Are you a new homeowner in a residential complex over three storeys high? Do you worry that your builder may have cut corners – leaving you with defects, stress, and little recourse to make things right?
This time, the government has your back. With new legislation, you’re no longer left powerless. No longer will you move into your new apartment only to be met with cracks in the walls, leaking balconies, or silence when you ask for help.
These laws were made with you in mind.
Government Taking Action
The Victorian Government is introducing sweeping reforms to better protect homebuyers and apartment owners through the Building Legislation Amendment (Buyer Protections) Bill 2025. This Bill proposes major changes to the Building Act 1993 (Vic), the Domestic Building Contracts Act 1995 (Vic), and other legislation, with the goal of boosting consumer protections and holding builders and developers more accountable. It’s one of the biggest overhauls in years – and here’s what you need to know.
Current Landscape: Construction Industry Challenges and Defects Crisis
According to the Centre for International Economics (CIE), Victoria has some of the highest rates of defective building work in the country, averaging 1.04 defects per dwelling. The situation is even worse for apartments, which record the highest defect rate nationally at 2.13 defects per unit. While the full financial toll is difficult to measure, the CIE estimates that building defects cost Victoria around $675 million each year (Building Statement – Strengthening Victoria’s Building System (Department of Transport and Planning, released 3 March 2025, page 3).
Gaps in Consumer Protection
Historically, owners of apartments in Victorian buildings over three storeys were left with little financial protection when defects emerged. Below are the limited avenues of recourse that were available to them:
Limited Insurance Cover
3 Storeys or below:
Builders of low-rise apartments (three storeys or fewer) are required to obtain domestic building insurance before commencing work, which provides some protection. This insurance covers non-completion and breaches of statutory warranties under the Domestic Building Contracts Act 1995 (Vic). It provides capped indemnity of $300,000 (including legal costs), applies for 2 years for non-structural defects and 6 years for structural defects, and extends to future owners.
However, this is also known as the insurance of last resort. To access insurance, one of four things must happen: The builder dies, the builder goes bankrupt, the builder disappears, or the owners go to VCAT or court, win a decision, and the builder still refuses to comply.
Only then does the DBI “kick in.”
Before DBI becomes available, homeowners may try to resolve the issue through direct negotiation with the builder, lodging a complaint through any one of the following dispute resolution or regulatory bodies: the VBA, CAV, DBDRV or VCAT.
However, none of these options guarantee a fix or compensation – especially if the builder has no money, refuses to cooperate, or disappears. That is why many see the current system as flawed: you only get insurance help after going through a lengthy and costly process, and by then, the damage is often done.
Above 3 storeys:
Whilst residential apartments over three storeys are required to have insurance through their owners corporation, they are not covered by domestic building insurance (DBI). Unlike DBI, owners corporation insurance does not cover losses from incomplete or defective building work, or breaches of statutory warranties. This exclusion creates a clear gap in consumer protection. The lack of DBI for high-rise apartments has been heavily criticised, especially following high-profile defect cases, and has prompted calls for reform.
Contractual Defect Liability Periods
Most sale contracts included a short defect liability period (often 3-12 months post-settlement), during which the builder or developer was obliged to fix identified defects. After this period, owners had little leverage to compel rectification.
Statutory Warranties
Owners could rely on implied statutory warranties under the Domestic Building Contracts Act 1995, which required work to be done with due care and skill and in accordance with plans and specifications. These warranties could be enforced by successive owners, including owners corporations, for common property defects.
However, enforcing these warranties typically required initiating legal proceedings, which can be costly, slow, and uncertain in outcome.
Dispute Resolution and Legal Action
Owners could lodge complaints with the Victorian Building Authority (VBA), or seek dispute resolution through Domestic Building Dispute Resolution Victoria (DBDRV), the Victorian Civil and Administrative Tribunal (VCAT), or the courts. These processes were often lengthy and costly, and the VBA’s enforcement powers were limited in practice. Building surveyors could issue directions to fix defects, but only before an occupancy permit or certificate of final inspection was granted (as per LU Simon Builders Pty Ltd v Victorian Building Authority [2017] VSC 805). After that point, there were few effective mechanisms to compel developers to rectify defects post-sale.
Owners Corporation Actions
Owners corporations could sue builders or developers for defects in common property, but only after passing a special resolution among lot owners. Additionally, for mixed-use buildings, recourse was further limited if the building included commercial premises, as statutory protections did not apply to non-residential components.
The need to fix this system is coming to a critical juncture.
Background of Bill
This reform has been a long time coming. The groundwork began in 2019, when the Victorian Cladding Taskforce recommended a full-scale review of the state’s building system. In response, the government established the Building Reform Expert Panel, which spent several years investigating the sector and producing expert reports throughout 2023.
These findings have now shaped the 2025 Amendment Bill, which aims to strengthen buyer protections, crack down on substandard building practices, and streamline dispute resolution processes. Contained in this legislation is what the Allan Government announced in October 2024, which is a new watchdog – the Building and Plumbing Commission – which will eventually replace the Victorian Building Authority (VBA). While the Commission has not yet been legislated, the Bill already hands new powers to the VBA as a transitional step.
A Snapshot of Changes for Homeowners
Before we delve into one of the most important reforms this Bill introduces, we outline several other changes aimed at giving homeowners stronger protections and more practical pathways for resolving issues with domestic building work. Here’s a breakdown of the key changes:
Domestic Building Insurance for residential buildings under 3 storeys
Domestic Building Insurance (DBI) will become insurance of first resort for residential buildings up to three storeys. This means homeowners can access support, such as rectification works or compensation, as soon as they suffer loss due to defective or incomplete work, without needing to wait for a builder to disappear, go bust, or ignore a tribunal order – as is currently the case.
