With building defects remaining a recurrent theme across the Australian property market, a number of legislative enactments are being introduced across the States and Territories to protect owners and hold parties accountable for their involvement in the poor construction of homes.
The experiences arising with some of this legislation could be described as a mixed bag. From a consumer perspective the expansion of plaintiff rights against a range of parties is a positive development. On the other hand, some features of the new enactments, such as the Design and Building Practitioners Act 2020 (NSW), have at least anecdotally resulted in more costly litigation and certain difficulties in procuring rectification work. In other cases, it may be too early to tell if the impact of some of the legislation will be enduringly positive.
Victoria has recently embarked on its own substantial rewrite of building legislation, which closely mirrors aspects of legislation currently in force in New South Wales, with the recent passing of the Building Legislation Amendment (Buyers Protections) Bill 2025 (Bill). This amending legislation will come into effect on the earlier of the date of proclamation or 1 July 2026.
The Bill focuses on three key aspects: statutory insurance; the powers of the Victorian Building Authority (VBA) and the implementation of a developer bond.
Statutory Insurance
The Bill provides that all former domestic building warranty insurance policies are to be transferred from the Victorian Managed Insurance Authority to the VBA as if those policies were always with the VBA.
The Bill amends the Building Act 1993 (Building Act) to include a new Part 9A, being the statutory insurance scheme for domestic building work (Scheme).
The Scheme will apply to most kinds of domestic building work where that work results in the construction of a single home, or the construction of 2 or more homes in a building comprising 3 storeys or less.
The most wide-ranging and beneficial change for owners is that the Scheme is “first-resort” in nature, meaning that it is not necessary for the subject builder to die, disappear or become insolvent prior to a beneficiary making a claim on the Scheme.
A building owner is entitled to assistance under the Scheme if the building owner has suffered loss arising from or in connection with domestic building work that is incomplete, defective or non-compliant. Assistance from the Scheme may include rectification or payment of compensation.
The Bill also seeks to avoid the risk that owners will be left without insurance coverage by making it more difficult to, for example, register a plan of subdivision. Often, however, such protections are punitive and may not provide direct recourse for owners if it is later identified that a valid policy was not obtained.
There are various stipulations in Part 9A governing when cover applies to, and when a claim can be made by, a beneficiary under the Scheme. Many of these matters will be guided by the regulations which are not available (and will likely not be until the Bill comes into operation).
Powers of the VBA
Under amendments to Part 5 of the Building Act, the VBA is afforded the ability to issue rectification orders in relation to any work involved in the construction of a building (whether or not such work is domestic building work).
The power to issue rectification orders is broad and can be issued where such work fails to meet the standards specified in the contract and additionally – in the case of domestic building work – any breach of the warranties contained within section 8 of the Domestic Building Contracts Act 1995.
A rectification order under Part 5 can be issued against any person who carries out the work or a person falling with the broadened definition of a ‘developer’ within the meaning of Part 5, increasing the potential reach of these kinds of orders.
A rectification order may be issued at any time (whether or not the work is complete) but cannot be made 10 years after the issuance of a certificate of final inspection, the issuance of an occupancy permit, upon practical completion, or any other period prescribed by the regulations. It remains to be seen whether it will apply to the earliest or latest of the above. An application may be made to the Victorian Civil and Administrative Tribunal to extend the time for the making of such an order.
Developer Bonds
The Bill also amends Part 6 of the Building Act to require the developer to provide a developer bond for buildings with more than 3 storeys. For the purposes of Part 6, “developer” means the owner of the land upon the date of registration of the plan of subdivision.
The amount to be secured under the developer bond is currently set at 2% percent (or such percentage that may be prescribed in the regulations) of the total build cost. In our experience that amount is often significantly less than the cost to rectify defects which may exist in the affected construction work.
The Bill provides for the appointment of an assessor who is immune from any action. The assessor is conferred broad powers to request documentation and enter onto any property for the purpose of facilitating the bond process.
The assessor is empowered to undertake a preliminary inspection and provide a preliminary report for a builder to rectify defects. Peculiarly, the builder is not required to rectify in accordance with any scope of work in the assessor’s report. Following any rectification work, the assessor is to then undertake a final report identifying the status of defects in the preliminary report, after which claims can be made on the developer bond if issues remain.
Summary
The Bill provides a number of new rights and protective measures to owners of property in Victoria.
However, as with most things, the devil remains in the detail. Access to, and the effectiveness of, these rights and measures may be significantly impacted by the regulations yet to be seen. Similarly, it is unclear how rigorously the VBA will utilise its new found powers and whether the threat of the exercise of such powers will itself start to change the building culture that has led to the defect issues currently experienced by many owners in Victoria.