On 1 July 2026, changes to Victoria’s domestic building regulatory and dispute resolution regimes are expected to take effect under the Building Legislation Amendment (Buyer Protections) Act 2025 (Act).
These amendments represent one of the most significant seismic shifts in the residential building sector, and are probably the most significant statutory reforms in that sector since the commencement of the Building Act 1993 (Vic) in 1994.
A full analysis of the amendments is beyond the scope of this update. However, here are the key points you need to know:
- the introduction of statutory powers increasing the ability of regulators to intervene directly in the performance of contractual obligations;
- the potential extension, in effect, of the existing ten-year statutory limitation period for ‘building actions’ on a case-by-case basis;
- regulatory intervention in developers’ subdivision and conveyancing processes;
- greater regulatory intervention in cases of allegedly defective or incomplete building work, outside traditional dispute resolution processes;
- provision for developers to provide statutory financial security for performance of their obligations; and
- the ‘turning on its head’ of the pre-existing ‘last resort’ domestic building insurance scheme in Victoria, which for more than twenty years, has only offered limited coverage in the event of the death, disappearance or insolvency of the builder.
Consolidated and expanded regulatory powers
The Act consolidates the following regulators, bringing them together under a single ‘Building and Plumbing Commission’ (BPC):
- Victorian Managed Insurance Authority (VMIA);
- Victorian Building Authority (VBA); and
- Domestic Building Dispute Resolution Victoria (DBDRV).
The government believes that combining these authorities will improve industry efficiency and improve consumer access to regulatory and dispute resolution authorities.
The BPC’s role comprises regulatory monitoring, dispute resolution services, disciplinary functions and insurance oversight.
Rectification powers
The BPC will be able to order a person or developer to rectify defective, incomplete or non-compliant building works.
Before issuing a rectification order, the BPC should have regard for the relevant building contract and earlier decisions of building inspectors. A person or developer may apply to the Victorian Civil and Administrative Tribunal (VCAT) for a review of the issuance of a rectification order.
The BPC may apply to VCAT for an extension of time, beyond ten years, in which it may issue a rectification order. This power to extend time represents a quantum leap over the existing and well-established statutory limitation period of ten years for the bringing of ‘building actions’, which has been in place for over twenty years.
Issuing occupancy permits
The Act introduces new preconditions applicable to developers that must be complied with before they can apply for an occupancy permit.
Developers will be required to notify the BPC of their intention to apply for an occupancy permit six to twelve months in advance of applying, in order to allow for an inspection to be carried out by the BPC.
Upon inspection, if a serious defect is found and if the BPC makes a rectification order, the developer will not be able to:
- apply for an occupancy permit;
- register a proposed plan of subdivision; or
- complete an off-the-plan sale of the building,
until the rectification order is complied with.
Developer bond scheme
The Act introduces a developer bond scheme for residential buildings that are above three storeys high, with the aim of providing financial protection for purchasers of apartments.
The scheme is based on the State Building and Protection Scheme in New South Wales. It will require developers to provide a bond of 2% of the estimated total build cost to the BPC.
The developer must arrange for the issuing of the bond before applying for an occupancy permit. A failure to do so will be an offence under the Act and can result in a fine of up to 2,500 penalty units, which is around $500,000.
The bond will be held for the future cost of building work that may be needed to rectify defects in the building.
An inspection regime will accompany the bond scheme. Inspections of buildings will be conducted by a building assessor, who will be selected and paid for by the developer.
Inspections of buildings will be undertaken as follows:
- Initial inspection – between 15 -18 months after the issuance of an occupancy permit. Developers will be given an opportunity to rectify any defects found in the initial inspection.
- Secondary inspection, if required, and limited to only an inspection of the rectification works, between 21-24 months after the issuance of an occupancy permit.
Owners can apply to the BPC for access to the bond after the secondary inspection to cover costs incurred for rectifying defects.
The bond will be released to the developer if there are no defects in the initial report and if the owners’ corporation of the building agrees.
First resort insurance scheme
As mentioned above, the pre-existing ‘last resort’ domestic building insurance scheme in Victoria has been in place for more than twenty years, as well as well-known insurance exemptions for multi-residential developments that have more than three storeys above ground level and two or more separate dwellings.
The Act introduces a statutory insurance scheme (SIS) that will be available to owners of residential buildings with three storeys or less. This will allow owners to make claims directly with the VBA when they first identify an issue, without needing to prove the builder is insolvent, deceased, or untraceable.
Some building work will be excluded from the SIS, including ‘residential apartment buildings’ with more than three storeys. The new developer bond scheme outlined above will apply to those buildings.
The SIS will apply to building contracts under which the value of the building work exceeds $20,000. An owner will be able to make a claim for loss due to defective building work when a builder fails to comply with a rectification order, as a ‘first resort’. There will be no need to prove death, disappearance or insolvency.
The VBA will replace the VMIA in the administration of the domestic building insurance eligibility and coverage schemes. In effect, the VBA will administer the SIS as a government monopoly, and private insurers will not participate.
While the VMIA has been the dominant provider in recent history, it is noteworthy that since the announcement of these proposed amendments, the only domestic building insurer in Victoria other than VMIA has announced its withdrawal from this market.
The SIS will depend on the VBA’s enhanced power to order rectification work, the rationale being that rectification work orders should reduce demand for insurance payouts. If a builder fails to rectify work and the SIS responds, the VBA can take disciplinary action and seek to recover costs from the builder.
Builders will be required to pay an insurance premium to the VBA before work starts. The SIS will extend cover to owners even if their builder failed to purchase an insurance policy.
Key takeaways
These changes will result in builders and developers needing to meet further compliance measures (and costs) and will have significant impacts upon a vast number of project participants in the residential development space, both front-end and back-end.
There is a concern that despite the consumer protections introduced by these amendments, unintended consequences and complexities that are yet to fully play out are likely to be inevitable.
For example, it is unclear how the Act treats proportionate liability and third-party claims, particularly where it allows for, in effect, an early ‘mandating’ of responsibility by regulator directives.
Aside from the obvious project planning and transactional impacts, there is also a real risk that the increased intervention and decision-making powers may provide fertile ground for appeal.
Contact us
If you would like to know more about how these changes may affect your present or future developments, contracts, regulatory compliance or dispute resolution strategies, please contact Stuart Miller on +61 3 9321 7840.
| Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
Liability limited by a scheme approved under Professional Standards Legislation. © 2025 Rigby Cooke Lawyers |