Articles

The Commercial Response

The developer bond is therefore likely to influence far more than the provision of financial security.

It has the potential to reshape contractual risk allocation, procurement strategies, post-completion security arrangements and project financing throughout Victoria’s residential apartment sector.

Builders should not assume that existing contractual arrangements will remain commercially appropriate under the new legislative framework. 

Developers may seek to renegotiate contractual risk allocation, strengthen indemnity provisions, extend security arrangements and require more comprehensive quality assurance obligations.

Equally, builders should critically examine whether their own subcontract agreements adequately protect them if rectification work is ultimately found to arise from the acts or omissions of subcontractors, consultants or suppliers. 

Rights of indemnity, contractual recovery provisions and insurance arrangements may all warrant careful review before the reforms become fully operational.

For many businesses, the legislation presents an opportunity to revisit procurement strategies, contract administration procedures and project governance before disputes arise.

Expanded Rectification Powers

The expanded rectification regime represents one of the most significant practical changes introduced by the reforms.

Historically, many significant defect disputes ultimately proceeded through courts or tribunals where liability was determined after detailed expert evidence and forensic examination of the facts.

The reforms place substantially greater emphasis upon statutory rectification at a much earlier stage, prior to any litigation.

Receipt of a rectification order may require a builder to promptly investigate the alleged defects, preserve evidence, engage technical experts and determine an appropriate commercial response while responsibility remains contested.

That response may include undertaking rectification work, obtaining independent expert advice, pursuing contractual rights against subcontractors or suppliers, or challenging aspects of the regulator’s conclusions where there are proper grounds to do so.

Importantly, these commercial and operational decisions may need to be made long before legal liability has been finally determined.

The cost of expert investigations, management time, disruption to current projects and the diversion of supervisory resources may itself become significant, irrespective of the ultimate legal outcome.

Builders who have maintained comprehensive project records and implemented disciplined quality assurance systems are likely to be better placed to respond efficiently and effectively under the new regime.

Reviewing Existing Business Practices

Although the reforms will commence progressively (with developer bonds due to commence in about July 2027), industry participants should not wait until every provision is operational before reviewing their business practices.

Builders should consider whether their existing contracts adequately allocate responsibility throughout the contractual chain and whether subcontract agreements provide effective rights of recovery where defective work is attributable to others.

Quality assurance systems should also be reviewed.

Inspection procedures, hold points, photographic records, document retention practices, product certification records and site reporting protocols may all assume greater importance under the new regulatory environment.

Businesses should also consider whether personnel responsible for project delivery have appropriate systems for documenting construction decisions, recording compliance with Performance Solutions and preserving contemporaneous evidence capable of demonstrating compliance with the National Construction Code.  

Preparing for the reforms is likely to prove considerably less expensive than attempting to reconstruct project history after allegations of defective work have emerged.

Looking Beyond Compliance

Perhaps the most important lesson arising from the reforms is that build quality is increasingly becoming a commercial risk management strategy rather than simply a regulatory obligation.

Businesses that consistently deliver quality work, maintain disciplined quality assurance systems, preserve comprehensive project records and administer contracts effectively are likely to be substantially better positioned than those that continue to regard compliance as little more than a statutory requirement, or a “box ticking” exercise.

In many respects, the legislation rewards those businesses that already demonstrate good construction practices.

For others, however, it may serve as a catalyst for significant changes to contract administration, procurement, supervision and project governance.

Conclusion

The Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) represents far more than another series of amendments to Victoria’s building legislation.

It reflects a fundamental shift in regulatory philosophy towards earlier intervention, stronger regulatory oversight and greater accountability throughout the residential construction sector.

Whether those policy objectives ultimately achieve their intended outcomes remains to be seen. Their success will depend not only upon the legislation itself but also upon the resources available to the regulator and the practical manner in which the new powers are exercised.

What is already clear, however, is that the reforms alter the commercial environment within which builders operate.

Builders who review their contractual arrangements, strengthen quality assurance systems, improve project documentation and refine their contract administration procedures before the reforms are fully implemented are likely to be considerably better positioned than those who wait until the first rectification order is issued or the first developer bond is called upon.

As has always been the case in construction, the most effective dispute resolution strategy is to avoid the dispute arising in the first place.

Under Victoria’s new regulatory regime, disciplined project management, comprehensive documentation and sound contractual risk allocation are likely to become more valuable than ever before.

This article was settled by Justin Cotton

Justin Cotton is a Principal of Lovegrove & Cotton Construction and Planning Lawyers and heads the firm’s New Zealand practice. With more than two decades’ experience in construction law, he advises builders, developers, and property professionals on construction contracts, regulatory compliance, dispute resolution and risk management across Australia and New Zealand.

For enquires contact Tsigereda Lovegrove who is a construction and planning lawyer with Lovegrove & Cotton Construction and Planning Lawyers. She advises builders, developers, building surveyors and property owners on construction law, regulatory compliance, planning, contractual risk allocation and dispute resolution. Tsigereda regularly advises industry participants on navigating legislative reform, managing regulatory risk and responding to complex building disputes.

Lovegrove & Cotton has practised exclusively in construction, planning and building law for more than three decades. The firm advises builders, developers, building surveyors, engineers, architects, owners corporations and government authorities on regulatory reform, contract drafting, project risk management and complex construction disputes.

Builders who are reviewing their contracts, quality assurance systems or risk management practices in light of Victoria’s building reforms are welcome to contact the authors.

Disclaimer

This article represents the personal views of the author. It is intended solely for general informational and educational purposes and does not constitute legal advice. Readers should obtain independent professional advice before acting upon any matter discussed in this article. The views expressed are not necessarily those of any institution, organisation, university, chamber, regulator, government agency or professional body with which the author is associated.

Image Acknowledgements:

The digital renders used in this article were developed collaboratively by Lovegrove & Cotton and ChatGPT