Building industry lobby groups have hit out at new legislation that will overhaul Victoria’s building laws and have called for the legislation to be withdrawn to allow for more consultation.

But a well-respected reform advocate has welcomed the changes.

(above image: frumufilms via freepick.com)

Introduced into Parliament on Tuesday, the Building Legislation Amendment (Buyer Protections) Bill 2025 will enact some of the Victorian Government’s previously announced reforms which are designed to improve consumer protection in the home building industry.

Changes under the new legislation will include:

• creation of a new Building and Plumbing Commission that will handle building regulation, insurance and dispute resolution under a single agency
• new and expanded powers for the new regulator to issue building rectification orders for up to ten years after building completion
• new protections for apartment owners through a developer bond scheme; and
• replacement of the current last resort domestic building insurance scheme with a new first-resort scheme.

In addition, the Department of Transport and Planning has released a Regulatory Impact Statement to commence consultation on two further areas of proposed reforms.

These are:

• requirements for apartment owners to be provided with a new building manual upon handover; and
• new mandatory inspections to be completed prior to waterproofing or plastering.

The latest developments come amid ongoing concerns about consumers being forced to shoulder expensive repair bills to fix defects which are discovered after they have moved into their new home.

The reforms also follow a damning report into the culture of the Victorian Building Authority that was released last year.

A key part of the reforms involves the replacement of the Victorian Building Authority with a new building regulator.

Set to be known as the Building & Plumbing Commission, the new regulator will oversee building and plumbing regulation across the state. It will operate as a ones-stop-shop by bringing together all aspects of building quality control into a single agency. This includes regulation, insurance and dispute resolution.

The new regulator will replace the current Victorian Building Authority along with the operations of Domestic Building Dispute Resolution Victoria (DBDRV) and the domestic building insurance operations of the Victorian Managed Insurance Agency (VMIA).

Next, the Commission will be given new powers in respect of rectification orders.

As things stand, the Victorian Building Authority is only able to direct builders to fix substandard work in cases where the defects are identified during construction.

Under the new laws, the new regulator’s powers to order rectification will extend to long after a homeowner has moved in.

If defects are not rectified, the regulator will be able to prevent the issuing of occupancy permits or the completion of off-the-plan sales for apartment buildings. This will mean that developers will be unable to close sales until serious defects are rectified.

Beyond that, the new regulator will be able to issue rectification orders against builders for up to ten years after the issuing of an occupancy permit.

Third, the Bill will afford new protections for consumers in medium to high rise apartments (four storeys or more) through the introduction of a developer bond scheme.

As things stand, consumers who purchase apartments in complexes which are more than three stories in height are not covered by domestic building insurance. These consumers have little protection in cases where their builder becomes insolvent and is unable to rectify defects.

Under the new laws, developers will pay a bond which is held by the regulator for two years after construction.

Set at two percent of the building’s construction cost, the bond will be available to help pay for rectification of defects which are identified within this timeframe.

The bond scheme will commence at the end of 2025. It will be in place whilst the Government develops a decennial liability insurance scheme to provide 10-year insurance for apartment owners.

Finally, the legislation will replace the existing last-resort domestic building insurance scheme with a first-resort scheme.

Currently, domestic building insurance provides protections homeowners in cases where their building project is incomplete or defective. It is mandatory in cases where the contract price is greater than $16,000.

As things stand, however, the protection provided is limited by the fact that the scheme operates on a last resort basis.

This means that consumers can only claim insurance where their builder dies, disappears or becomes insolvent.

Under the new legislation, however, this will transition to a new First Resort Domestic Building Warranty Insurance. As a result, consumers will be able to make a claim as soon as their issue is first identified.

In a statement, Premier Jacinta Allen welcomed the new legislation.

“Building or buying a new home will be the biggest investment most of us ever make, and Victorians rightly expect to get what they pay for,” Allen said.

“This is all about more homes. We will build – and sell – more apartments and townhouses if buyers know they are rock solid and will stand the test of time.”

Builders call for legislation withdrawal

However, building industry lobby groups have slammed the legislation.

