The Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) introduces the most significant reforms to Victoria’s residential building regulatory framework since the commencement of the Building Act 1993 (Vic).

Much of the public commentary surrounding the reforms has understandably focused on consumer protection.

While that focus is justified, it tells only part of the story.

From the perspective of those who procure and construct residential building projects, the legislation represents a fundamental redistribution of legal, commercial and financial risk throughout Victoria’s residential construction industry. The reforms have the potential to influence procurement, contract drafting, project supervision, quality assurance, insurance, defect management and dispute resolution long before any claim reaches a court or tribunal.

For builders in particular, the reforms warrant careful attention. They alter not only regulatory obligations but also the commercial allocation of risk throughout the life of a project, from contract negotiation and project delivery to post-completion defect management. Businesses that continue to operate under contractual arrangements developed for the previous regulatory environment may find that those arrangements no longer provide the level of protection they once did.

A Shift in Regulatory Philosophy

Historically, significant building defects frequently evolved into complex multi-party litigation. By the time proceedings commenced, developers, builders, consultants, subcontractors, suppliers and insurers were often involved. Expert evidence was required across multiple disciplines, responsibility was vigorously contested and proceedings commonly continued for years before liability was finally determined.  Those disputes frequently consumed substantial legal costs, management time and commercial resources.

The reforms signal a significant shift in regulatory philosophy.

Rather than relying primarily upon litigation after defects have materialised, the legislation seeks to intervene earlier through expanded regulatory powers, enhanced oversight, first-resort domestic building insurance, developer bonds and significantly strengthened statutory rectification powers.

Whether these reforms ultimately reduce litigation remains uncertain. Achieving that objective will require substantial regulatory resources, technical expertise and sustained administrative capability. Regardless of whether litigation declines, however, the reforms are likely to change commercial behaviour throughout Victoria’s residential construction industry.

Builders should therefore regard the legislation not merely as another regulatory reform but as a development that has the potential to alter how projects are managed from commencement through to final completion and beyond.

Earlier Regulatory Intervention

Perhaps the most significant practical consequence of the reforms is that commercial decisions may need to be made much earlier than has traditionally been the case.

Receipt of a rectification order may require a builder to immediately investigate alleged defects, preserve evidence, engage technical experts, respond to the regulator and divert supervisory and trade resources from current projects while the legal merits of the allegation remain unresolved.

Those commercial costs may be incurred well before a court or tribunal has determined whether defective building work actually exists.

The reforms therefore move the practical burden of defect management forward in time.

Instead of responding to litigation after liability has crystallised, builders may increasingly find themselves responding to regulatory investigations while technical responsibility remains disputed.

This shift has important commercial implications.

Management resources may be diverted from current projects. 

Cash flow may be affected by investigation costs, expert fees and rectification work. 

Relationships with developers, subcontractors and consultants may come under pressure while responsibility for the alleged defects remains uncertain.

The commercial consequences of responding to a rectification order may therefore extend well beyond the cost of carrying out the rectification work itself.

Documentation as Risk Management

The reforms also reinforce the importance of comprehensive project documentation.

Inspection records, quality assurance documentation, photographic records, product certifications, subcontractor records and contemporaneous site notes may become critical in demonstrating compliance with the National Construction Code or defending the appropriateness of construction methodologies adopted during construction.

Where Performance Solutions or innovative construction methodologies have been adopted, builders may also need to justify those decisions at a much earlier stage than has traditionally occurred.

In practical terms, documentation may become almost as important as construction itself.  

Builders should also review their contract administration systems.

Subcontract agreements, consultant appointments, inspection hold points, quality assurance procedures, record retention policies and contractual rights of recovery should all be examined to ensure that responsibility for defective work can be effectively identified and, where appropriate, passed down the contractual chain.  Businesses that invest in disciplined project administration are likely to find themselves in a considerably stronger position than those that continue to rely upon informal site practices and incomplete records.

First-Resort Domestic Building Insurance

One of the most significant reforms is the introduction of first-resort domestic building insurance.

Historically, many homeowners could only access domestic building insurance where the builder had died, disappeared or become insolvent.

The new regime represents a significant policy shift by providing eligible homeowners with much earlier access to “DBI” insurance protection.

For builders, however, the implications extend well beyond the insurance itself.

Earlier insurer involvement can be expected to influence how alleged defects are investigated, documented and resolved. 

Builders who maintain comprehensive project records and robust quality assurance systems are likely to be significantly better placed when responding to insurer enquiries, regulatory investigations and defect allegations than those whose documentation is incomplete or inconsistent.

The reforms therefore reinforce an important commercial reality.  Quality assurance is no longer simply a matter of good construction practice. Increasingly, it becomes a critical component of commercial risk management.

Developer Bonds and the Allocation of Commercial Risk

The introduction of the “developer bond” may prove to have consequences extending well beyond the provision of financial security for the benefit of consumers.

A bond equivalent to 2 per cent of total build cost represents a substantial amount of capital that may remain committed after completion of a residential apartment project. 

For larger developments, the opportunity cost of that capital, together with the cost of maintaining bank guarantees or other approved security, is likely to be significant.

Developers might therefore reconsider how post-completion risk is allocated under their construction contracts.

Rather than accepting the commercial exposure created by the developer bond, developers may seek to negotiate longer defects liability periods, retain performance security for extended periods and strengthen contractual rights of recourse against builders should rectification become necessary.

They may also seek more comprehensive quality assurance obligations, expanded inspection regimes and greater contractual rights to require the production of project records and supporting documentation.

These changes are unlikely to be commercially neutral.

Longer defects liability periods, extended retention of bank guarantees and increased performance security requirements have the potential to affect contractors’ cash flow, working capital and tender pricing throughout Victoria’s residential apartment sector.

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.

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.

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