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A Profound Recasting of the Dispute Landscape

The Building Legislation Amendment (Buyer Protections) Bill 2025 (Vic) (“the Bill“) heralds the most significant realignment of Victoria’s building dispute resolution framework since the enactment of the Building Act 1993 (Vic) (“the Building Act”).

At the heart of the Bill lies the newly created Rectification Order (“RO”) regime, established under Part 5A, sections 75B to 75S of the Bill. These reforms are set to reprofile the entire litigation and dispute resolution fabric of the Victorian domestic building sector.

In effect, the VBA assumes a central role traditionally held by plaintiff litigators and owners corporation representatives. The Authority becomes, in a metaphorical sense, the “plaintiff litigator” in defect enforcement, displacing the need for many private claims.

This article explores the impacts of the RO powers on the Victorian legal profession, the building industry, dispute resolution bodies, and the courts.

The Core Reform: Rectification Orders Explained

Under section 75B of the Bill, the Victorian Building Authority (“VBA”) is empowered to issue Ros against:

• The person who carried out the building work (typically the builder or owner-builder); and or
• The developer of a residential apartment building.

An RO can be issued where building work is incomplete, defective, or non-compliant, provided no more than 10 years have passed since the occupancy permit, certificate of final inspection, or practical completion. Notably, VCAT can extend this limitation under section 75C of the Bill.

The “wingspan” of rectifiable damage includes structural failures, water ingress, termite infestation, and consequential property damage such as cracked driveways (section 75E(1)(a)(iii), (4)(d).

Critically, no new building permit is required to carry out rectification work under an RO (section 75E(6)), representing a departure from traditional regulatory controls.

Broadening the Enforcement Spectrum: Bandwidth and Reach of the RO Powers

The RO powers provide the VBA with a broad enforcement mechanism that bypasses traditional private litigation. The breadth of matters that can be captured including unfinished work, serious defects, and consequential damage ensures that a significant volume of disputes will now shift away from courts and tribunals and instead be dealt with through administrative enforcement by the regulator.

Moreover, joint and several liability under section 75B(4) ensures that builders and developers are equally responsible, regardless of relative fault a marked departure from the proportionate liability regime under the Wrongs Act 1958 (Vic).

In this way, the VBA assumes a central enforcement role in resolving disputes that were previously subject to multi-party private litigation.

Reallocation of Dispute Work: Migration Away from Traditional Litigation

Displacement of Private Plaintiff Legal Proceedings

Historically, body corporates and homeowners pursued defect claims through litigation in the County Court, Supreme Court, or proceedings at VCAT. Under the RO regime, many disputes, regardless of value, may now be addressed through VBA enforcement without the need to issue proceedings.

This represents a material shift:

• Domestic building disputes that would otherwise populate court and tribunal dockets will often be addressed administratively.
• Legal practices specialising in plaintiff-side construction defect litigation may experience a reduction in first-instance instruction flow.

The legislation does not distinguish between high-value and low-value disputes. The determinant is the presence of defective, incomplete, or non-compliant work within the 10-year window.

Second Wave of Litigation

Although traditional defect litigation volumes will decline, new categories of disputes are expected to arise:

• Challenges to the validity and reasonableness of Ros.
• Contestation between multiple RO recipients regarding rectification responsibilities.
• Insurance coverage disputes arising from RO-triggered liability.
• Developer versus builder disputes concerning defect attribution.
• Strata warranty enforcement where developers guarantee builder conduct.

Importantly, the litigation landscape is reoriented, not extinguished. Owners and owners corporations may now commission expert defect reports and submit them to the VBA instead of immediately commencing proceedings.

Emergence of the Second Wave: Contribution and Indemnity Proceedings

However, a second wave of litigation is foreseeable. Builders and developers compelled to undertake rectification at their own cost are likely to initiate contribution and indemnity claims against:

• Architects
• Engineers
• Building surveyors
• Subcontractors
• Product suppliers

The litigation pathway transitions from plaintiff-driven defect claims to downstream contribution disputes post-rectification. Consequently, while first-instance claims against builders may decrease, secondary litigation between construction professionals is likely to rise.

Will It Take Pressure Off the Courts and VCAT?

Reduced First-Instance Litigation

The RO regime is likely to reduce the number of direct defect claims filed at VCAT and in the courts. However, the central adjudicative forum remains VCAT:

• Parties seeking review of ROs must apply to VCAT (section 75S).
• VBA applications to extend the 10-year limitation period must be made to VCAT (section 75C).

Thus, while traditional proceedings may reduce, VCAT will remain pivotal to the overall dispute framework, especially for RO review and limitation extension applications.

Extension of the 10-Year Period – 10 years plus perpetuity? 

The 10-year limitation period under section 75B(3) is not absolute. Under section 75C, VCAT may grant an extension in appropriate circumstances.

If extensions become common, several consequences may arise:

• Builders who completed works more than a decade ago may face renewed rectification obligations.
• Building surveyors, engineers, and certifiers who have since retired or ceased trading may become subject to new claims as uninsured men of straw defendants 
• Professional indemnity insurance policies may no longer respond, particularly where run-off periods have expired and annual claims made polices have lapsed.
• The capacity of small or dissolved firms to defend or meet liabilities is likely to be minimal, increasing the risk of sectoral instability.

Many original parties will have retired, deregistered, or entered insolvency, leaving remaining parties to absorb liabilities across the contractual chain, whether 10 to 15 years down the line any original contracting party will still be in existence is a scenario that is yet to play out as there is an assumption of the ‘defendant in 10 years plus perpetuity’.

The “No Man’s Land” of Unpermitted Rectification Work

Under section 75E(6), rectification work performed under an RO does not require a new building permit.

While this expedites defect remediation, it also reduces the traditional regulatory oversight associated with new construction:

• Work may proceed without staged inspections or occupancy permit issuance.
• There may be limited documentation verifying the standard or completion of rectification.
• Purchasers, insurers, and future stakeholders may encounter difficulties assessing the quality or regulatory compliance of rectified works.

This creates a regulatory gap where rectification occurs outside the conventional permit regime, raising the possibility of lower transparency and inconsistent quality assurance.

Conclusion: A Measured Reprofiling of the Dispute and Enforcement Landscape

The introduction of Rectification Orders represents a significant repositioning of dispute management in Victoria’s domestic building sector.

• Primary Enforcement Role: The VBA assumes a primary enforcement role and, metaphorically, becomes the “plaintiff litigator.”
• Contraction of Private Litigation: Traditional private litigation pathways will contract but not vanish.
• Emergence of Secondary Disputes: A two-tiered litigation environment will emerge, involving VBA-led enforcement followed by downstream contribution claims.
• VCAT as Central Forum: VCAT will remain pivotal, particularly for review and limitation extension proceedings.
• Professional Risk Adjustment: The professional services and insurance markets will need to adjust to accommodate longer-tail risks.

Overall, while the reforms offer the potential to enhance construction quality and consumer protection, they introduce new structural challenges that will require ongoing regulatory oversight, sectoral monitoring, and possible future legislative refinement.

The success of the Rectification Order framework will ultimately depend on pragmatic implementation, robust resourcing, and the market’s adaptive capacity.

Disclaimer 

The information provided in this article is for general informational purposes only. It does not constitute legal advice. For specific legal advice, please contact us on the above contact details.

Image Acknowledgements:

The digital renders used in this article were developed collaboratively by Lovegrove & Cotton and ChatGPT. The photo images that are not the digital renders are stock images sourced from Shutterstock.