Articles

The Building Legislation Amendment (Buyer Protections) Bill 2025 (Vic) (“the Bill”) introduces sweeping changes to Victoria’s building regulatory framework, aimed at strengthening enforcement mechanisms, enhancing consumer protections, and increasing accountability for certain actors such as developers and builders. 

The reforms give the Victorian Building Authority (“VBA”) broader powers, including the power to apply to extend liability limitation periods in certain circumstances, and introduce financial securities such as developer bonds.

While these changes clearly strength consumer safeguards they could introduce unintended consequences, including liability disputes between builders and developers, blurred lines of conflicting jurisdictions between building surveyors and the VBA in terms of enforcement mandates, the potential to increase construction costs, and extended liability exposure beyond the long-standing 10-year cap.

The balance between consumer protection and industry sustainability will ultimately depend on how these reforms are implemented and enforced. This is an attempt at providing a dispassionate analysis of the reforms and in some instances how they may pay out.

Expanded powers for the VBA

Broad authority to issue rectification orders

• Under Section 75B of the Bill, the VBA can now issue rectification orders (ROs) to:

• A person who carried out the work. This would mean the builder and conceivably would mean the owner builder. It could also mean to persons that have carried out the building work illegally i.e. without a building permit.
• Developers of residential apartment buildings. 

There is no doubt that this significantly increases accountability and broadens the enforcement net beyond just builders.

Under section 75B(2) (a) RO can only be issued if the building work is incomplete, noncompliant or defective in circumstances where no more than 10 years have lapsed since the issue of an occupancy permit, the certificate of final inspection or in circumstances where a building permit is not required, then the ‘date of practical completion’. The RO can be issued regardless of whether the building work was carried out under a contract or met the requirements of the Domestic Building Contracts Act 1995(Vic) (“DBCA”).

Pursuant to section 75B(8) of the Bill, the VBA can issue ROs for work that has been commenced pursuant to a building permit, whether or not a certificate of final inspection or occupancy permit has been issued. This captures the ‘work in progress’ paradigm.

Applications may be made to extend the period of time in play for issue of ROs pursuant to section 75C of the Bill, the application has to be made to the Victorian Civil and Administrative Tribunal (“VCAT”) which has the discretion to extend.

Rectification order powers and directives

The respondent can be compelled to complete and rectify non-compliant and defective building work, and the respondent(s) will have to comply with the stipulated period of time.  It is envisioned that there will be tension on the part of the respondents to determine who will bite the bullet as it were and make good the compliance obligation.

The wingspan of the type of building work that can be captured by an RO is not a ‘catch all’ but it is pretty extensive.

Section 75E (1)(a) (iii) stipulates that the mandate of an RO may also require the respondent to rectify any damage caused in carrying out the building work or by the non-compliant or defective building work including:

• drainage impairment; and
• undermining of a fence, retaining wall or boundary structure; and 
• the compromising of the structural integrity of a building, swimming pool or wall; and 
• the cracking, lifting or cratering or a driveway or pathway; and  
• water penetration; and 
• infestation by termites.

RO work has to be carried out by a registered practitioner, but a building permit is not required to carry out the work.

Section 75E(5) provides that a registered builder has to carry out the building work that is the subject of the RO which is predictably prudent. 

There is however a paradox in that section 75E(6) provides that a building permit ‘is not required to carry out building work required by the rectification order’. This is a very interesting development as the rectification work could be significant. 

It has under the traditional regime been illegal for anyone to carry out building work in Victoria without a building permit pursuant to section 16 of the Building Act 1993 (Vic) (“Building Act”). On face value, there would appear to be a conflict here as the carrying out of building work without a building permit under the said section is a very serious statutory offence. The reason for this is that the building permit and the building permit delivery process are designed to protect the consumer by ensuring that work is carried out in accordance with the approved plans and the construction code, that the work comes under the umbrella of the Building Act and its statutory protections.

