On 22 February 2024, the Victorian Government passed the Building Legislation Amendment (Domestic Building Insurance New Offences) Act 2024 (Vic) (the Act) into law. The Act commenced operation on 28 February 2024.
The Act amends the Domestic Building Contracts Act 1995 (Vic) (DBC Act) and the Building Act 1993 (Vic) to improve consumer protection for homeowners by further regulating builders and mandating domestic building insurance (DBI).
Key amendments
- Builders who enter into major domestic building contracts must ensure the domestic building work undertaken is covered by DBI.
- Uninsured builders who enter into major domestic building contracts may have their registration immediately suspended and face penalties of up to 500 penalty units for an individual, or 2500 penalty units for a company.
- The Victorian Building Authority (VBA) has greater enforcement powers to take disciplinary action against builders who breach their insurance obligations.
Previous DBI framework
Prior to the amendments, builders carrying out domestic building work were required to take out DBI where the contract price was more than $16,000. DBI is a consumer protection insurance designed for those constructing a new home, renovating, or developing buildings of up to three residential levels. It safeguards the property owner in the event of incomplete or defective work, and serves as a last-resort protection in case the builder becomes insolvent, dies, or disappears.
The Act was introduced in response to the limited enforcement avenues available to the VBA and limited consequences for builders where they had failed to take out DBI (and had taken deposits), including in response to the collapse of Porter Davis Home and other domestic builders in Victoria including Snowden and Hallbury Homes.
New offences under the Domestic Building Contracts Act for uninsured builders
The Act introduces a new Part 3A, "Offences related to major domestic building contracts and domestic building insurance", which comprises new sections 43A and 43B.
The new section 43A inserts a definition of domestic building insurance, as follows:
"domestic building insurance, that covers domestic building work, means insurance that:
- relates to the carrying out of the domestic building work; and
- a builder is required, by an order under section 135 of the Building Act 1993, to be covered by within the meaning of section 135(6) of that Act; and
- complies with section 137AA of that Act."
Meanwhile, section 43B provides that it is an offence for a builder to enter into a major domestic building contract and accept deposits from a building owner, if the builder has not obtained DBI for the domestic building work being carried out. The maximum penalty for a builder committing an offence under section 43B(1) knowingly or recklessly is 500 penalty units for an individual ($96,000 as at the date of this article), or 2500 penalty units ($480,000) for a company. In circumstances where the builder commits the offence under a standard of strict liability the maximum penalty for a person is 240 penalty units ($46,000) or 1200 penalty units ($230,000) for a company.
Amendments to the Building Act
The Act establishes a new purpose under the Building Act of regulating builders and enforcing offences under the DBC Act against builders who demand or receive money under a major domestic contract without ensuring that the domestic building work undertaken is covered by DBI.
In addition, the Act makes other consequential changes including amendments to section 180(b) which expands the grounds upon which the VBA may immediately suspend the registration of a builder, to include circumstances where a builder accepts deposits without first taking out DBI, in accordance with section 43B of the DBC Act. If a court finds that a builder is guilty of breaching section 43B of the DBC Act, in addition to any penalty for that offence, the court may direct that the builder is ineligible to apply for registration under Part 11 of the Building Act for up to 3 years.
Enhanced powers of the VBA
The Act provides the VBA with explicit powers to enforce disciplinary action against builders who breach their obligations under the DBC Act and the Building Act. If the VBA believes on reasonable grounds that a builder has breached section 43B of the DBC Act, they can request that a builder produce information or documents relating to the alleged contravention. The Act has also broadened the circumstances in which the VBA can bring proceedings (seeking orders such as an injunction) against a builder to include a breach of section 43B.