The Victorian Parliament passed the Building Legislation Amendment (Buyer Protections) Bill 2025 (Vic) (Bill) on 3 June 2025 with the reforms set to commence on 1 July 2026 or on a later date to be proclaimed. These reforms introduce significant changes which are aimed at improving protections for property buyers and increasing accountability for developers and builders in Victoria’s residential construction sector.
Developer Bond Scheme
A developer bond scheme for residential buildings over three storeys will be introduced. Under this scheme, developers will be required to lodge a bond equal to 2% of the total build cost, which will be held for around two years following the issue of the occupancy permit. The purpose of the bond is to provide security for defect rectification where current insurance schemes do not protect owners in taller apartment buildings.
Additionally, purchasers may be entitled to rescind their contracts and recover deposits as well as penalty interest if an occupancy permit is not issued or if the developer fails to lodge the required bond.
A New Insurance Scheme
The Bill also expands the scope of Domestic Building Insurance (DBI) in Victoria which previously was limited to cases in the event a builder "died, became insolvent, disappeared". Under the new framework, DBI will become the primary means of redress for defective construction in residential buildings up to three storeys and will allow owners to claim for losses arising from incomplete, defective, or non-compliant building work. This expansion is a significant change to the insurance landscape and is likely to result in higher insurance premiums for builders and developers as the scope of potential claims increases.
Rectification Orders
Stronger rectification powers through the establishment of the Building and Plumbing Commission (BPC) will also be introduced through the Bill. The BPC will have authority to issue rectification orders against builders and developers during construction and for up to ten years after completion. These orders may require the completion of building works, rectification of non-compliant or defective work, or the repair of damage caused by construction.
Failure to comply with a rectification order may result in the refusal to issue an occupancy permit, the recording of restrictions on the property’s title, or a refusal to register a plan of subdivision for buildings over three storeys. The enforcement of rectification orders is also designed to prevent off-the-plan sales from proceeding until defects are rectified.
Impact
These reforms are intended to increase accountability for developers and builders while giving property buyers and owners corporations clearer avenues to address defects and non-compliant work. It is anticipated that the changes will raise costs for developers through bond requirements and higher insurance premiums, though it is also touted to be significant step towards improving buyer protections and reinforcing the need for quality and compliance in Victoria’s construction industry.
Further updates will follow as reforms are announced.