from your lender to your builder confirming that construction finance is approved and in place, so the builder can start work. You may also see it called a build commencement letter, a letter of commencement or a notice to commence.

It is not a formal industry term. Lenders use different names and processes, and in our sample only CBA describes a formal commencement letter. Other lenders set conditions that must be met before construction starts or before the first progress payment.

It matters because many builders will not book the slab or order materials until they have it. If the letter is delayed, the start date can slip, and in some contracts that delay has consequences for you.

When the letter is issued depends on your lender’s construction policy, whether you are buying the land as well, the documents you provide, the approvals from council or a private certifier and whether your own contribution has been paid.

This guide explains how Australian lenders may assess and issue an authority to commence construction letter, based on lender policy wording we reviewed in October 2026.

What is an authority to commence construction letter?

It is written confirmation from the lender that:

• your construction loan has been approved and the loan has settled, or is ready to settle
• the lender has received and checked the building contract, plans and specifications
• the builder’s licence and insurances have been checked
• any contribution you need to make from your own funds has been dealt with
• the lender is prepared to pay progress claims under the contract, subject to its usual conditions

It is not a council approval or building permit. Those come from the council or a private building surveyor or certifier and allow the work to be carried out legally. The lender’s letter is about finance. Builders generally want both before they start.

Related research: Can You Get a Construction Loan If the Builder Hasn’t Started Yet?

What does the letter usually include?

Formats differ between lenders, but a commencement letter or notice may set out the property address, the borrowers’ and builder’s names, the contract price the lender has assessed, and how progress claims should be submitted. It may also remind the builder that each payment depends on the lender’s inspection and the owners’ sign-off, and that variations need to be approved before they are paid from the loan.

Some lenders also notify the borrower when the letter is issued. CBA’s wording, for example, mentions an SMS to the customer.

Why do builders ask for it?

A builder takes on cost as soon as work starts: site works, concrete, frames and trades. Many building contracts give the builder the right to see evidence that the owner can pay the contract price before construction begins. A lender’s commencement letter is one of the clearest forms of that evidence.

For you, the letter is a sign that the finance side of the build is in order. It also means the clock may be ticking on lender time limits for starting and finishing the build.

Why lenders treat the start of construction carefully

• The security is incomplete. Until the home is built, the lender is lending against land and a partly finished building.
• The contract must match the valuation. The lender’s as-if-complete valuation is based on the contract and plans it has seen.
• Insurances need to be in place. Builders’ contract works, public liability and home warranty insurance protect the project.
• Your own money usually goes in first. Many lenders want your contribution used before loan funds.
• Builds have time limits. Lenders set deadlines for starting and finishing construction.

How do lender policies differ on authority to commence construction?

We reviewed policy summaries for 40 Australian lenders (a mix of banks and non-banks) from a third-party broker policy tool, as at October 2026. This is a research sample of 40 lenders, not the whole market.

Only 1 of the 40 lenders in our sample, CBA, describes a formal build commencement letter process in its policy wording. Other lenders set conditions that must be met before construction starts or before the first progress payment. Examples:

• CBA says construction cannot commence until its procedure is complete and a build commencement letter has been issued. Before that, documents including the signed building contract, agreed specifications, council approved plans, any variations, the builder’s contract works and public liability insurance and the builder’s licence must be checked and sent to the bank. Its first progress payment also depends on the commencement letter having been issued to the builder.
• ANZ looks for evidence of the approval to commence construction, such as council approved plans, a building permit, a decision notice or a construction certificate, and home warranty insurance before the first progress payment.
• NAB requires an as-if-completed valuation before building works begin.
• Firstmac lists council approved plans, evidence of the builder’s registration or licence and insurances, and the signed final building contract before the first drawdown.
• Newcastle Permanent asks for council approved plans and specifications and a building contract signed by both the owners and the builder before it funds the construction.

Many lenders also want your own contribution used first. Bank of Us, St.George, Westpac, Suncorp Bank, WLTH, Granite, Newcastle Permanent and Auswide Bank are examples whose wording requires the borrower’s own funds or equity contribution to be used before loan funds are paid out.

These are examples of how differently lenders approach the same situation. These examples are not recommendations, and policy must be confirmed before an application is lodged. Policies change often, so confirm the current position with a broker before you apply.

Policy summary as at October 2026, from a third-party broker policy tool (export dated 20 October 2026). The lender guides behind it are dated between June 2026 and October 2026 for the lenders named on this page. The sample counts on this page cover all 40 lenders, whose guides are dated between October 2025 and October 2026. For example, CBA's guide is dated 7 July 2026. Lender policies change often and may have changed since.

How long do you have to start building?