In circumstances where this firm has been retained to regularise matters when municipal building surveyors (MBS) have issued building orders with respect to non-complaint building work, our practice has always been to agree that a new building surveyor is engaged to approve rectification building works plans, to issue a new building permit and ultimately issue a certificate of final inspection when the building work is completed. The MBS normally require an engineer to certify that the work is fit for purpose also. This approach engenders an outcome that brings the work of the subject of the building permit into the protective umbrella of the legislation.

Conceded MBSs have the power to waiver the building permit requirement when they issued emergency orders, but this is because of an emergency situation i.e. imminent threat to life and limb is in play.

The consequences of this ‘relaxation’ could be multifarious namely absent of building permit:

• There will be no occupancy permit so the 10-year liability cap will not crystalise.
• If it is residential building work it might compromise the home warranty insurance cover that would have been taken out by the original residential builder.
• There may be no such cover for the new work, hence if the builder goes belly up there will be no insurance fall back for the rectification work.
• The registered building practitioner engaged to do the rectification work may be somewhat nervous as the builder will be venturing into a no man’s land of sorts.

From a consumer protection point of view, the carrying out of building work particularly when the RO is issued for non-complying building work is very problematic. Hopefully this consequential impact of this provision will be given more consideration.

Section 75I Authority may require participation in the dispute resolution process

This provision contemplates a dispute resolution process in circumstances where the authority does not think that the building owner has made a reasonable attempt to resolve the dispute, and the Authority can require the owner to participate in the dispute resolution process. The process will no doubt be enunciated by way of regulations in the fullness of time. Question whether there will be a separate and discrete dispute resolution tribunal, will there be mediation and what if a settlement cannot be engineered? 

Notice requirements

Pursuant to section 75N, the authority has to give written notice as soon as practical after the RO is issued to the:

• Developer; and 
• RBS; and 
• The MBS if the MBS is not the Relevant Building Surveyor (RBS); and 
• The owner of the land ; and 
• A prescribed person (if any).

The beginning of an assumption of powers enforcement powers that were traditionally the domain of building surveyors in Victoria and the strengthening of the compliance enforcement regime

A major shift in enforcement power

Traditionally, rectification enforcement was limited to:

• The MBS’ emergency powers under Section 106 of the Building Act.
• The broader enforcement framework under Section 212 of the Building Act, which placed elevated responsibility on municipalities for their rate paying hinterland.
• RBS issuing building notices and orders that often-achieved indifferent results as they lacked real teeth. 
• In the case of private certifiers, if there was non-compliance with a building order, the matter had to be referred to the VBA, and the private certifier was not allowed to have anything further to do with the matter.
• As the majority of the RBSs are private, the system had real limitations from an enforcement perspective. There was also the apprehension that some certifiers were loathe to come down hard on the builder thus ‘diminishing’ the effectiveness of an important statutory power.
• Under any criteria, this is a significant ‘upping of the ante’, and the reforms have real teeth. 
• Having said that, the new powers of the VBA to issue ROs in matters of noncompliance seem to be concurrent and possibly ‘duplicatory’ powers. It will be interesting to see how this plays out to see whether building surveyors who already in some instances are reticent about issuing building orders will become more so. 
• As the RBSs have to be copied into the ROs, it will follow the RBS and the VBA will cooperate and there may be more spirit d’accord.  

The registrar of titles has to be given notice when an RO is issued for a serious defect with respect to residential apartment buildings

Pursuant to section 75Q of the Bill, the VBA has to give the registrar and the RBS a copy of the RO when it is issued pursuant to section 75Q(1) of the Bill. Further once the rectification work has been complied with the VBA must notify the registrar of that outcome. This is a lengthy section and has to be read with great care as it goes into considerable detail.

Review powers

Section 75S articulates the review powers available to those affected by a decision of the VBA with respect to an RO and the associated consequences and implications. There does not appear to be a stay power i.e. a power to stay the RO. Absent such a power, it would appear that the RO respondent will have to comply with the order regardless of the merits of the matter.

