Buyers of newly constructed homes and apartments throughout Victoria are set to enjoy greater protection from the middle of next year as new building industry reforms are set to become law.

Last week, the Building Legislation Amendment (Buyer Protections) Bill 2025 was passed in the Victorian Legislative Council.

The Bill has now passed both houses of Parliament and will become law.

The legislation will:

• Consolidate responsibility for regulation, dispute resolution and insurance into the current Victoria Building Authority (VBA) as a single entity. This will see the VBA act as a one-stop shop for building regulation, dispute resolution and insurance.
• Beef up the VBA’s enforcement powers. This includes by extending the power of the regulator to issue rectification orders to force builders and/or developers to rectify incomplete or defective work for up to ten years after an occupancy certificate has been issued. (Currently, the VBA is able to issue rectification orders only where defects are identified during construction. The regulator does not currently have any powers to order builders to fix defects which are discovered after a consumer has moved into their new home.)
• Replace the current system of last resort protection for domestic building insurance with a new first-resort scheme to be administered by the VBA. Currently, consumers can only claim domestic building insurance in respect of incomplete or defective building work in cases where a builder dies, disappears, becomes insolvent or fails to comply with orders issued by courts or tribunals. Under the new system, however, consumers will be able to lodge a claim as soon as defects are identified. In addition, coverage will be extended to owners even in cases where builders fail to purchase an insurance policy as they are legally required to do.
• Introduce a new developer bond scheme in respect of apartment buildings of greater than three storeys in height (currently, consumers in these complexes have no financial protection against defective work as they are not covered by domestic building insurance). Modelled on the current developer bond scheme in NSW, then new scheme will see developers pay a bond worth two percent of the building’s construction costs that will cover defects which are identified during post occupancy inspections. This will offer intermediate protection for consumers in mid- and high-rise residential buildings whilst the Victorian Government develops a ten-year decennial liability insurance scheme to cover these buildings.
• Restrict the sale or occupancy of apartment buildings above three storeys in cases where serious defects have not been rectified or the developer has not complied with the requirements of the developer bond scheme.

The Bill’s provisions will come into effect from the middle of next year from 1 July 2026. This is expected to provide sufficient time for relevant systems which are needed to support the provisions to be put into place.

The new legislation comes amid ongoing concern about the prevalence of serious defects in new homes and apartments throughout Victoria.

In the multi-unit residential sector (units/townhouses/apartments), a 2019 analysis of 212 residential buildings found that 85 percent of all building across Australia and 74 percent of buildings across Victoria had at least one serious defect.

On average, that report found that the average apartment building across Australia generally and Victoria in particular had 14 defects and 11 defects respectively.

The legislation also comes amid concerns about gaps in the state’s existing system of regulation and consumer protection.

In his second reading speech last week, Victorian Minister for Consumer Affairs Nick Staikos noted that current responsibility for regulating domestic building functions is fragmented across various agencies.

For consumers, this has created confusion about which agency to approach in cases where problems arise. Consumers are also being passed around different agencies before finding the right one to investigate and resolve their issue.

Meanwhile, the current absence of any ability for the VBA to issue rectification orders once an occupancy certificate has been issued means that consumers who uncover defects after moving in are left to their own devices to pursue the matter through the Victorian Civil Appeals Tribunal.

Reaction to the legislation has been mixed.

On one hand, the Master Builders Association and Housing Industry Association have raised concerns about the impact of the new legislation upon builders.

However, consumer lobby groups such as the Consumer Action Law Centre have said that the legislation has delivered important improvements to consumer protection.

Architects have also supported the Bill.

Speaking prior to the vote in Parliament last week, David Wagner, Victorian Chapter President of the Australian Institute of Architects, described the Bill as a ‘game-changing piece of legislation’ which ‘brings much needed oversight to areas of residential construction that have been vulnerable to risk and inconsistency’.

“This (Bill) is a significant advancement that will rebuild market confidence,” Wagner said.

“We need a regulatory framework that focuses on prevention. By embedding robust inspection, insurance and rectification processes, this legislation supports the delivery of well-constructed, defect-free homes.

“With Victoria facing the challenge of delivering up to 80,000 new homes annually to support population growth, the passage of this Bill is vital.”

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