In a joint statement, Master Builders Victoria (MBAV) CEO and Housing Industry Association (HIA) issued a united rejection of the new legislation, referring to it as ‘unfair and unworkable’.

Whilst the two building groups acknowledged the need to improve consumer protection, MBAV and HIA say that the includes ‘hasty and misconceived’ definition and powers and will ‘unfairly punish reputable builders’.

They called for the current Bill to be withdrawn so as to enable further consultation.

During an interview, HIA Victorian Executive Director Keith Ryan told Sourceable that industry concerns centred primarily around the new powers regarding dispute resolution and rectification orders.

First, Ryan said the legislation failed to address concerns regarding the existing dispute resolution scheme for builders.

As things stand, Ryan says that builders who are seeking payment for a disputed payment claim under their contract are typically forced to wait up to six months whilst the claim goes through Domestic Building Dispute Resolution Victoria (DBDRV) and then for years if the dispute goes through to the Victorian Civil Appeals Tribunal (VCAT).

The new legislation does nothing to address this situation.

Moreover, for builders, Ryan says that the new legislation involves unduly onerous new requirements.

First, the legislation means that builders could be subject to rectification orders for up to ten years or even longer after building handover. Whilst the legislation specifies a ten-year timeframe during which orders can be made, this will be able to be extended if the new regulator is granted an extension from VCAT.

What’s more, builders will not have any effective means by which to challenge the order.

To be sure, builders will in fact be able seek review from VCAT in regard to any orders which are issued against them. However, there is no process by which to obtain a stay on the order whilst the appeal is underway. This means that builders would still need to follow the order notwithstanding that the order is subject to appeal.

In addition, the definition of a defect under the Act is extremely broad. This effectively means that a builder could potentially face a rectification order in respect of almost any part of the build with no apparent need for consumers to demonstrate that there are serious problems with the build.

For these reasons, Ryan said that the outcome would be terrible for builders.

“This is legislative madness and totally unfair,” he said.

“This bill essentially takes a completely failed dispute resolution process which has caused the problems for consumers but also caused problems for builders. It basically creates a shortcut which says to consumers, ‘Well, you’ve got the right to get an order made which can have anything fixed. In the meantime, the poor builder can wait for that process to be resolved. Then if there happens to be a builder’s claim (for payment), they can then progress that through the old system which is DBRVR, there goes half a year, and VCAT, there goes years.’

“What we’ve got now (in the legislation) is a system which tries to address the worst failings of the dispute resolution system and essentially creates a process by where consumers can -if they convince the regulator – get a quick, immediate solution, but builders are left waiting.”

Meanwhile, Master Builders Association of Victoria CEO Michaela Lihou said a lack of clarity in the proposed legislation will unfairly damage builders trying to do the right thing.

In particular, Lihou said that the Bill lacks clarity around the definition of what constitutes a ‘defect’ as distinct from a ‘serious defect’ and the appropriate way to deal with each.

“We’re concerned that this legislation is being rushed through, when there is already a raft of existing consumer protections, albeit they are not always appropriately enforced and in a timely manner,” she said.

“Piling more legislation on decent builders is just another way of pushing them out of the industry.”

Lawyer Voices Support

However, a well-respected lawyer and prominent voice on building industry reform has broadly welcomed the proposed legislation.

Bronwyn Weir, Managing Director of Weir Legal and co-author of the landmark Building Confidence Report that was prepared for the Building Ministers Meeting in 2018, said that the changes were a step in the right direction.

But she expressed hope that further reforms will follow.

“I am pleased to see legislation that will introduce a ‘first resort’ builder’s warranty insurance for consumers,” Weir said.

“I think this will materially improve protection for consumers.

“The new powers for the regulator are also long overdue and will allow the issuing of rectification orders to both builders and developers.

“The reforms also copy the NSW developer bond scheme. However, they don’t appear to include other important developer accountability regulations from the NSW scheme such as a statutory duty of care and developers being able to be sued by owners for breach of statutory warranties. They also have not followed the ACT’s developer licencing scheme.

“On the whole, these changes are a step in the right direction and hopefully further reforms will follow. I wish the regulator luck in implementing them effectively.”

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