Major Shake-Up for Domestic Building Contracts in Victoria

For many families, their home is the single biggest investment of their lives. As Consumer Affairs Minister Nick Staikos noted in the second reading speech introducing the reforms, a home is “the foundation of their future,” which makes it essential that Victoria’s laws around domestic building contracts are “clear, effective and modernised” to protect consumers.

That is the purpose of the Domestic Building Contracts Amendment Bill 2025 (Vic), introduced to Parliament on 18 June 2025. If passed, the reforms will commence on 1 December 2026 (unless proclaimed earlier) and apply only to contracts signed after commencement, so current agreements won’t be disrupted.

Why These Changes Are Needed

The Domestic Building Contracts Act 1995 (Vic) (DBC Act) has not been substantially modernised since its introduction almost three decades ago. In that time, Victoria’s housing sector has changed dramatically.

• Industry pressures: Global supply chain problems, labour shortages, and inflation have driven up costs. Builders have sought protection through rigid payment schedules and cost escalation clauses.
• Consumer harm: The collapse of Porter Davis Homes in 2023 exposed loopholes that left families with half-finished homes, lost deposits, and no effective recourse under existing law.
• Changing practices: Modern construction methods, including modular and prefabricated housing, demand greater flexibility in contract regulation.

Minister Staikos made clear that the government’s review, launched after the Porter Davis collapse, showed the law was no longer “fit for purpose.” The Bill responds by strengthening consumer protections while still supporting industry innovation.

Key Reforms in Detail

Stronger Contract Requirements

• All domestic building contracts (not just major ones) must be written, legible, and contain key details: parties’ names and addresses, builder registration, work description, price, and date.
• Contract splitting, previously used by some builders (including Porter Davis) to sidestep consumer protections, will be banned. Multiple contracts that could form one major domestic building contract (MDBC) will be treated as a single agreement.
• Statutory warranties are modernised to mirror the Australian Consumer Law (ACL) guarantees, ensuring consistency.
• Warranties will also apply even if the contract is verbal, unsigned, or poorly drafted.

Deposits and Progress Payments

The Act has not updated payment rules since 1995. The Bill creates new regulatory powers so that deposit and progress payment limits can be set (and adjusted) by regulation. This allows flexibility for:

• Different types of contracts (e.g. homes vs renovations).
• Different construction methods (e.g. modular builds).

Importantly, builders will be barred from demanding payments not tied to actual progress. This ensures families only pay for completed work.

Cost Escalation Clauses

Builders have long pushed for cost escalation clauses to reflect rising material and labour costs. Consumers, however, risk being caught by unpredictable increases.

The Bill strikes a balance:

• Allowed only in contracts over $1 million.
• Capped at 5% total increase.
• Clauses must be initialled or signed by the homeowner.
• Builders must provide invoices and evidence for increases, and warrant that costs are calculated with due care.

Breaches will be an offence, with penalties and a loss of entitlement to recover the additional costs.

Plans and Specifications

Currently, preparing plans, specifications, or bills of quantity counts as “domestic building work,” meaning builders can’t contract for these preliminary services without triggering the full DBC Act requirements.

The Bill removes these tasks from the definition of domestic building work, bringing Victoria in line with other states. This makes it easier to contract for design work upfront, while ensuring plans still form part of the final building contract.

Variations and Termination Rights

• A single, simplified process will replace today’s complex variation regime. All variations must be written, signed, and costed, with exceptions for urgent or surveyor-directed changes.
• Owners may terminate contracts if:
  • Costs increase by more than 15%, or
  • Completion time exceeds the contract schedule by 50%.
• Unlike current law, owners no longer need to prove the builder couldn’t have reasonably foreseen the blowout — simplifying the process and reducing disputes.

Enforcement and Dispute Resolution

• Oversight will shift to the Building and Plumbing Commission.
• Inspectors gain expanded powers to enter sites, request documents, and enforce compliance.
• Dispute resolution powers will be broadened, covering issues like delays, damage, unpaid insurance, and non-performance.

Developers and Commercial Contracts

Recognising that developers are not ordinary consumers, the Bill carves out a separate regime:

• Only core requirements (such as builder registration, implied warranties, and foundation information) apply to developer-builder contracts.
• Consumer-oriented provisions like deposit limits, cooling-off periods, and extensive variation controls will not apply.

This ensures consumer protections are targeted at individuals and families, while developers can negotiate more commercially flexible terms.

Voices from Parliament

In his speech, Minister Staikos emphasised the reforms are about “fairness, lifting standards and making sure that Victorians can enter into domestic building contracts with confidence.”

Other members also weighed in, with Josh Bull (Sunbury) hailing the reforms as bringing “a more structured, more certain and better way of contracting when it comes to housing.”

Implementation and Next Steps

• Commencement: 1 December 2026 (unless proclaimed earlier).
• Application: only to new contracts signed after commencement.
• Transition: industry will have time to update templates, consult on draft regulations, and train staff.

Final Word

The Domestic Building Contracts Amendment Bill 2025 is one of the most significant reforms to Victorian building law in decades.

It:

• Brings contracts into the modern era,
• Tightens payment rules,
• Protects families from unfair risks,
• Simplifies variation and termination rights, and
• Consolidates enforcement in a single, stronger regulator.

As Minister Staikos put it, the reforms “deliver a modern fit-for-purpose regulatory framework … to give consumers greater confidence and security when building or renovating their homes,” while also enabling the building industry to innovate and adopt new technologies.

The Bill has already passed the Legislative Assembly and now awaits debate in the Legislative Council.

At Warlows Legal, we believe these reforms will strengthen protections for our clients and provide a clearer, fairer foundation for anyone embarking on a building or renovation journey. If enacted, it will give Victorians a fairer foundation for building their dream homes.