New offences for failing to obtain Domestic Builders Insurance in Victoria, and update on reforms

The Victorian Government introduced the Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023 (Vic) into Parliament on 28 November 2023. If passed, it aims to provide added protection to consumers by amending the Domestic Building Contracts Act 1995 (Vic) (DBC Act) and the Building Act 1993 (Vic), including via mandating builders obtain domestic building insurance (DBI) before accepting payments from building owners under any major domestic building contract (DBC).

The Bill was introduced in response to the collapse of Porter Davis Homes and other domestic builders in Victoria, one consequence of which has been the uncovering of poor practices within the residential construction sector, including the practice of builders failing to obtain DBI before accepting deposits for DBCs. The Bill (if passed) is foreshadowed to come into operation on 28 November 2024 (unless proclaimed earlier).

The Bill introduces a new Part 3A, "Offences related to major domestic building contracts and domestic building insurance", including the inclusion of sections 43A and 43B into the DBC Act. These sections provide that it is an offence for a builder who has entered into a major domestic building contract to demand or receive money from a building owner under the DBC without ensuring that the domestic building work is covered by a DBI policy. A builder who is found in breach of section 43B will face a penalty of up to $96,000 for an individual, or $480,000 for a company.

The Bill also proposes to amend the Building Act to empower the Victorian Building Authority (VBA) to enforce compliance with the new DBI obligations and take disciplinary action against builders who breach these obligations. It is proposed the VBA's powers are expanded to authorise it to compel a builder to provide information or documents if it has reasonable grounds to suspect the builder has breached section 43B of the DBC Act. Amendments to section 180 of the Building Act also seek to expand the grounds upon which the VBA may immediately suspend the registration of a builder, to include circumstances where the builder fails to obtain DBI prior to accepting deposits.

Further reforms are on the way

The Bill is the Victorian Government's latest step in reforming the residential construction sector. In addition, the Victorian Government has flagged its intention to implement further comprehensive reforms aimed at elevating building standards and providing greater consumer protection for Victorians seeking to carry out domestic building works on their home. The introduction of the Bill coincides with the release of the Expert Panel's Comprehensive Review of Victoria's Building System – Stage Two Report, which set out 14 recommendations to enhance accountability (including to developers), improve dispute resolution and prevention, increase compliance and enforcement and improve insurance coverage in the residential construction sector. The government has advised that it will now consult with the building industry and consumers regarding the recommendations of the Expert Panel Stage Two Report.

The Bill's tabling also follows Parliament passing the Building Legislation Amendments Bill 2023 (Vic) earlier this year, which implemented the foundational recommendations of the Expert Panel Stage One Report (which focused on practitioner registration, building approvals, regulatory oversight and consumer protection). Stage Three of the Expert Panel’s work will finalise the recommended reform package, including advice on the development of a framework for a new Building Act (including national harmonisation as appropriate, and changes to regulations), and changes to regulations to align with the outcomes of Stage One and Stage Two.