A New Building Regulator for Victoria

  

Reform of licensing, compliance, insurance and payments

  

 

 

Victoria in 1993 established the Building Control Commission, responsible for building regulation, the Building Practitioners Board to register and monitor practitioners conduct, and the Plumbing Industry Commission, responsible for licensing plumbers, drainers and gasfitters and plumbing work standards. In 2013 the Victorian Building Authority (VBA) replaced those regulators, becoming responsible for building standards, permits, surveyors, plumbers, contractors and subcontractors. In 2024, the Building Act was amended to make the State Building Surveyor a statutory position, to be the primary source of technical expertise for building and plumbing work.

 

In July 2025 the VBA became the Building and Plumbing Commission (BPC), with the Building Legislation Amendment (Buyer Protections) Bill 2025, as an integrated regulator that consolidated the functions of the VBA, Domestic Building Dispute Resolution Victoria and the Domestic Building Insurance arm of the Victorian Managed Insurance Authority. The goals are: 

·      To strengthen consumer protection through defect rectification orders and new insurance and bond schemes; 

·      To maintain standards in the building and plumbing industries through more effective regulation of builders and developers; 

·      To ensure consistency in compliance with the building code across the state; and streamline regulation with the BPC as the single point of contact.

 

The decision to replace the VBA with the BPC coincided with an October 2024 review by Weir Legal and Consulting Victorian Building Authority – The Case for Transformation. With seven detailed case studies, the review began by acknowledging ‘the dreadful experience these complainants have had in their interactions with the building industry, the VBA and the legal system.’  It found ‘the VBA management and culture failed consumers’, and builders were not made accountable for poor standards of work and unethical conduct. The VBA ‘failed to protect homeowners’ because of:

·      Ineffective regulation of practitioner conduct, weak enforcement and slow processes;

·      Consumer neglect with complaints that were lost, delayed, or ignored; and

·      Systemic regulatory failures such as combustible cladding and building defects in apartment towers [1].

 

This post first looks at the scope of the regulatory powers the BPC is given under the legislation and the changes from the system under the VBA, then the new domestic building insurance and apartment bond schemes are detailed. Issues with the legislation are discussed, including those raised by Master Builders Victoria, followed by the potential for issues with rectification orders and whether the BPC is responsible for providing technical solutions. Further reforms with a new domestic building contract and proposed changes to security of payment legislation are also discussed.  

 

 

Building and Plumbing Commission Powers

 

The BPC will oversee licensing, compliance, dispute resolution, and provide insurance coverage for defects. Current licenses will automatically transfer to the BPC and remain valid, but builders will need to meet minimum financial standards (that are not yet specified) to renew their licenses, have proof of insurance cover and provide a training plan for continuing professional development. There are new powers to combat phoenixing, where companies are liquidated to avoid debts and restarted under a new name. Builders who are directors of insolvent companies may face suspension or non-renewal of their licenses, with provisions for immediate suspension [2].

 

To protect homeowners, the BPC can order builders and developers to fix defective work for up to 10 years under Rectification Orders (ROs) that can be issued to whoever is responsible for carrying out the building work, including unregistered persons, subcontractors and owner-builders. The BPC can suspend licenses if builders fail to comply with ROs for defective work, which is a significant change. ROs can be issued to any class of building, including commercial buildings. Opportunities to rectify defects before an insurance claim is triggered start with the consumer resolving defects informally with the builder, and ending with the BPC issuing an RO. The viability of the scheme relies on the BPC compelling builders to rectify defects, reducing demand for insurance payouts.

 

For residential buildings of up to three storeys, Domestic Building Insurance (DBI) administered by the BPC will become insurance of ‘first resort’ and the BPC will set premiums. Homeowners have access to DBI in the form of ‘assistance’ when they suffer loss from incomplete, defective, or non-compliant work, in addition to the existing triggers for cover when a builder dies or becomes insolvent, disappears, or ignores a court order. Assistance will involve rectification or completion of the works or payment of compensation. The BPC can order builders to rectify defects, take disciplinary action against them, seek tenders for work, and recover amounts paid under DBI to fund repairs if the builder refuses. The new insurance scheme will start in July 2026, and may affect insurance premiums and underwriting conditions for builders. 

 

For residential buildings over three storeys, developers will be required to lodge a bond of 2% of the total build cost as security for covering the cost of fixing defects in common areas. Criticisms of the bond scheme are that it only covers common property, not private areas or structural defects, and doesn’t address issues related to faulty materials, design, or workmanship. For apartment buildings, ROs may be issued against builders and subcontractors, and also against developers. The BPC may withhold an Occupancy Permit if no bond is lodged or if serious defects are not fixed, and off-the-plan sales may be blocked. If an Occupancy Permit is issued without the developer having a bond, off the plan purchasers can rescind the contract. 