Lenders set deadlines for construction to begin, and some set deadlines to finish. Examples from our sample:

• CBA: construction must commence within 12 months of the disclosure date in the credit contract and be completed within 24 months of the first drawdown.
• ANZ: construction must commence within 12 months of the land settlement date and be completed within 24 months of commencement.
• Macquarie: construction must commence within three months of the initial loan settlement.
• WLTH: construction must commence within 6 months of loan settlement, with a construction period of no more than 18 months.
• Granite: the loan includes a covenant to commence construction within 6 months.
• Bank of Us: construction is expected to be completed within a reasonable timeframe, generally 15 months or less from the first drawdown.

If a deadline cannot be met, some lenders may consider an extension if it is requested before the period ends. Others may withdraw the undrawn part of the approval. Planning approvals and builder schedules are the usual causes of delay.

What documents does the lender need before the letter is issued?

The list varies, but it commonly includes:

• the signed fixed-price building contract and payment schedule
• the agreed plans and specifications
• council or private certifier approved (stamped) plans and any permits
• details of any variations and out-of-contract items, with quotes
• the builder’s licence
• the builder’s contract works and public liability insurance
• home warranty or domestic building insurance, where it applies in your state
• evidence that your own contribution has been paid or is available

If anything is missing or does not match the contract the lender valued, the letter may be held up until it is resolved.

Does the land need to settle first?

Usually. If you are buying land and building, the land purchase normally settles first, with the construction loan set up at the same time or soon after. The commencement letter generally follows once the land has settled and the construction documents are approved. If you already own the land, the process can start once the construction loan is approved and settled.

Related research: Can You Get a Construction Loan for Unregistered Land?

What happens if the builder starts before the letter?

It can cause problems. Some lenders will not fund a build that has already started under another arrangement. Macquarie, for example, treats properties where construction has commenced in any form as unacceptable for its construction lending, and CBA does not accept partially completed construction being refinanced from another lender. A builder starting early can also complicate the valuation and the first progress payment.

How does the letter relate to the first progress payment?

The letter allows the builder to start. The first payment is usually the deposit or base stage. Some lenders pay the builder’s deposit from loan funds once all documents are approved, while others pay only after an inspection of the first stage. Your own funds are usually used first, so the first claims may be paid by you rather than the lender.

Related research: How Do Construction Loan Progress Payments Work?

What if you change builders or contracts?

A new builder or a substantially changed contract usually means the lender needs to reassess. It may need a new valuation, new insurance certificates and the new builder’s licence before a fresh letter can be issued. That can take time, so it helps to raise any change with the lender as early as possible.

10 common mistakes with the authority to commence construction

1. Assuming loan approval is the same as the commencement letter.
2. Not sending the stamped plans or final specifications to the lender.
3. Signing variations after approval without telling the lender.
4. Forgetting that your own contribution usually goes in first.
5. Letting the builder start before the letter is issued.
6. Not checking the lender’s deadline for starting construction.
7. Overlooking home warranty insurance requirements.
8. Waiting until land settlement to gather construction documents.
9. Not confirming who sends the letter to the builder.
10. Leaving no buffer for council or certifier delays.

How to get the letter issued faster

• Ask the lender or broker for the construction document checklist at approval.
• Collect the builder’s licence and insurance certificates early.
• Send the stamped plans as soon as they are issued.
• Keep the contract, plans and specifications consistent.
• Have your own contribution ready to pay when asked.
• Confirm the builder’s contact details for the letter.

Is it worth waiting for the letter before paying the builder?

Generally, yes. Paying a builder before the lender has issued its letter can make it harder to show your contribution and may not fit the lender’s process. If the builder asks for money early, it helps to ask the lender how that payment will be treated first.

Example scenarios

Scenario 1: Stamped plans delayed

A couple’s construction loan is approved, but the certifier has not stamped the plans. The lender is unlikely to issue the commencement letter until it has the approved plans, so the slab date moves back.

Scenario 2: Variation after approval

The owners add a $20,000 upgrade after the lender valued the contract. The lender may need the variation, a quote and evidence of how it will be paid before issuing the letter.

Scenario 3: Land settles, build starts later

A buyer settles on land but the builder cannot start for nine months. Depending on the lender, that may be close to, or beyond, its deadline for commencing construction.

Scenario 4: Builder starts early

A builder begins site works before the letter is issued. Some lenders may decline to fund a build that has already started, so the owners may need to pause the work while the lender reviews the situation.

So, what is an authority to commence construction letter?

It is the lender’s confirmation to the builder that finance is in place and construction can start. Lenders issue it, or set equivalent conditions, only after the contract, approvals, insurances and your contribution are checked.

The smoothest starts usually have:

• a signed fixed-price contract that matches the valuation
• stamped plans and permits ready early
• the builder’s licence and insurance certificates on hand
• your own contribution ready to be used first
• a start date within the lender’s deadline
• a lender whose construction process was understood from the start

Need help with your construction loan?

A Fundd mortgage broker can help you compare options and check whether current lender policies may suit your build. We can review your building contract, plans and timeline with you before you apply.