Victoria to overhaul the VBA and build a better regulator

Property Law: 23 March 2025

Author: Victoria Agahi - Our People

Big changes are coming to Victoria’s domestic building industry. The state government is laying the groundwork for a stronger, more efficient regulator that prioritises homeowners, streamlines processes and ensures better oversight.

Why is the current system getting the wrecking ball?

A government commissioned review found that the Victorian Building Authority (VBA) wasn’t doing enough to protect homeowners from bad builders and poor-quality construction. Slow processes, weak enforcement and poor customer service left too many cracks in the system.  Instead of patching things-up existing structures, the government has decided to go back to foundations and create a new regulator: the Building and Plumbing Commission (BPC).

What’s changing

On 4 March 2025 the Victorian government introduced the Building Legislation Amendment (Buyer Protections) Bill 2025, the first of five bills aimed at boosting consumer protection.

Under the proposed bill, the VBA will merge with industry bodies such as the Victorian Managed Insurance Authority (DMIA), and Domestic Building Disputes Resolution Victoria (DBDRV) to form one streamlined body. This will roll all key industry functions into one sturdy structure, including:

• Licensing and regulating builders (including disciplinary action and suspension);
• Managing building insurance (so homeowners aren’t left out in the cold);
• Handling disputes (without needing a  hard hat and a lawyer).

By bringing everything under one roof, the goal is a faster, stronger and more homeowner-friendly system.

Homeowner Protections

First Resort Insurance – for buildings up to 3 storeys

The biggest upgrade? “First Resort” insurance to be administered by the VBA only – a game-changer for homeowners.  Based on Queensland’s long standing model, this will allow homeowners to claim insurance without having to sue builders or developers first. 

Here’s what it means:

• Faster compensation for defective or incomplete work;
• Reduced legal cost and stress for homeowners;
• No more court battles before accessing insurance.

Full details (including the quantum of the insurance) are still to be finalised, but the policy is intended to cover domestic building contracts of more than $20,000 for either:

• One home; or
• 2 or more homes where the building is 3 storeys and less

It is proposed to even cover lost deposits – even where the builder has failed to get domestic building insurance – though builders who skip insurance will face hefty penalties – up to 2500 penalty units for a company (currently approximately $494,000).

Builders will also need independent inspectors to assess defects, estimate repair time, and ensure the problems are fixed before home owners have to escalate further. If defects are found, and not rectified, the insurance will start operating without requiring the consumer to go to VCAT. The builder would then be pursued by the regulator for compensation and regulatory action.

It should be noted that this is homeowner insurance – parties to contracts for more than 3 dwellings vendors selling properties off-the-plan, and builders will not have access to this insurance.

New Developer Bond for buildings over 3 storeys

For  larger projects, developers will need to pay a bond (currently proposed to be 3% of the project costs) before getting an occupancy permit. This ensures funds are available to fix defects before new owners move in. 

Failing to comply could mean significant fines, including:-

• 500 (for individuals) or 2500 (for corporations) penalty units if the developer fails  to notify the Authority that it intends to apply for an occupancy permit in the 6 months to 30 days before an occupancy permit application is made;
• 2500 penalty units if the developer fails to arrange the issuance of a bond; plus
• an additional 500 (for individuals) or 2500 (for corporations) penalty units for any person applying for an occupancy permit where the bond has not issued.

To get their bond back, developers must:-

• appoint an independent assessor to inspect the building;
• arrange preliminary and final inspections of the building by the assessor within strict timeframes;
• fix any defects found; and
• pay the costs of the assessor – whether or not the assessor was appointed by the developer.

If a developer fails to comply, the owners corporation can claim the bond to cover repairs (provided the majority of lot entitlements are not still in the developer’s ownership). It should be noted that the bond can also be accessed by:

• The building assessor (only if the developer cannot pay costs due to insolvency, liquidation or if they cannot be located);
• any other person who carried out functions for the residential apartment building.

Amendments to the Sale of Land Act and Subdivision Act

To stop properties from slipping through the cracks to new owners, amendments have also been made to the Sale of Land Act 1962 and Subdivision Act 1988  impacting off-the-plan sales in buildings over 3 storeys. These changes include:

• No early access: Off-the-plan Vendors cannot permit purchasers to take possession of a lot before an occupancy permit issues;
• Stronger exit rights: Buyers can cancel their off-the-plan contract if the vendor has not complied with the requirements of the developer bond scheme.

What is a “developer”

The definition of “developer” has been broadened to capture anyone responsible for coordinating, financing or overseeing construction – not just landowners and builders.

Stronger Oversight and Accountability - Rectification Orders (ROs)

The landscape of Rectification Orders will be shifted to give regulators more power to intervene early, noting that ROs:

• will be able to be issued before a project is finished;
• will apply to both builders and developers;
• can covers serious issues like drainage, structural integrity, water penetration and termite damage; and
• the Titles Office is to be notified of ROs relating to serious defects,  preventing registration of a plan of subdivision for residential apartments until the RO has been complied with and VBA’s costs paid.

Additionally:

• Work to comply with a RO will have to be carried out by a registered building practitioner – but a building permit will not necessarily be required for these works;
• The VBA will be able to recover the costs of administering ROs as a debt.

Additional Measures

Other measures we are seeing introduced, include:

• increased exposure for liability for parties involved in a build - with all respondent parties to a compliance issue to have joint and several liability.  In principle, this could conflict with the proportional liability framework – which could trigger complex disputes between builders, developers and other stakeholders.
• Stopping the issuance of occupancy permits or completion of off-the-plan sales until serious defects are rectified.
• The VBA may get powers to apply to VCAT to extend liability beyond the 10 year gap.
• Rectification Works orders may be issued for work up to 10 years after the permit issued.

What’s next

The second reading of the Act took place on 5 March 2025.  Assuming no major variations pending royal assent, the BPC will officially replace the VBA in the coming months as part of a phased transition.

For now, Victoria’ construction industry is getting a long-overdue renovation.  Lets hope this new foundation holds up!

Support for builders & property owners

For advice on the upcoming changes and other property law queries, contact Victoria Agahi on +61 3 8600 6000 or chat with us online.