 

The developer bonds will be held by the BPC for two years after issue of an Occupancy Permit, and return to the developer if there are no outstanding defects. Recourse against or release of the bond will be subject to two reports from an independent assessor. A final inspection must be completed 21 to 24 months after occupancy, confirming defects have been rectified, otherwise the owners corporation can claim against the bond to fund rectification, with any unused portion returned to the developer. While the bond could be released 24 months after occupation, contested claims would take much longer.  Developers may apply to the Victorian Civil and Administrative Tribunal (VCAT) for review of a RO, and the BPC may apply to VCAT for an extension of time beyond the 10-year limit.

 

KCL Law posted: ‘these reforms mark a fundamental reset of Victoria’s residential construction sector. Consumer protection, professional accountability, and industry transparency are now front and centre, with significant implications for how developers, builders and regulators interact. But this is more than regulatory housekeeping, it’s a rebalancing of risk and responsibility across the entire supply chain. Builders are being asked to operate more like professionals than tradespeople. Developers must budget not just for construction but for compliance and regulators will no longer sit back and wait for failure before stepping in.’

 

 

Issues With the Legislation

 

There was a public consultation phase on the BPC. Although the submissions are not available online, the concerns they raised were widely reported. In particular, in May 2025 Master Builders Victoria (MBV) and Housing Industry Association (HIA) called for the Building Legislation Amendment (Buyer Protections) Bill to be subject to a review by a Parliamentary Committee, concerned that many provisions in the Bill increase costs for builders, unfairly penalise good builders, and would not do much to protect consumers from bad building practices. 

 

In a June post the MBV’s key concerns with the Bill were: 

·       ROs can be issued to both builders and developers, but only registered builders face the risk of losing their registration if they don’t comply. Developers, who are not required to be registered, face no equivalent consequences; 

·       The Bill places the entire burden of rectification on the builder, even when the defect is determined to be caused by another party, such as the designer; 

·       The home building sector is already seeing a decline in builder numbers due to frustration with an increasingly complex and biased regulatory environment; 

·       The definitions of ‘Defect’ and ‘Serious Defect’ are too broad. ROs should be limited to serious defects only, and if ROs apply to all defects a genuine appeal process must be provided for the builder.  

 

There are valid concerns here. In particular, has the ‘burden of rectification’ been placed solely on the builder, when other parties such as designers or engineers may be at fault? The legislation does not define how disputes over proportionate liability will be managed. Also, the broad definition of a serious defect may become problematic, and when combined with the lack of clear guidelines on liability, disputes may be more complex, protracted, and difficult to resolve. That said, the legislation does not prevent the builder chasing other parties who are at fault, and the builder and developer have responsibility to resolve a dispute and compensate for rectification.

 

The Victorian HIA compiles data on building registrations from the VBA annual reports. Their chart shows the number of registered domestic builders by company and by individual. The number of individuals registered as domestic builders has declined from a 2020-21 high of 17,545 to 16,669 in 2024-25, but the number of companys registered as domestic builders had a small increase. The number of finalised applications for building practitioner registration has also declined, from 2,821 in 2020-21 to 1,384 in 2024-25. These trends predate the transition of the VBA to the BPC, and not evidence of builders leaving the industry because of onerous or bad regulation. 

 

Figure 1. VBA data

Source: HIA

 

The 2024-25 VBA annual report’s table 4 with building and plumbing registration and licensing has more detail. Figure 2 shows that, between 2023-24 and 2024-25, there have been increases in the number of people registered as surveyors, inspectors and domestic project managers, and over 1,100 more licensed plumbers. The annual report says ‘the 18.7 per cent increase in the number of building surveyors registered is attributed to practitioners attaining registration through the mutual recognition pathway’, however The Age newspaper revealed 60% (123 out of 204) of new Victorian building surveyor registrations in 2024-25 through mutual recognition from Western Australia, where the qualification standards are lower and a bachelors degree is not required. There were also 4,936 engineer endorsements (for engineering wanting to work in building construction) were a four per cent increase over 2023-24.

 

Figure 2. Building and plumbing registration and licensing 

Source: 2024-25 VBA annual report, p. 40 [3].

 

 

A petition to the Legislative Council (from an unknown group called vicbuildersunite with only 300 signatures) also called for a review of the legislation, because it would ‘result in an anti-competitive situation through the creation of a government-controlled insurance monopoly.’ The petition then argued: ‘There is a lack of procedures to resolve disputes between builders and subcontractors whenever a disputes occurs over works which increases costs to consumers, a lack of accountability from third party building inspectors both private and regulated, a lack of transparency and fairness in how the regulator investigates practitioners and unfair costs associated with accessing building standards and technical information which includes the limited hours the regulators technical team are available.’ There are more like complaints than criticisms, and to suggest ‘a lack of transparency and fairness’ in a scheme that has not yet started is ridiculous. 

