The Building and Plumbing Commission (BPC) officially commenced on 1 July 2025, bringing together the functions of the Victorian Building Authority (VBA), Domestic Building Dispute Resolution Victoria (DBDRV), and the domestic building insurance role of the Victorian Managed Insurance Authority (VMIA). This consolidation marks the first time that regulation, dispute resolution, and domestic building insurance have been integrated within a single agency.

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Alongside this structural change, the Victorian Government has introduced significant reforms through the recently enacted Building Legislation Amendment (Buyer Protections) Act 2025. This legislation represents a major overhaul of the regulatory framework governing Victoria’s building industry with key parts intended to commence during 2025 and 2026. It’s important to the State government is currently consulting with industry to develop new regulations which will underpin these changes and provide more detail on their implementation.

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Aimed at enhancing consumer protections, streamlining dispute resolution, and improving the quality of building work, the Act brings important changes for all stakeholders. This article provides an in-depth look at these key reforms and their implications across the building sector.

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New statutory insurance scheme for domestic buildings

One of the most notable changes is the establishment of a new statutory insurance scheme administered by the BPC for domestic buildings up to three stories. This scheme will:

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• Provide assistance to building owners for incomplete, defective, or non-compliant domestic building work, replacing the more limited qualifications for triggering insurance such as death, disappearance, or insolvency of the builder.

• Allow for rectification of defective work, completion of unfinished projects, or payment of compensation.

• Introduce an "optional additional cover" for builders and owners, although specifics are yet to be defined.

• Increase the threshold for warranty insurance from $16,000 to $20,000, impacting both builders and owner builders’ insurance requirements.

• The building owner can make a claim against the statutory DBI irrespective of having made a claim against anyone else. However; if the building owner has not made any reasonable attempt to resolve their dispute with the builder, the BPC can require the parties to participate in a compulsory dispute resolution process. This must occur prior to the BPC issuing a rectification order.

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Enhanced authority for rectification orders

Once these changes come into effect, the BPC  will be empowered to issue rectification orders, replacing the limited "directions to fix" previously available. Key aspects include:

• The ability to issue orders for incomplete, non-compliant, or defective work.
• Joint liability for builders and developers in high-rise projects.
• Mandatory reporting of serious defects to the titles office, preventing subdivision approvals until rectification is completed.
• Significant penalties for non-compliance, with fines of approximately $100,000 for an individual, or $500,000 for corporate entities.

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Introduction of developer bonds for high-rise buildings

As a pre-cursor to the development and implementation of a decennial liability insurance market for high rise buildings, the BPC will introduce a developer bond to ensure accountability in high-rise developments (residential apartment buildings with a rise in storeys of more than 3). This requires developers to secure financial guarantees before applying for occupancy permits. Key features will include:

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• A bond amounting to 2% of the total build cost, which can be in the form of a bank guarantee or insurer-issued bond. The bond will be held by the BPC for two years after an occupancy permit is issued.

• Strict penalties for non-compliance, including fines for misrepresentation of bond issuance.

• The ability for owners to rescind contracts if developers fail to secure the required bond.

• Claims can be made upon this bond for the cost of repairing defective works; and any other purpose agreed between the developer and the owners corporation; and to pay the building assessor or any other person undertaking the functions under the Act.

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Stricter regulations for occupancy permits

The Act imposes new regulations on the issuance of occupancy permits for high-rise buildings four storey and above, ensuring that no occupancy permit can be issued if a developer bond is not in place or if there are outstanding rectification orders. Developers will also be required to notify the BPC of their intention to apply for an occupancy permit 6-12 months before an application is submitted, allowing the BPC time to undertake an inspection. If a serious defect prompts the BPC to issue a rectification order, the developer will be unable to apply for the occupancy permit, register subdivision plans, or complete off the plan sales until the order is complied with.

This change aims to protect consumers from purchasing apartments in buildings with unresolved defects.

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Implications for stakeholders

The changes introduced by the Building Legislation Amendment (Buyer Protections) Act 2025 have far-reaching implications for various stakeholders in the building industry:

• Consumers: Enhanced protections and clearer pathways for recourse in the event of disputes or defects in building works.

• Builders and developers: Increased regulatory scrutiny and potential financial implications due to new insurance and bonding requirements.

• Regulatory bodies: The BPC emerges as a more powerful regulator, with expanded authority to enforce compliance and protect consumer interests.

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Conclusion

The Building Legislation Amendment (Buyer Protections) Act 2025 represents a significant shift in the regulatory landscape of Victoria's building industry.  The legislation aims to improve consumer protections and ensure higher standards in building practices, and it also introduces new challenges and responsibilities for builders and developers. As the industry adapts to these changes, stakeholders will need to stay informed and proactive in navigating the evolving regulatory environment. The ultimate impact on construction costs and consumer experiences remains to be seen, but the commitment to enhancing buyer protections is a positive step forward for the industry.

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