Addressing post-occupancy weaknesses

• Previously, after an occupancy permit was issued, the RBS had ambiguous enforcement powers and rarely issued orders unless an immediate safety risk was present, typically only at the behest of a MBS.
• Under the new framework, ROs can now be issued after an occupancy permit has been granted, ensuring greater enforcement oversight. This is sound.

Joint and several liability for compliance

New liability framework

• Under Section 75B(4) of the Bill in circumstances where there is more than one respondent, they are jointly and severally liable for compliance.
• This provision would capture those that were responsible for the building work and the residential apartment developers. 
• This is significant as for the first time since promulgation of the Building Act joint and severable liability has been re-introduced under the guise of rectification orders. 
• It is at odds with the more universal proportionate liability framework under the Wrongs Act 1958 (Vic) (“Wrongs Act”).Section 24AI of the Wrongs Act provides that:
• ‘In any proceeding involving an apportionable claim—

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just having regard to the extent of the defendant’s responsibility for the loss or damage; and 

(b) judgment must not be given against the defendant for more than that amount in relation to that claim’

• Question whether a conflict of laws issue will be in play.  It could probably be successfully argued that an RO is not an apportionable claim but philosophically it heralds a significant departure from the underlying philosophy that embraces responsibility driven liability apportionment.

Potential consequences of the joint and several liability encroachment 

• Under standard proportionate liability, each party is responsible only for their share of a defect.
• However, under Part 5A of the Bill, the respondents to an RO are fully responsible for compliance, regardless of fault.
• In all likelihood, this will lead to subsequent litigation between the developer and the builder. Once rectification costs crystallise, both parties will seek to shift liability onto the other and will likely belatedly join the RBS if there is an argument that the work did not comply with the National Construction Code (NCC).
• The developer will likely argue that it was incumbent upon the builder to construct the building in accordance with the NCC and the section 8 statutory warranties under the DBCA.
• If the work is defective, it is highly likely that the builder will have breached the statutory warranties and the developer will argue that prima facie the builder is exclusively liable for rectification. One consequence of this is that it tends to undermine the rationale that would have underpinned the statutory warranties namely that the builder is to warrant that their workmanship is fit for purpose. It is not easy to fathom circumstances where the developer would have created liabilities that are captured in the section 8 warranties; which also pursuant to section 9 of the DBCA, run with the land.
• It is submitted that the primary source of disputes between developers and owners arises when the drawings included in the contract of sale package do not align with the final built product. 

This discrepancy often occurs because different sets of approved drawings were used—one forming the basis of the sale contract and another set of drawings approved by the RBS guiding the builder’s work under the building contract. If such a misrepresentation can be established, it could fall within the scope of joint and several liability as contemplated by the relevant legal framework.

• This provision does not however align ‘immaculately’ with statutory warranties, as it effectively makes the developer a fallback guarantor for the builder’s legal responsibilities. Normally, these liabilities are covered by warranty insurance, except for buildings taller than three stories, where such coverage does not apply.

Since the amendments do not require mandatory insurance for residential builders on buildings over a certain height, to reiterate developers effectively become the fallback for covering liabilities, a quasi-insurer of sorts. While this improves consumer protection, developers may wonder why they are held responsible for issues caused by registered builders, especially when another law provides a remedy for such situations.

VCAT’s power to extend liability periods for ROs

Challenging the 10-year liability cap

The VBA can seek to extend liability beyond the 10-year cap by applying to VCAT under Section 75C of the Bill. As this is a very significant departure in philosophy i.e. the philosophy of a clear and unambiguous limitation stop gap, the section is quoted verbatim below:

1. “The Authority may apply to VCAT for an extension of the time within which the Authority may issue a rectification order in relation to particular building work.”
2. “An application under subsection (1) must set out the reasons the Authority is applying for an extension of time.”
3. “VCAT may make an order extending the time within which the Authority may issue a rectification order for the building work, if VCAT is satisfied that the reasons justify the extension.”