 

There are a few other issues that have been raised that should not take too long to be resolved: 

·      There is a lack of clarity on transition arrangements for projects already underway or with pre-existing contracts and how they are affected by the new bond requirements;

·      A RO may allow penalties based on single complaint without a thorough investigation; and

·      The minimum financial standards for builders have not been specified.

 

 

Issues with ROs and the Condensation Scenario

 

There are potentially issues with how ROs will be managed. The Explanatory Memorandum for the legislation says:

 

‘New section 75E sets out what a rectification order can require a person to do.  Subsection (1) provides that the person may be required to take any action or the action specified in the order to complete the building work, rectify the non‑compliant or defective building work, rectify any consequential damage associated with the building work or the defective or non‑compliant work, follow any directions or meet any standards in completing or rectifying the work or do any other thing in connection with the required completion or rectification activities.’

 

‘New section 75H specifies what information a rectification order must contain.  This includes a statement describing the action the person to whom the order is issued must (or must not) take for the purposes of the order, a statement describing any standards that must be met or directions the person must follow, a statement describing any other things the person must do for the purposes of the order, the date by which the order must be complied and any prescribed information.’

 

Tim Law, an architectural scientist specialising in mould in buildings, worries Victoria’s legislation expects the BPC to fix every problem it uncovers and the State Building Surveyor (SBS), as the designated technical authority, to provide solutions. The result could be the BPC becoming both enforcer and scapegoat, responsible not just for identifying defects, but for solving problems and inheriting liability for every systemic failure in Victoria's building industry over the past decade. If this is right, it will become a very expensive problem for the BPC as the costs for defect remediation will be carried by DBI, and the BPC will have financial responsibility for outcomes they cannot control. However, if the BPC follows the NSW example, it will issue ROs that define the problem for the builder to get advice on how to fix, and then show the BPC that they have done the work. 

 

 

Reform of Contract and Payment Legislation

 

In September 2025, the Domestic Building Contracts Amendment Bill 2025 (Vic) was passed by the Victorian Parliament and will take effect by or before December 2026, and will apply to domestic building contracts entered into after the commencement date. The BPC will take over the protection functions of Consumer Affairs Victoria, which posted the new laws will: 

·       Provide stronger protections for homeowners when signing domestic building contracts;

·       Set clear rules on when builders get paid. Deposit limits, progress payment stages, and progress payment limits can be set in regulations. Any payments for completed work will be subject to a proportionality requirement;

·       Allow the use of cost escalation clauses for contracts worth $1 million or more. But these clauses can only add up to 5% to a contract’s price, and extra consumer protections will also apply;

·       Separate preliminary agreements. Builders and clients can make their own agreements for developing plans, specifications and bills of quantity;

·       Ensure clearer contract requirements for all. Currently, some basic document requirements only apply to major domestic building contracts. These will now apply to all domestic building contracts;

·       Provide a single, simple process for contract variations for major domestic building contracts. This applies whether the homeowner or the builder requests a variation; and

·       Set stronger rights for homeowners to end a major domestic building contract. This will make it easier to walk away if needed.

 

The new contract has mandatory pre-contract disclosures, tighter variation controls, and new rules on progress payments and deposit limits. It recognises the role of modern methods of construction by linking progress payments to the actual proportion of building work done, which affects financing of modular and prefabricated construction. This important reform means prefabricated houses in Victoria will have their own framework for staged payments. New rules around fixed-price contracts reduce reliance on provisional sums and prime cost items. (See here and here).

 

Along with the Domestic Building Contract Act the Government is also improving security of payment (SOP) to reduce insolvency risk and protect smaller contractors, subcontractors, and suppliers. In September 2025 the Building Legislation Amendment (Fairer Payments on Jobsites and Other Matters) Bill was made public. This is the first package of reforms from a 2023 Parliamentary Inquiry into SOP, and is based on 16 of the 28 Inquiry recommendations. Industry consultations are underway on a second set of SOP reforms. (See here, here, and here). The security of payment bill will align Victoria with other states by removing excluded amounts, which were unique to Victoria, and  unfair payment clauses, and make the enforcement of payments simpler. It will be easier to make claims and have them adjudicated if there’s a dispute.

