The Building Legislation Amendment (Buyer Protections) Act 2025 (the Act) is now law.  

The Act implements major reforms to the building regulatory framework in Victoria, including the establishment of a statutory insurance scheme providing domestic building insurance on a first-resort basis for domestic buildings with a rise in storeys of three or less. It also strengthens the enforcement powers of the Victorian Building Authority (VBA), which will be renamed the Building and Plumbing Commission (BPC). In particular, the BPC will be empowered to order the rectification of building work that is incomplete, defective or non-compliant both prior to and after an occupancy permit has been issued.  

These measures create a broader risk environment for builders, developers and others involved in domestic building work, including subcontractors. This article focuses on the insurance and enforcement powers aspects of the reforms.  

The Act also introduces a developer bond scheme for apartment buildings with a rise in storeys of more than three (which are not currently covered by domestic building insurance). You can read more about the developer bond scheme, in our previous article "The new developer bond regime in Victoria: What you need to know before 1 July 2026". 

The Act reforms Victorian domestic building insurance in two stages.  

The first stage (which commenced on 1 July 2025) involves the VBA replacing the Victorian Managed Insurance Authority (VMIA) as the designated insurer for domestic building insurance in Victoria. This is part of the Act's broader objective of bringing regulatory, dispute resolution and domestic building insurance functions within a single government agency (the BPC).  

The second stage, which will commence on a date to be proclaimed or by 1 July 2026 at the latest, will introduce a new statutory insurance scheme providing first‑resort domestic building insurance for buildings of three storeys or less.  

Building owners who have suffered loss arising from incomplete, defective or non-compliant building work can immediately claim on their insurance, even when the builder is still trading and without first needing to engage in any dispute resolution process. By contrast, the existing (last-resort) insurance scheme is only triggered when a builder has died, disappeared or become insolvent. The BPC will be able to order a builder to rectify defective, non-compliant or incomplete work and recover any payments made from the builder by way of subrogation. These measures will effectively remove building owners from the dispute resolution process.  

Importantly, the statutory insurance will cover building owners even if the builder has not purchased an insurance policy.   

The Act empowers the BPC to order a builder (or anyone else who carries out building work, such as a subcontractor) to rectify incomplete, defective or non-compliant work. The recipient of a rectification order must comply with it within a specified timeframe and cannot seek a stay on the operation of the order.  

Importantly, a rectification order can be issued at any time during the construction phase and up to 10 years after an occupancy permit is issued. Currently, the VBA does not have the power to issue a rectification order after an occupancy permit has been issued, nor can it require a builder to complete incomplete work. If the builder does not comply with the rectification order, an insurance response will be triggered and the BPC will be able to tender for the rectification of the building work. Again, the BPC will be able to recover any costs from the builder.  

The Act represents a major structural shift in the risk landscape for building professionals in Victoria.  

It will almost certainly result in a higher volume of claims regarding incomplete, defective or non-compliant work, as a result of the broader scope of cover. It is possible that building owners who previously elected to rectify building work themselves (rather than engage in costly and time-consuming litigation) will now immediately make claims on their insurance, which the BPC will then seek to recover the cost of from builders and subcontractors.  

Other questions that may arise and which will require careful consideration could include:   

• Is a rectification order issued to a builder to rectify incomplete, defective or non-compliant work a "claim" within the meaning of a professional indemnity policy and are costs the builder incurs in complying with that order recoverable (under its own professional indemnity policy and against third parties)?  

• Can a builder facing a subrogated cost recovery claim by the BPC reduce its liability by way of a defence that would have been available had the building owner claimed against the builder directly?  

To discuss the Act or its potential implications further, please contact our Construction Risk Insurance team.