Buyers with defects in new homes to get easy access to cash under law changes

Buyers will be able to claim insurance the moment they find defects in new homes, and apartment developers will be forced to pay a bond to cover repairs under the Allan government’s plan to restore trust in the building industry and regulator.

Housing Minister Harriet Shing on Tuesday revealed the government would introduce legislation to parliament reforming the Victorian Building Authority (VBA), first promised late last year, as it seeks to address a “trust deficit” between the public and the regulator.

Victorians will get improved access to money to fix defects on their new homes.Credit: Pat Scala

The authority will be renamed the Building and Plumbing Commission and be given tougher powers, including the ability to bring together other agencies such as those responsible for dispute resolution and insurance.

To boost protections for Victorians building their own home, domestic building insurance will be rejigged into a “first resort” scheme allowing claims to be made the moment a defect is found.

Currently, this insurance is only available in limited situations such as when the responsible builder becomes insolvent, dies or cannot be found.

Coverage will include lost deposits, including cases where a builder hadn’t taken out the required insurance, which has been a key issue in the collapse of building companies over the past two years. Plumbing defects will be included where it can be considered part of broader building work.

Shing acknowledged these changes would likely lead to more claims being lodged, but said the measures also provided certainty to builders about the process and how cases would be assessed.

The Age has previously reported that the collapse of large home builders had strained the finances of the Victorian Managed Insurance Authority, leading to two hikes in premiums to improve the agency’s budget. The new commission will take on responsibility for domestic building insurance.

When announcing reforms to the Victorian Building Authority last year, the government committed to find consumer protections for defective work in buildings four storeys and above.

As part of the legislation announced on Tuesday, a developer bond scheme will be set up where companies provide to the regulator 2 per cent of the cost of construction. The bond will be held and released to fix defects, then returned after two years.

A home damaged by defective plumbing included in the VBA’s internal review.Credit: Luis Enrique Ascui

This system will begin at the end of 2025 while the government does further work on a 10-year liability scheme to cover apartment owners.

Master Builders Victoria chief executive Michaela Lihou said more information was needed but supported the objective of the announcement.

“But we also believe in a system that treats honest builders with respect, and protects their rights to run their businesses appropriately, under the eye of a fair and just industry watchdog,” she said.

Opposition planning spokesman Richard Riordan said tougher powers were welcomed but that the government was scrambling to patch up its own mistakes.

“Labor has allowed shoddy, rushed apartment builds to flood the market, leaving home buyers to deal with the consequences,” Riordan said.

Shing said she did not expect developers to pass the cost of the bond on to customers, as the money would be returned if there were no issues with the build.

“It is only fair that if a tenant in a rental property has to pay a bond, then a developer in a large-scale … project, that will return them a significant amount of profit, provides a bond for consumer certainty,” she said.

Housing Minister Harriet Shing.Credit: Gus McCubbing

Under the commission’s new powers, the regulator will be able to demand the rectification of building work up to 10 years after it has been cleared for occupancy. The commission will also be able to prevent the sale of homes if serious defects aren’t fixed.

Shing said the government was committed to improving the regulator, which has been dogged by revelations aired by The Age and 60 Minutes about a toxic workplace culture, and an investigation that found it had risked breaching its own laws by doing hundreds of audits by smartphone.

An internal review released in October found families were left traumatised and out-of-pocket with unfinished homes because of poor responses from the watchdog.

In January, the Independent Broad-based Anti-Corruption Commission charged as many as 34 people as part of an investigation into allegations VBA staff took bribes to register builders.

“The VBA has had many issues that have created a trust deficit for the community,” Shing said on Tuesday.

“What I would say, however, is that since beginning in the role [as VBA chief executive], Anna Cronin’s work has been transformative, there is continuous improvement,” Shing said.

Cronin said Victorians had previously been “ping-ponged” across multiple agencies when they had problems with their homes, and a new centralised authority would join this work together.

“Consumers have a pretty horrendous journey and even if it works well, it’s still a pretty complex journey,” Cronin said.

“No more being pushed around to other organisations, no more handballing. [It is a] one-stop shop. It’s going to make a very big difference to the consumer experience.”

The Department of Transport and Planning is also starting consultation on mandatory inspections during construction works, and the creation of a new building manual system for apartment buildings, which is intended to allow owners to easily access information about how their home was built.

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