Read more about this reform in our other article here.
VBA Takes Over Building Dispute Resolution
The Bill introduces an integrated regulatory model under which the Victorian Building Authority (VBA) will assume responsibility for resolving domestic building disputes – functions currently managed by Consumer Affairs Victoria and Domestic Building Dispute Resolution Victoria (DBDRV) – as well as providing domestic building insurance. The VBA, which will be renamed the Building and Plumbing Commission, is intended to operate as a “one-stop shop” for domestic building regulation. This centralisation aims to streamline dispute resolution, reduce consumer confusion, and improve regulatory efficiency.
Read more about this reform in our other article here.
10-Year Rectification Power
Currently, the regulator can only direct builders to fix substandard work before occupants move in. The new powers will allow rectification orders to be issued for up to 10 years after the issue of the occupancy permit. The VBA will also gain new powers to order builders to fix non-compliant, incomplete or defective work for up to 10 years after the work was done. This significantly expands the timeframe in which action can be taken, which is an important protection for buyers.
Key Reform: Developer Bonds for Apartment Buildings
For the first time, developers of residential buildings over three storeys will need to lodge a 3% bond (of the overall cost of the works) with the VBA before an occupancy permit can be issued. This bond acts as security for fixing any building defects identified after completion. It will be held by the VBA for two years post-occupancy.
1. Real Protection for Buyers
Traditionally, Victorian apartment buyers have had limited recourse if defects surfaced after moving in. Once the short defect liability period in the contract expired, owners were often left to deal with costly repairs themselves. The new bond requirement changes the game by guaranteeing that money is set aside to fix problems, giving buyers genuine financial protection.
2. Accountability for Developers
Developers now have a strong incentive to deliver quality work and promptly address any defects. If they fail to do so, the bond can be used to pay for necessary repairs. This accountability helps lift building standards across the industry.
3. Power to Buyers
Buyers of off-the-plan apartments gain a significant new right: if a developer fails to pay the required bond, or underpays it, buyers can rescind (cancel) their contracts. This empowers buyers and ensures developers cannot cut corners or avoid their responsibilities (note this specific recourse is only available to off-the-plan buyers).
4. Bridging the Gap with Other States
Unlike New South Wales, where developers face broader post-sale obligations, Victoria has historically lagged behind in protecting apartment buyers. This reform begins to close that gap, aligning Victoria with best practices and offering much-needed peace of mind to new homeowners.
5. A Step Toward Long-Term Insurance
Perhaps most excitingly, the developer bond is seen as a stepping stone toward a 10-year building insurance product for high-rise apartments, labelled Decennial Liability Insurance, DLI. This would provide even longer-term protection, similar to what is available in other countries, and further strengthen consumer confidence in the apartment market.
How Will Defect Claims Be Made?
The process for accessing bond funds is carefully structured to ensure fairness and accountability. Here’s a simplified breakdown:
Appointment of Assessor
- After the first owners corporation meeting, the developer must appoint a qualified building assessor to inspect the property. If they don’t, the VBA can step in.
Preliminary Inspection Report
- Within 15-18 months of occupancy, the assessor prepares a report identifying any defects.
Final Inspection Report
- A follow-up report must be done within 21-24 months, reporting on defects and their rectification status.
Bond Claim
- If defects are not rectified, the owners corporation can claim against the bond to fund repairs. The VBA oversees this process, ensuring impartiality and accountability
VBA Decision
- The VBA makes a final determination on the bond claim.
Disputes over the total cost of building works (used to calculate the 3% bond) can be taken to the Building Appeals Board.
When Will These Reforms Start?
Unless it’s brought in earlier, the Bill will officially take effect on 1 July 2026. However, key elements, such as the developer bond scheme and the VBA’s expanded powers, are expected to commence by the end of 2025.
Why This Reform Is Good for Victoria
Closes a Major Protection Gap
- For the first time, owners in high-rise apartments have a dedicated financial remedy for post-completion defects, similar to protections in NSW but tailored to Victoria’s needs.
Incentivises Quality and Accountability
- Developers are financially motivated to ensure quality construction and timely defect rectification, or risk losing the bond and facing regulatory penalties.
Restores Consumer Confidence
- By providing a clear, accessible pathway for defect remediation, the scheme addresses a root cause of buyer anxiety and supports greater trust in the apartment market.
Supports Industry Standards
- The reform is part of a broader package to strengthen oversight, streamline dispute resolution, and improve builder qualifications – helping the industry deliver safer, higher-quality homes as Victoria aims to build 800,000 new homes over the next decade.
Lays Groundwork for Long-Term Insurance
- The bond is an interim step toward a proposed 10-year decennial liability insurance scheme, which would bring Victorian protections in line with international best practice.
Final Thoughts
The Building Legislation Amendment (Buyer Protections) Bill 2025 marks a turning point for consumer rights in Victoria’s building industry. Whether you’re buying a family home or investing in an apartment, the reforms promise greater peace of mind, easier access to insurance, and new ways to ensure developers and builders deliver what they promise.
When it comes to home, nothing is more important. This is why this legislation is more than just another statute passed by the Victorian Parliament – it’s a promise. A promise that your home will be safe, built to standard, and that if something goes wrong, you will not be left to fight alone.
Your home should bring comfort, not concern. This reform is a step toward restoring trust, security, and fairness in the building industry – so that every Victorian homeowner can finally breathe a little easier.
Please get in contact with Warlows Legal today using the contact information below for more assistance.