For fear of labouring the point, this is a major departure from legislated status quo, which previously cut off the ability to initiate legal proceedings after a decade since the issue of an occupancy permit had lapsed (save for the amendment that extended the ability to sue for cladding defects for an additional period of 5 years).

The apposite part of section 134 of the Building Act that captures the additional tightness of the 10-year cap is below:

1. “Despite any thing to the contrary in the Limitation of Actions Act 1958or in any other Act or law, a building action cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate offinal inspection of the building work.”

Consumer protection: first-resort domestic building insurance

Easier claims for homeowners

Building owners can now claim insurance for defective or incomplete work without first pursuing the builder under section 137K of the Bill.  This would remove the long and circuitous process of chasing responsible parties before an insurance payout. The reform would be a major win for consumer protection, it may increase however insurance premiums, time will tell.

Developer bond scheme: holding developers accountable

A new security requirement

Under Part 6, Division 1 of the Bill, developers must lodge a financial bond to cover potential building defects in residential apartment buildings over three storeys (section 93). 

The key provisions include:

• Applicability to multi-storey residential buildings (four storeys and above) and does not apply to single dwellings, townhouses, or low-rise residential buildings (three storeys or less).
• The bond is set at 2% of the total construction cost for eligible buildings.
• The VBA will hold the bond for two years and may use it to fund rectification works if defects are identified.

Contractual and market implications

The introduction of developer bonds may have several potential consequences:

• Developers facing rectification cost orders may seek to recover these funds from builders through contractual indemnities or litigation.
• Developers may extend the tenure of contractual defects liability periods under the building contract to two years and withhold 2% of the contract sum as retention, secured by instruments such as bank guarantees. Many developers already insist that builders provide a 12-month security, this is likely to be stretched out to 2 years. While this approach would not negatively impact consumers, it could affect cash flow dynamics for contractors.
• There is also a risk that developers may increase contract prices to absorb the cost of the bond, potentially passing the financial burden onto buyers. This could have an inflationary effect on apartment construction costs, particularly for high-rise and high-risk projects.

Additional reform priorities: strengthening prevention and risk management

Whilst the Bill strengthens post-construction enforcement, it does not adequately address preventative measures that would reduce the incidence of defective work before it takes shape in the as built form as the reforms are more focussed on how to react to non-complaint building work rather than how to prevent it. 

The following proactive reforms could significantly improve regulatory oversight and enhance consumer protection without increasing compliance burdens unnecessarily.

Risk-Based Building Inspections

A graduated inspection regime could be introduced, aligning the frequency and depth of inspections with the risk profile of the building.

• High-risk buildings (e.g., high-rise residential, hospitals, and aged care facilities) should undergo more frequent and thorough inspections than low-risk single dwellings.
• The IBQC consequence-based guidelines are instructive in this regard, aligning regulatory scrutiny with potential risk exposure.
• Currently, finite compliance resources are spread thinly across all buildings, rather than being directed where the risk of defects is highest.

Nine-year notification system: proactive claim management

Rather than indefinitely extending liability periods as is contemplated by section 75C of the Bill, a legislated and structured notification system could encourage earlier defect detection and remediation:

• At year nine, local councils—as the holders of occupancy permit records—would generate automated notifications to property owners, advising them that only one year remains to lodge claims for defective work.
• Conveyancing laws could mandate disclosure of the 10-year expiry date in sales contracts:

• Red-light warning: Final year approaching
• Orange-light warning: Nine-year notice mechanism activated
• This approach is already under consideration in some international law reform efforts, where this firm has been engaged to advise on liability and insurance regime overhauls in offshore jurisdictions.

This structured alert system would ensure that homeowners take action before their rights expire, rather than discovering defects too late when the statutory warranty period has lapsed. Furthermore, the integrity and consumer and practitioner security that coincides with a clear 10-year limitation period would not be compromised. If the section 75C reforms go ahead, the 10-year plus infinity scenario will be in play and this will generate unintended consequences.

