The Year 2026 is a big year for building reform. The state government has stated that apartment living is seen as part of the solution to the housing crisis. However people are reluctant to purchase apartments because of:
- Poor construction; and
- Poor management.
The poor management practices are being addressed as part of the expert panel review of the Owners Corporation Act, and the poor construction practices are being addressed as part of the building reform.
Building Legislation Amendment (Buyer Protections) Act 2025
There are significant changes to the building legislation as it currently stands. The major change is the Building Legislation Amendment (Buyer Protections) Act 2025 (Buyer Protections Act).
The Buyer Protections Act is due to take effect on 1 July 2026 and has the following major elements:
1. Regulation Changes
Several regulatory bodies will be rolled into one; the Building and Plumbing Commission (BPC). The BPC incorporates:
a. The Victorian Building Authority (VBA)
b. Domestic Building Dispute Resolution Victoria (DBDRV)
c. The Victorian Managed Insurance Authority (VMIA)
It also incorporates bodies that had been previously transferred such as the Plumbing Industry Commission (PIC).
Although BPC is actively promoting its new integrated role officially, the BPC takes on its new responsibilities as of 1 July 2026.
2. Developer Bonds (1 July 2026)
It has been a constant source of grief that a developer can build poorly constructed apartment buildings and then go bankrupt leaving the taxpayer and the lot owners to pay for the rectification.
For high rise buildings, four storeys and above, the developer is now required to lodge 2% of the total construction cost as a bond. The bond is held by the BPC for rectification works in the first two years after completion.
The lodging of the bond is a requirement for the issuing of an Occupancy Permit.
There is an inspection regime that consists of an inspection between 15 – 18 months after the occupancy permit has been issued.
The building is checked again between 21 – 24 months after the occupancy permit has been issued to ensure defects (if any) have been rectified.
The owners corporation will be responsible for submitting claims on the bond to the BPC regardless of whether the defect is on common property or an owners lot.
Mixed residential and retail developments are also covered under this scheme if they meet the criteria.
3. “First Resort” Insurance
To claim on the builder’s current insurance the builder must be missing, bankrupt, or dead (MBD). It follows that the opening move in building litigation is to bankrupt the builder which can be a slow and costly process.
Under the First Resort insurance scheme, a homeowner can make claims for incomplete, defective or non-compliant domestic building work, even if the builder is still trading.
The First-resort Home Warranty Scheme covers domestic building work for buildings up to three storeys, when building work is carried out under a domestic building contract valued at $20,000 or more.
The idea is that the First Resort insurance will cover buildings up to three storeys and the Developer Bond will cover four storeys and above.
It is not clear that all three storey or less buildings will be covered by either the current Domestic Building Insurance or the First Resort insurance scheme.
4. Rectification Orders
The BPC has a new power to issue rectification orders. Rectification orders can be issued at any time during construction and up to ten years after the date of practical completion.
The power is retrospective, which means that buildings constructed prior to the regime are also subject to rectification orders.
The regime is different for buildings of three stories or less and four stories or more.
a. Three storeys or less
Failure to comply with a rectification order is an offence and is grounds for immediate suspension of the practitioner’s registration.
Note that this class of building has the benefit of the First Resort insurance scheme.
b. Four storeys or more
If a rectification order is issued during construction for a serious defect, then the developer can be prevented from obtaining an occupancy permit (one of the triggers for settlement in an off the plan situation).
5. Financial Standards
The Buyer Protections Act introduces Minimum Financial Requirements (MFR). The MFR requires domestic builders to hold Net Tangible Assets (NTA) proportional to their turnover.
Builders must maintain a 1:1 ration capped at 20 times their NTA.
Domestic Building Contracts Amendment Act 2025 (1 Dec 2026)
Domestic Building Contracts Amendment Act 2025 (DBAA) provides a significant set of reforms:
- Provide stronger protections for homeowners when signing Domestic Building Contracts (DBC).
- Set clear rules when builders get paid.
- Allow cost escalation clauses for contracts worth 1 million or more.
- Separate preliminary agreements in regard to plans, specifications, and bills of quantity.
- Ensure clearer contract requirements for all domestic building contracts and make the requirements the same for domestic building contracts and major domestic building contracts.
- Provide a single, simple process for contract variations.
- Give homeowners stronger rights to terminate a major domestic building contract.
Summary
There are significant changes occurring in the building space in Victoria. Those changes should be taken into account when entering into building arrangements.
In the main changes are to ensure that the consumer is not placed at a disadvantage due to poor building practice.