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Building Legislation Amendment (Buyer Protections) Bill 2025 passed
The Building Legislation Amendment (Buyer Protections) Bill 2025 (Vic) (Bill) has now passed through the Victorian Parliament and Royal Assent was given on 3 June 2025.
Building Legislation Amendment (Buyer Protections) Bill 2025 passed: Time for the Victorian domestic building industry to get ready
Australia | Publication | June 2025
The Building Legislation Amendment (Buyer Protections) Bill 2025 (Vic) (Bill) has now passed through the Victorian Parliament and Royal Assent was given on 3 June 2025. The reforms will commence on a day to be proclaimed, or 1 July 2026 at the latest.
As set out in our previous update in April 2025 here, it introduces a new developer bond scheme for multi-storey residential buildings and expands rectification powers, significantly reshaping building regulation in Victoria. No changes were made to the Bill by Parliament, other than correcting an error to confirm that the new developer bond will be 2 per cent, not 3 per cent, of the total build cost.
The Victorian Government says it will continue working with industry, stakeholders and community to ensure that everyone is informed, supported and ready, and says that work will now commence on the new regulations, which will be the subject of extensive consultation with key stakeholders.
Content
Developer bond scheme
To recap, a new developer bond scheme, similar to New South Wales’ Strata Building Bond and Inspection Scheme (SBBIS), will apply to residential buildings with more than three storeys.
Where it applies, key features of the scheme include:
| Feature | Description |
|---|---|
| Bond requirement | Developers must provide a bond equal to 2% of the “total build cost” before they can apply for an occupancy permit. This bond acts as security to ensure that any serious defects identified after completion can be rectified. Total build cost is defined broadly as the estimated total cost of the building work carried out for or in connection with the construction of the residential apartment building. |
| Notification to BPC | Developers must notify the Building and Plumbing Commission (BPC) - the new name for the Victorian Building Authority—of their intention to apply for an occupancy permit between six and 12 months before doing so. This allows the BPC to schedule inspections and monitor compliance. |
| Rectification orders | If the BPC identifies serious defects during its inspection, it can issue a rectification order, preventing the issue of occupancy permits, registration of a plan of subdivision, or completion of off-the-plan sales until the defect is corrected. |
| Purchaser protections | Purchasers may be able to rescind their contracts and recover deposits plus penalty interest if the occupancy permit is not issued or the bond is not lodged. |
| Bond access for defects | The bond can be accessed to pay for rectification of defects found during inspections by a building assessor conducted 15–18 months and 21–24 months after the occupancy permit is issued, providing an additional layer of protection for buyers and owners corporations. |
Uncertainty and transitional provisions
It remains unclear if the bond scheme will apply to projects already underway when the reforms commence. In New South Wales, buildings were exempt if their building contracts were entered into before that state’s scheme began. A similar exemption in Victoria is not guaranteed and will depend on forthcoming regulations. In the meantime, developers may find themselves entering building contracts without certainty as to whether the bond requirement will apply.
Rectification orders
The BPC will have broader powers to issue rectification orders for incomplete, non-compliant, or defective building work up to ten years after an occupancy permit is granted. Rectification orders can be directed at the person who performed the work, including subcontractors, and for multi-storey buildings, also at the developer. The definition of “developer” may capture multiple involved entities.
Where a serious defect is identified, the BPC may block occupancy permits, plan registrations, or settlement on off-the-plan sales until the problem is rectified. Notably, these new powers can apply to work completed before the legislation comes into effect, opening the door to retrospective enforcement in serious cases.
Practical tips and next steps
Developers should review their contract provisions and procedures in light of the developer bond regime and increased risks arising from rectification orders. For example, developers should:
- Include strong clauses for quality control and defect rectification
- Include robust provisions for reviewing designs and design certification by consultants
- Ensure defects liability periods cover the new inspection windows
- Ensure contractors maintain adequate professional indemnity insurance
- Ensure builder’s security aligns with the developer bond amounts, process and timing (minimum of 2 per cent of the total build cost)
Other ways that developers may mitigate the increased risks include:
- Careful and proactive management of design and construction, to minimise the risk of defects and ensure that any defects are identified and rectified early
- Assessing prospective building contractors/subcontractors to ensure they have sufficient financial standing and are likely to still exist ten years after the occupancy permit is issued
- Consider parent company guarantees if needed
- Obtaining dilapidation reports on adjoining properties, because rectification orders may also be issued in relation to damage to adjoining properties
The Victorian Government is now developing regulations to clarify the scheme, including transitional rules and possible exemptions. Developers should also monitor transitional rule updates, especially when negotiating new contracts.
Takeaways
Developers and builders will need to take the new reforms into account when planning for future projects, while also advocating to the Victorian Government to ensure that the final form of regulations help to make the transition workable for industry.
You can access the Act and related materials here: Building Legislation Amendment (Buyer Protections) Act 2025 (Vic).
If you have questions about these reforms or would like assistance in reviewing your contracts, please get in touch.
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