Reforms to Victoria’s building regulatory framework: what it means for you

A new ‘development bond scheme’ for all residential buildings over three storeys in height will be introduced, with the bond held as security for the rectification of defects. Pending exceptions in the regulations, developers must arrange for the issue or execution of developer bonds to the VBA before an occupancy permit can be obtained (ss 137ZN and 137ZP). 

This scheme is modelled on the Strata Building Bond and Inspections Scheme in NSW and paves the way for a future 10-year liability scheme.

The bond will be set at 3 per cent of the total build cost, unless another amount is prescribed.

Developers must, at their cost, nominate and then appoint a building assessor to carry out inspections and prepare reports. A preliminary report will be required around 15 to 18 months after the occupancy date (permit issue date), and a final report will be required around two years after the occupancy date.

Owners will also be entitled to make a claim to the VBA on the bond to pay for rectification of defects, as will the assessor for any outstanding payments. 

A purchaser of an off-the-plan apartment will be entitled to rescind their contract if an occupancy permit has been issued for the lot, but the developer has not paid the bond or has paid a bond that is less than the required amount (s 9AEA).

Amendments to be made to the Sale of Land Act 1962 will prohibit owners of land (for the development of residential apartment buildings) from applying to register that land where they are subject to notices relating to rectification orders in respect of non-compliant building work and defective building work.

To register as a builder, all applicants must meet new ‘minimum financial requirements’ which are to be prescribed by the regulations (Pt 3 Div 2).

Registered builders failing to meet these requirements could be disciplined, fined or even have their registration suspended or cancelled.

The Amendment Bill creates the Building and Plumbing Commission, consolidating regulatory, insurance and dispute resolution functions into a single agency.

This integrated regulator is designed to serve as a ‘one-stop-shop’ for consumers facing issues with building work, and will be equipped with robust enforcement powers to address defective or non-compliant construction.

Issuing rectification orders

Proposed amendments will empower the VBA to issue a rectification order to a builder, developer, or both, for work, that is incomplete, non-compliant, or defective on a residential apartment building. This rectification order can be issued up to 10 years after a works completion date, and it can be issued to developers of apartments (s 75B(1)(b)).

Administering domestic building disputes

The VBA will take over the handling of domestic building disputes from Consumer Affairs Victoria, including their conciliation function, providing the VBA with greater powers to resolve disputes between residential owners and builders. 

Introduction of a Statutory Insurance Scheme (SIS) for buildings up to three storeys

Transitioning from a ‘last-resort’ to a ‘first-resort’ insurance model, the SIS allows homeowners to claim on insurance for incomplete, defective, or non-compliant domestic building work without requiring builder insolvency or disappearance. 

The VBA will administer the scheme instead of the Victorian Managed Insurance Authority (cl 1(a)(i), Pt 2 Div 1, and Pt 4) and the VBA will become the only insurer moving forward (cl 1(a)(ii). This will mean the VBA will have oversight of not only practitioner registration and building permit applications, but domestic building insurance too. 

The VBA will have a statutory right to recovery or subrogation against builders and ‘any other person through whose fault the claim…arose’ (s 137ZD).