Strengthening rectification orders (ROs) through early intervention

If the nine-year notification system identifies a potential defect, but the responsible party refuses to rectify it, the VBA should be empowered to issue a Rectification Order (RO) immediately. This proactive defect detection model ensures that remediation efforts begin before the statutory liability period expires, rather than allowing latent defects to emerge only after consumers lose their rights to claim.

Final joint inspection protocol: pre-occupancy peer review

A peer review inspection process could be mandated before an occupancy permit is issued, similar to the Chinese system.

• Developers, builders, engineers, and architects would participate in a final joint inspection convened by the Building Surveyor, and it would be a peer review by all of the responsible actors.
• This best practice approach was applied to the Shanghai Tower, where an 18-month delay occurred between the first peer review inspection and the final occupancy permit, ensuring rigorous pre-occupancy defect detection.

Such a process could prevent a significant portion of post-handover disputes, ensuring that any defects or matters for non-completion are identified by a peer reviewing of the key actors and rectified before the building surveyor issues the occupancy permit.

Annual user-pays auditing for building surveyors

An independent auditing regime for Building Surveyors (BSs) could be introduced on a user-pays basis to detect potentially systemic compliance issues early.

• Regular independent audits of surveyors would act as an early-warning detection system, preventing low-quality approvals from compounding into large-scale defects.
• This mirrors best-practice risk mitigation systems in other industries, such as trust account audits in the legal profession, which ensure accountability and financial integrity.
• A user-pays auditing model would ensure systemic problems are identified before non-compliant work becomes embedded in the built environment.

Conclusion: A significant regulatory shift with complex implications

The Building Legislation Amendment (Buyer Protections) Bill 2025 represents a major new chapter in the evolution in Victoria’s building regulatory framework. The expansion of rectification orders (ROs) to include developers, and the introduction of developer bonds strengthen the consumer protection framework. The bill also enhances the enforcement capabilities of the VBA.

However, certain aspects of the reforms introduce complexities that will require careful implementation. The removal of the requirement for a building permit when carrying out rectification work is a notable departure from conventional regulatory processes. Building permits have traditionally served as a critical checkpoint to ensure that rectification work aligns with the NCC and is subject to independent oversight. Without this requirement, there may be challenges in ensuring that rectification work meets the necessary compliance standards and consumer protections.

The shift toward joint and several liability under rectification orders also marks a significant change. This contrasts with the proportionate liability framework that has been in place for many years, potentially leading to complex liability disputes between builders, developers, and other stakeholders. These disputes may require further legal clarity to ensure that responsibilities are fairly apportioned and do not create unintended pressures on any single party. 

Additionally, the VBA’s ability to seek extensions beyond the traditional 10-year liability cap introduces a longer-term mechanism for addressing latent defects. While this on face value would appear to enhance consumer protection, it is likely to trigger something tantamount to liabilities in perpetuity and such liabilities that could have been covered by professional indemnity run-off cover will no longer be possible to underwrite. 

The reforms are significant and are probably the most significant reforms since the promulgation of the Building Act in 1994.They will require very significant resource allocation by the VBA such as the ‘bandwidth’ of the RO capture. Furthermore, some of the powers are duplicatatory, namely the power to issue ROs in circumstances that were typically the domain of the RBS.

The developer bonds will have support from consumers, but a 2% developer bond is no substitute for an effective home warranty scheme for a north of three-storey paradigm. 

This article was prepared by Lovegrove and Cotton team, and was settled by Tsigereda (Ziggy) Lovegrove, Solicitor and Practice Manager of Lovegrove and Cotton, and the Secretary of IBQC Dispute Resolution Committee. Ziggy is also involved in the Law Reform team that is providing liability and insurance advice to an off-shore country, with respect to potential amendments to thesaid country’s Building Act.

Some of us in Lovegrove & Cotton have significant local and internation law reform experience. We currently have off-shore government deployments.  Contact us if you require any law reform advice in the development of building regulation on (03) 9600 4077 or via email at enquiries@lclawyers.com.au and enquiries@lclawyersnz.com

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.