I rise to speak on the Domestic Building Contracts Amendment Bill 2025. This bill is part of the Allan Labor government’s continuing work to modernise and strengthen the framework for Victoria’s building industry. From the outset I would like to thank the Minister for Consumer Affairs and his team for their efforts in bringing this important piece of legislation to this house, and I trust these changes will make a positive impact for Victorians.
This bill is informed by the comprehensive review of the Domestic Building Contracts Act 1995 initiated following the collapse of Porter Davis Homes. That event highlighted the significant risks that can arise when consumer protections are insufficient and when industry practices move ahead of the legislation that governs them. The review confirmed that the Domestic Building Contracts Act 1995 remains an important piece of consumer protection legislation but after nearly three decades it requires updating. The reforms in this bill respond to that conclusion. They aim to give people greater confidence when entering into building contracts, ensure protections are clear and enforceable and provide the building industry with a framework that is adaptable to changes in construction methods and technologies. For many families a home is the single largest financial commitment they will ever make. This is true whether they are building from scratch, undertaking a major renovation or extending an existing property. It is therefore critical that the laws governing domestic building contracts are clear, effective and able to meet the needs of both consumers and the industry.
The bill before the house delivers reforms across a range of areas, and I will outline some of the most significant. One of the most important reforms relates to the payment timing in major domestic building contracts. The current rules have not been substantively updated since the act commenced in 1995 and no longer reflect industry practice. They do not take into account the different stages and payment needs that can arise depending on the method of construction. This bill introduces a new regulatory head of power to prescribe deposit amounts, progress payment stages and payment caps for different types of contracts. Details will be set out in the regulations, which allows these requirements to be updated as industry practice changes. It also allows different rules to be applied for different types of construction. For example, builds that use modern methods of construction may have different staging to a conventional build. A central safeguard is the introduction of a proportionality requirement. This means that a builder cannot demand or receive more than the value of work that has been completed at that stage. This prevents the situation where consumers are paying ahead of the work and are potentially exposed to loss if the builder cannot complete the project. For building contracts that are not prescribed, such as a smaller renovation, the bill allows owners and builders to agree to custom payment stages and amounts. This ensures flexibility where a one-size-fits-all approach would be inappropriate.
The bill also addresses the issue of cost escalation clauses. In recent years builders have faced significant volatility in the cost of materials and labour as well as supply chain delays, and we do not deny this reality. In response to this, this bill permits cost escalation clauses only in major domestic building contracts with a contract price of $1 million or more. Any increase is capped at 5 per cent, and there are strict conditions around how such clauses can be used. We are taking steps to ensure this is properly safeguarded. Before the contract is signed, the builder must provide a clear warning notice explaining the clause. Any increases must be calculated with due care and skill, and the builder must provide documentary evidence, such as invoices or receipts, to substantiate the increase. If any of these requirements are not met, the builder cannot recover the increased amount. This approach recognises that while cost escalation clauses can help manage genuine unforeseen cost increases, they must be tightly controlled to protect consumers from being exposed to open-ended price rises.
Another significant reform is to the definition of ‘domestic building work’. Currently work such as the preparation of plans, specifications and bills of quantities is included in the definition. This means that any agreement for this work must comply with the full set of requirements under the act even though it is not construction work. The bill removes these activities from the definition, allowing builders and owners to enter separate preliminary agreements for them. This aligns Victoria with other jurisdictions, including Queensland and Western Australia. It allows builders to be paid for preparatory work without having to comply with contract provisions that are designed for actual building work, while still ensuring consumer protections apply where appropriate. This change supports better prepared contracts, as preliminary work can be completed in detail before the main contract is signed, giving owners more certainty about the cost and scope of their project.
The bill supports the establishment of the Building and Plumbing Commission by transferring compliance, monitoring and enforcement powers from Consumer Affairs Victoria to the Victorian Building Authority. Bringing these functions together – regulation, insurance and dispute resolution – into a single agency will make oversight more efficient and cohesive. It ensures there is one body responsible for the full spectrum of building quantity, safety and consumer protection. The bill also makes important changes to when and how building owners can end a contract. Under the amendment, if the agreed completion time blows out by more than 50 per cent or if the contract price increases by more than 15 per cent, the owner can end the contract. Crucially, they will not have to prove that the builder could have reasonably foreseen the increase in time or cost, and this removes the unnecessary hurdle that has made it harder for consumers to exercise their rights.
The bill addresses the practice of contract splitting, where multiple smaller contracts are used to avoid the rules that apply to major domestic building contracts, including domestic building insurance requirements. This practice was again seen in the collapse of Porter Davis Homes and left many consumers without the protections they should have had. This bill makes it clear that multiple related contracts can be treated as a single major domestic building contract if they relate to the same project. Statutory warranties will also be extended to a broader range of contracts, including verbal agreements, unsigned contracts and written contracts where the scope of work is unclear. This ensures that consumers are covered even when documentation is poor or incomplete.
The bill introduces a single clear process for variations to plans and specifications in major domestic building contracts, regardless of who initiated the change. This replaces the existing inconsistent rules, and more importantly, it gives both parties certainty around how variations must be documented and agreed to. Other reforms include removing most consumer protections from purely commercial arrangements between developers and builders and modernising statutory warranties to bring them into line with the consumer guarantees in Australian consumer law.
The reform in this bill will deliver a modern, fit-for-purpose domestic building contracts framework for Victoria, and we are doing this for tens of thousands of customers who, more often than not, find themselves at a disadvantage when it comes to building a house, just like a couple in my local community. In their 60s and now entering retirement, they downsized to a new townhouse in the area where they have lived for over 35 years, because they love living in our local community. The townhouse seemed adequately suited to the new chapter of their lives, but little did they know it would mark the beginning of several years of being kicked around between builders, developers and insurers, with no-one seeming to wish to take responsibility. The builder of their townhouse used subcontractors, which is common practice; however, it later became clear that critical inspection steps were missed, resulting in an improperly installed sewerage system. This issue may require a complete replacement, involving cutting through the concrete slab and temporarily vacating the property. Despite numerous defects and the plumbing being the problem, the builders are refusing to take any responsibility, insisting that the developers are to blame. This is precisely the kind of situation that this bill, along with other reforms in this space, is designed to prevent. I have sat with this couple many, many, many times and have seen their stress and lack of sleep. When they should be able to retire and enjoy the best years of their life, this has put undue stress on them. I am happy that this bill will help to alleviate these types of problems.
By closing loopholes in responsibility and strengthening oversight, the bill will ensure that no home owner, being someone in their retirement or a young couple hoping to start a family, ends up trapped in years of stress, uncertainty and costly disputes. They give consumers stronger protection and clearer rights while giving the industry the flexibility and certainty it needs to deliver more homes for Victoria. They respond to lessons from past failures, close loopholes that have been exploited and ensure our laws can keep pace with changes in building methods and industry practice. This is a balanced and considered package of reforms, and I commend the bill to the house.