Welcome domestic building reforms for Victoria: Domestic Building Contracts Amendment Bill 2025 (Victoria)

Key changes impacting builders and developers

Application of the DBC Act to developers

The Bill introduces a new definition of “developer” and provides that only certain provisions of the DBC Act will apply to contracts between builders and developers. These include implied warranties, registration requirements, requirement for the builder to obtain information about foundations, and a new short list of contract content requirements (4 requirements instead of the current 21).

Many other requirements will fall away, including limits on deposits, restrictions on cost plus contracts and cost escalation clauses, banning of arbitration clauses, regulation of provisional sums and prime cost items, requirement for a contract information statement, the extensive list of contract content requirements, requirements for price change warnings, delay allowances, cooling off periods, regulation of variations and limits on progress payments.

These changes reflect the reality that contracts between sophisticated developers and builders do not require regulation by consumer protection provisions.

Plans and specifications

The DBC Act will no longer apply to the preparation of plans, specifications and bills of quantities for the carrying out of domestic building work. Industry is also likely to welcome this change, enabling design work to be carried out without the constraints of the DBC Act requirements.

Cost escalation clauses

The requirements for cost escalation clauses will be reformed, to allow cost escalation clauses in domestic building contracts with a contract price of $1 million or more.

There will still be strict regulation of cost escalation clauses; they will be void if not in the prescribed form and signed or initialled by the building owner, and there will be a 5 per cent ceiling on price increases from cost escalation clauses.

Variations

The provisions regulating variation of plans and specifications in major domestic building contracts will be replaced with a more practical regime. The current regime is prescriptive and complex, with different requirements depending on which party is seeking the variation.

This will be replaced by a single variation process that applies whether the variation was requested by the builder or the building owner. The parties must agree in writing to vary the plans or specifications, with the agreement to comply with certain requirements and to be signed by both parties. Some exceptions to the requirement are also provided for building surveyor required variations and urgent variations.

Ending the contract where completion time or cost blows out

The provisions permitting a building owner to end a major domestic building contract if the completion time or cost blows out will be amended to remove the requirement that the reason for the increase in time or price must be a reason the builder could not have reasonably foreseen at the contract date. The purpose of the change is to simplify the termination process so the owner does not need to make an assessment about the builder’s state of mind and what might or might not have been reasonably foreseeable.

The building owner will be entitled to end the contract if the contract price rises by 15 per cent or more, or completion time blows out by 50 per cent (excluding increases arising from prime cost items, provisional sums and variations initiated by the building owner). These thresholds are unchanged from the current DBC Act.

Limits on deposits and progress payments

The Bill provides for the limits on deposits and progress payments that a builder can claim to be moved from the DBC Act into regulations; this will enable them to be updated more easily. The Bill lays the groundwork for different percentage limits to be prescribed for progress payments for major domestic building contracts to build a home, depending on what percentage of the cost is attributed to the use of prescribed modern methods of construction. We will need to await release of the regulations to know exactly what is planned.

There will also be a general proportionality requirement that applies to all major domestic building contracts (including renovations), prohibiting builders from claiming an amount that does not relate directly to the progress of the building work.

Transitional provisions

The above changes will only apply in relation to contracts entered into on or after commencement of the reforms. This will help to make the transition smooth for industry, providing certainty about when to begin using updated forms of domestic building contracts.

Final comments

The reforms in the Bill are likely to be welcomed by industry. In the lead up to commencement of the reforms builders and developers will need to update contract templates and procedures and consult with the Victorian Government in relation to the content of proposed regulations.

We will monitor the progress of the reforms and provide an update if the Bill passes. Please contact us should you wish to discuss the impacts for your business or projects.