Victorian government overhauls construction industry following introduction of legislative reforms

The Building Legislation Amendment (Buyer Protections) Bill 2025 (161-page/716KB PDF) will provide the government with broader powers to order defects in apartment buildings to be rectified and introduces new schemes for developer bonds and first-resort domestic building insurance.

Administration of the Victorian Managed Insurance Authority's domestic building insurance operations and the Domestic Building Dispute Resolution Victoria will be transferred to the Victorian Building Authority (VBA) under the proposed legislation.

The bill is a step towards the Victorian government's overhaul of the building regulator, further to announcements that it will ultimately replace the VBA with a new body to oversee the building and plumbing industries across the state.

The bill includes several significant reforms that builders and developers should be aware of.

Ordering rectification of building work

A new rectification order regime has been introduced by the bill, which aims to ensure that registered building practitioners, unregistered persons and owner-builders can be held accountable to fix or complete building work.

The VBA will be empowered to issue a rectification order to a person or developer, or both, who has carried out incomplete, non-compliant or defective building work on a residential apartment building.

The bill defines a residential apartment building as a class two building, as defined by the Building Code of Australia, with more than three storeys or that is a part of a building that contains more two or more homes with three storeys.

A rectification order may be issued up to ten years after the issue of a certificate of final inspection, occupancy permit or practical completion date.

The VBA will be able to issue a rectification costs order, in relation to a rectification order, to a builder, developer or both, requiring payment of a specified amount incurred in the administration of the initial order.

The legislation also provides for an avenue to review decisions on rectification orders and costs orders by the Victorian Civil and Administrative Tribunal, if an application is made by a party within 28 days of the person receiving the order.

If a registered building practitioner refuses or fails to comply with a rectification order or rectification costs order without a reasonable excuse, the bill allows for disciplinary action or immediate suspension.

The bill provides that is an offence for an owner to apply to register land that is the subject of rectification orders.

Developer bonds 

A new developer bond scheme, requiring a developer of a residential apartment building to pay a bond to be held by the regulator for around two years, will also be established.

The bond is set at 3% of the total build cost or a percentage decided by the regulator and provides security for defects, with owners having a right to make a claim to the VBA in relation to the rectification of defects.

New offences for a person who applies for an occupancy permit for a residential apartment building without a developer having paid the bond or if a person falsely represents that a developer bond has been paid are also introduced by the bill.

A purchaser of an off-the-plan apartment will be entitled to rescind the contract of sale if the developer has not paid the bond as required.

Minimum financial requirements

Minimum financial requirements will also be introduced to register as a builder, with the details to be introduced in future regulations and legislation.

A registered builder who fails to meet the requirements may be subject to disciplinary action, including the suspension or cancellation of their registration.

Domestic building insurance

Responsibility for the current domestic building insurance regime, managed by the Victorian Managed Insurance Authority, is transferred to the VBA under the legislation.

Consumers will be provided with 'first resort' insurance to cover domestic building contracts that are valued over A$20,000 in building three storeys or below.

Looking forward

The bill has earmarked a commencement date of 1 July 2026, unless otherwise legislated.

A regulatory impact statement has also been released by the Department of Transport and Planning, starting the consultation process for the introduction of increased mandatory inspections during construction, and ‘building manuals’ prepared by builders or occupancy permit holders.

Future developments to keep an eye out for include the formalisation of the Building and Plumbing Commission, which the Allan government has announced in media releases alongside the legislation, and new regulations.