Written by Riley Gay
On 29 May 2025, the Victorian Parliament passed significant reforms to the regulation of the Victorian building industry. This article summarises some of the key changes coming into effect in 2026.
The changes introduced by the Building Legislation Amendment (Buyer Protections) Bill 2025 (the Bill) which we discuss in this article include:
- New functions and powers for the Victorian Building Authority (VBA) including stronger powers to order the rectification of defective, non‑compliant and incomplete building work;
- The VBA will take over the operations of Domestic Building Dispute Resolution Victoria (DBDRV) and will administer domestic building disputes; and
- Establishing a statutory insurance scheme for homes including buildings up to three storeys, to be operated by the VBA.
Integration of Powers to the VBA
Currently, the Victorian building regulatory system is fragmented across different agencies. The Bill aims to bring regulatory functions under the Building Act, dispute resolution functions under the Domestic Building Contracts Act and domestic building insurance into the VBA.
The new statutory insurance scheme for domestic building work will be linked with the VBA’s enforcement and disciplinary powers and dispute resolution services.
The VBA will have the power to order the rectification of incomplete, defective and non-compliant building work. The VBA will be able to issue a rectification order to a person who carried out the building work and developers. A rectification order will be able to be issued with respect to any building class and at any time during the construction phase and up to 10 years after the issuing of an occupancy permit. Currently, this power is limited to the construction phase.
Some implications include:
- the VBA will have increased powers to order rectification of building work at any time in the construction phase;
- stronger incentives on builders to rectify building work when ordered to do so because failure to comply with the regulator’s rectification orders can lead to the immediate suspension of the builder’s registration; and
- the VBA will be a “one stop shop” for administering domestic building disputes.
A more streamlined approach to regulation and dispute resolution will hopefully result in more efficient and effective resolution of domestic building disputes in Victoria.
Domestic Building Insurance Reforms
The Bill makes changes to domestic building insurance in two stages:
- First, the Victorian Managed Insurance Authority’s (VMIA) domestic building insurance business will be integrated into the VBA. Consequently, the VBA will be the designated insurer for domestic building insurance. This insurance will apply similarly to current builders’ warranty insurance. Building owners with domestic building insurance policies currently in place with the VMIA will continue to receive the same coverage under those policies after the transfer to the VBA takes place.
- Second, the Bill establishes a new statutory insurance scheme (SIS). Domestic building owners will be able to make an insurance claim without needing to undertake a dispute resolution process. The SIS will be administered by the VBA as a government monopoly. The Government’s stated aim is to ensure a close link between insurance, the regulator’s enforcement powers, disciplinary powers and cost recovery powers. If insurance responds due to a failure by the builder to rectify building work, the regulator is empowered to take disciplinary action and/or cost recovery action against the builder.
These changes intend to provide consumers with greater protection and access to an insurance policy without having to go through a dispute resolution process.
The Government has stated that affected insurers and builders will be consulted as part of implementation work over the coming year.
Other Reforms
The Bill also introduces various changes which we do not examine in detail in this article:
- A new ‘developer bond scheme’ in the form of a levy to be charged on all residential building projects over three storeys to be held as security for rectification of defects in those projects;
- Prescribed minimum financial requirements for builders (to be detailed in regulations); and
- New VCAT review jurisdiction with respect to decisions made in relation to the SIS, rectification orders and developer bonds.
Going Forward
The new law will take effect on 1 July 2026 unless proclaimed to come into operation sooner. This is to enable the necessary systems to be developed to support the measures in the Bill.
The Government has also indicated its intention for the VBA to be replaced by a new regulator, named the Building and Plumbing Commission. While the Bill does not establish that new Commission, it is clear the Government’s intention is to impose stronger regulation on the domestic building industry.
The next year will see a lot of change to the regulation of the Victorian building industry. Stay tuned!
Should you wish to discuss any of the above, please contact Riley Gay on 03 9947 4514 or any member of the Ligeti Partners Team on 03 9947 4500.
