You’ve just moved into your dream home – a place you saved for, hoped for, and imagined for years. But within months, the dream begins to crack – literally. A leaky roof. Warped floorboards. A builder who won’t return your calls. And a system that tells you there’s little it can do unless your builder disappears entirely or becomes insolvent.
For too long, that’s been the reality for many Victorian homeowners in residential buildings under three storeys. But now, that’s about to change.
The Building Legislation Amendment (Buyer Protections) Bill 2025 marks a significant turning point. It replaces a system of frustrating delays and limited insurance with proactive, people-first protections. Here’s how the old regime left homeowners exposed, and how the new reforms are set to transform defect management in Victoria.
The Old Regime: A System Stacked Against Owners
Under the previous framework, Domestic Building Insurance (DBI) was required by law to be taken out for work valued at more than $16,000, and it was only triggered in limited circumstances, namely, if the builder died, went bankrupt, or disappeared. Even then, the insurance only provided cover for structural defects up to six years and non-structural defects for two years. Coverage for non-completion was capped at 20% of the contract price, and the maximum payout under the scheme was $300,000. For many homeowners, this meant that unless their builder was entirely out of the picture, they were left footing the bill for defective or incomplete work.
Statutory warranties did exist under the Building Act 1993 and the Domestic Building Contracts Act 1995. Builders were required to carry out work with due care and skill, use appropriate materials, and comply with plans and specifications. However, enforcing these rights was another story. Homeowners were often forced to initiate costly and time-consuming proceedings at VCAT or in the courts, something many found too daunting or expensive to pursue.
Most building contracts also included a short defect liability period, typically around 12 months after practical completion. During this time, builders were obliged to return and fix any identified issues. But once that period expired, owners were left with few avenues to demand repairs.
Regulatory oversight was also limited. The Victorian Building Authority (VBA) could only issue directions to fix before an occupancy permit was granted. After the permit was issued and residents had moved in, there was no robust enforcement mechanism to deal with post-sale defects. Dispute resolution through Domestic Building Dispute Resolution Victoria (DBDRV) was available, but it was often slow, and outcomes were far from guaranteed.
The New Regime: A System That Puts Owners First
Under the 2025 reforms, the government has introduced a first-resort statutory insurance scheme (First Resort Domestic Building Warranty) that no longer requires homeowners to prove that their builder has become insolvent or disappeared, for building contracts over $20,000. Consumers are automatically covered by the first resort domestic building warranty when they enter into an insurable domestic building contract – even if the builder hasn’t paid the insurance premium.
Residential Buildings under Three Storeys
For residential buildings under three storeys, owners can now make claims directly for incomplete, defective, or non-compliant work. Insurance coverage remains in place for six years for structural defects and two years for non-structural ones, while the $300,000 cap seems to be intact. The scheme will be administered by the new Building and Plumbing Commission, which will eventually replace the VBA and consolidate insurance, regulation, and dispute resolution into one central body.
Another major change is the introduction of Rectification Orders (ROs). The VBA will now have the power to issue these orders for up to ten years after occupancy. Builders and developers who fail to comply can face serious consequences, including fines, suspension of their registration, or even being blocked from obtaining occupancy permits. This marks a fundamental shift in the balance of power, away from developers who could previously walk away, and toward homeowners seeking real remedies.
The dispute resolution process has also been strengthened. The new Commission (the restructure of the VBA) will provide homeowners with greater support and guidance through the claims process.
Statutory warranties are being retained under the new regime but will now be backed by stronger enforcement mechanisms. Builders who breach these warranties can face penalties even after the property has changed hands. Importantly, serious defects and any Rectification Orders issued may be recorded on the property’s land title, meaning future buyers will be made aware of outstanding issues. This increases transparency and further motivates builders to address problems properly and promptly.
Why This Matters
For homeowners, these changes are more than just legal reforms – they’re a lifeline. They reduce the financial risks associated with defect repairs, give consumers faster and more practical ways to resolve disputes, and send a clear message to the building industry: poor workmanship will no longer be tolerated.
Victoria is now shifting from a reactive system, where owners were left chasing down remedies after problems emerged, to a proactive one that places consumer protection at its core. In doing so, it joins global best practices in residential construction and restores trust in the home-buying process.
The First Resort Domestic Building Warranty will begin from 2026.
A Step Toward a Safer, Fairer Housing Market
For buildings under three storeys, these reforms are a long-overdue fix to a broken system. They empower homeowners, deter misconduct, and bring clarity to a process that has long been plagued by uncertainty.
Because when it comes to your home – your security, your investment, your peace of mind – nothing should be left to chance.
Please reach out to Warlows Legal for assistance today, using the contact information below.