 

Other reforms under consideration are a handover manual for completed buildings on their construction and maintenance. Building surveyors will be required to provide an information statement to the owner of the building or land within 10 working days of issuing a building permit. A Building Monitor as a dedicated advocate for Victorian domestic building consumers exists, but has not yet been funded. New categories to be considered for registration requirements are building consultants and site supervisors. Changes to approvals, registration and licencing, inspections and insurance requirements to promote modern methods of construction are being developed. An expert panel is advising on a rewrite of the Building Act. Further reforms could be increased mandatory inspections during construction, and introduction of 10 year defect liability insurance similar to the scheme in NSW. Statutory trusts for retention money as in Queensland are not proposed [4]. 

 

 

Conclusion

 

The Victorian Government wants higher accountability, lower defect rates, and faster dispute resolution in the construction industry, particularly for residential building. After a damming review highlighted the failings of the Victorian Building Authority a new regulator, the Building and Plumbing Commission, was established in mid-2025 with greater powers to address defects and management of new insurance and bond schemes to pay for rectification.

 

With the BPC able to issue Rectification Orders up to 10 years post-completion there is now a long period of liability for builders and developers, who will need to keep records of completed and disputed defects. There will be new, as yet unspecified, minimum financial standards for builders, and measures to prevent phoenixing of companies. The BPC will manage domestic building insurance and a developer bond scheme for apartments over three stories. The BPC can withhold an Occupancy Permit if no bond is lodged or if serious defects are not fixed, and off-the-plan sales may be blocked. If an Occupancy Permit is issued without the developer having a bond, off the plan purchasers can rescind the contract. As with any ambitious regulatory reform there are critics, and the relevance and accuracy of their arguments will be found over time. 

 

There are some potential problems for the BPC. How the transition for projects already underway or with pre-existing contracts that are affected by the new bond requirements will be managed is unclear. The ‘burden of rectification’ of defects is on the builder, although designers or engineers may be at fault, and the legislation does not define how proportionate liability will be managed. The definition of a serious defect is broad, and with the lack of clear guidelines on liability, disputes may be more difficult to resolve. The developer bond only applies to defects in common areas, not substandard work or faulty materials. However, the new insurance scheme should incentivise builders to rectify building defects as they are found by homeowners, preventing disputes.

 

In conjunction with the BPC legislation, there is a new Domestic Building Contract Act and new security of payment measures. The new contract has stronger protections for homeowners, tighter variation controls, and links progress payments to work done in a framework for modern methods of construction. A new security of payment bill will align Victoria with other states by removing excluded amounts. 

 

The concern of industry associations is that regulatory complexity, the cost of insurance and bonds, and minimum financial requirements, will result in builders leaving the industry, particularly smaller ones with limited capital, and reduce industry capacity. Residential building has always had high rates of entry and exit, because it is a cyclical industry with many small and medium size businesses. However, it would be difficult to know which exits are due to the new regulatory system, instead of industry conditions, retirement, or insolvency. 

 

The Weir Review of the VBA made 20 recommendations. Those on dispute resolution, phoenixing, domestic building insurance, inspections, occupancy permits and rectification orders have largely been adopted. Some like staged building permits, codes of conduct and training for builders and surveyors, and for BPC staff, are for the BPC to implement. The recommendations for declared designs, including plumbing designs, to be lodged on a government portal, as in the NSWDesign and Building Practitioners Act 2020, are not in the legislation, despite their importance in the NSW reform strategy [5].

 

Taken together, these reforms are a comprehensive upgrade of the construction industry’s regulatory framework in Victoria, particularly in the residential building sector. Consumer protection and builder accountability have been the focus, and the changes to risk and responsibility for compliance will affect all participants. For consumers the insurance scheme is a crucial change, because the builder does not have to be insolvent or disappeared to make a claim it makes insurance genuinely protective, and should lead to better quality of work. For contractors and subcontractors, an important change is the removal of excluded amounts in the new security of payment bill, and they can now claim for contested variations and costs through a simpler adjudication process. The BPC consolidates several regulatory bodies, has expanded powers, and is expected to be a more effective and proactive regulator than its failed predecessor. 

 

                                                               *

 

Acknowledgement: I’d like to thank David Chandler, Bronwyn Weir and Tim Law for their comments and assistance in preparing this post. Any mistakes or errors are mine.  

 

 

 [1] Flammable cladding in Australia and the second Grenfell Report were covered in this post.

[2] Insolvencies and entry and exit data were discussed in this post.

[3] The 2024-25 VBA annual report can be downloaded from

https://www.parliament.vic.gov.au/parliamentary-activity/tabled-documents/

[4] The Queensland statutory trust account systems was covered in this post. Regulation under the Queensland Building and Construction Commission will be the subject of a post in the near future. 

[5] The NSW reform strategy was outlined in this post.

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