Victorians building or renovating their homes will soon benefit from stronger consumer protections, following the passage of major updates to the state’s domestic building contract laws. The reforms aim to boost confidence in the residential construction sector while supporting better outcomes for both consumers and builders.

The changes will pave the way for the Building and Plumbing Commission to become Victoria’s new central authority for contract oversight, regulation, insurance and dispute resolution. Several existing powers will be transferred from the Director of Consumer Affairs Victoria to streamline governance and improve accountability.

Updates to the Domestic Building Contracts Act 1995 will make it easier for homebuyers to end a building contract and introduce clearer rules for deposits, progress payment limits and construction stages. The reforms also address cost escalation clauses — a critical issue that emerged during the post‑pandemic surge in construction costs — with new ceilings set to prevent unexpected and excessive increases.

Although passed by Parliament, many of the changes will be implemented in stages, with key provisions scheduled to commence from December 2026 to allow coordination with broader reforms underway.

In announcing the legislation, the Victorian Government highlighted the collapse of Porter Davis in 2023, which left more than 1,500 homes in limbo, including some that had not been insured. The incident prompted significant public concern and accelerated calls for stronger consumer safeguards.

Minister for Consumer Affairs Nick Staikos said the reforms are designed to ensure Victorians are better protected when undertaking one of the most important investments of their lives.

“For many families, their home is the single largest investment they will make in their lifetime – which is why it’s critical that domestic building contracts are clear and fair,” Mr Staikos said.

Minister for Housing and Building Harriet Shing said the reforms are “another important part of putting consumers at the heart of a better building sector”.

Australian Builder’s Collective president Phil Dwyer, a long‑time advocate for nationwide consumer protections, said the legislation represents meaningful progress for homebuyers, though further work is still needed.

“We will have proper protections for consumers; and for builders, no one who does the right thing has anything to worry about,” Mr Dwyer said.

“But while we will have a one-stop shop, the culture behind it is still there and that bothers us a little bit.

“There’s more work to be done, but I think it will be done.”

Housing Industry Association Victorian executive director Keith Ryan welcomed stronger definitions that differentiate between large‑scale developers and small builders, ensuring that contract rules are appropriately matched to project scale.

However, he cautioned that the industry will be reviewing the details closely. He noted that cost escalation clauses may be rarely used, particularly for builds above $1 million, given the marketing challenges and limited acceptance by banks. Ryan added that clearer guidance on progress payments will support growth in modular and prefabricated home construction.

While industry leaders agree the reforms will help reduce the risk of future collapses similar to Porter Davis, they also acknowledge that eliminating the risk entirely remains challenging. According to ASIC insolvency data, 2,307 construction companies have entered administration nationwide so far this year — the highest of any industry.

As implementation begins, the reforms are positioned to strengthen consumer confidence and create a more transparent and resilient home building sector across Victoria.

Source: realestate.com.au