Tuesday, 9 September 2025

Domestic Building Contracts Amendment Bill 2025

Second reading

Debate resumed on motion of Lizzie Blandthorn:

That the bill be now read a second time.

Renee HEATH (Eastern Victoria) (17:42): I rise today to speak on the Domestic Building Contracts Amendment Bill 2025. In principle, this is a bill that the opposition will support. It seeks to modernise domestic building contracts to strengthen protections for Victorian families who embark on the great Australian dream of building their own home. It builds on earlier legislation passed this year, the Building Legislation Amendment (Buyer Protections) Act 2025. It amends the Domestic Building Contracts Act 1995, the Building Act 1993 and related legislation. Its provisions include requiring domestic building contracts to be in plain English and include essential details such as the scope of work and agreed price. It extends implemented warranties; tightens rules on deposits and progress payments; restricts cost escalation clauses, banned for contracts under $1 million and capped at 5 per cent above $1 million; allows owners to withdraw or terminate contracts if prices increase by 15 per cent or if work is delayed by 50 per cent over the agreed timeframe; transfers powers from Consumer Affairs Victoria to the new Building and Plumbing Commission, which replaces the Victorian Building Authority; and expands inspector and enforcement powers and compliance obligations. These are objectives that, in isolation, are worthy considerations, and that is why we will support it.

However, this bill cannot be debated in isolation. It is in fact a reactive response to a crisis that this government knew was coming and was instrumental in creating. Yet now the government is avoiding looking at its own reflection in a mirror. To debate this properly we have to take a few steps back. The immediate backdrop of this bill is the collapse of Porter Davis Homes in 2023. Its failure set into motion the destruction of the dreams of hundreds of families and interrelated businesses and trades. Over 2600 building contracts were left in limbo. Subcontractors were owed $71 million, with more than 1000 unsecured creditors, including tradies. Employees were owed over $18 million in unpaid wages and entitlements, and lost home deposits averaged between $30,000 and $50,000. One client, Richard Williams, lost $38,000 – equivalent to, in his words, the eight rounds of IVF he and his wife were likely to need to have their second child.

The question we must ask is not just how this happened but why this happened. This government would have you believe that it was just a corporate failure. Inevitably it was, but it was also the predictable result of systematic pressures, which included unsustainable fixed price contracts, soaring costs, including higher taxes and compliance, and policy decisions that destabilised the sector. In the lead-up to the Porter Davis collapse over 530 construction businesses in Victoria had already gone under. Other major collapses include Probuild, Clough Group and PBS Building. Every one of them cited rising costs, fixed price contracts and project delays. It was a multifaceted, systemic industry-wide failure. It begins with the government’s unrelenting push for home ownership from grants, schemes and targets, such as the shared equity scheme, that created a demand bubble. We saw this during the 2008 global financial crisis, but demand-side economics without supply-side balance inflates prices. The IMF warned of the risk, and the government continues to ignore this, even as it drives home prices higher, with 43 per cent of the cost of new home and land packages coming from taxes, regulations and charges. That is extraordinary – 43 per cent from taxes, regulations and charges.

Another catalyst was the government’s insistence on the longest and harshest lockdowns in the world – 262 days that were, as we know, based on political calculations rather than clear health advice and amounted to a gross breach of human rights. The impacts on construction were absolutely devastating, with large sites cut up to 25 per cent capacity and small sites capped at five workers. Small-scale projects saw up to a 66 per cent reduction and construction payroll jobs would drop 7 per cent in Victoria, worse than the national average. Builders locked into fixed-price contracts could not absorb the delays and cost blowouts. Supply chains were severely restricted and material costs skyrocketed. Labour vanished. Small to medium builders lacked the cash revenue to survive the stop-start chaos. So while Daniel Andrews fronted daily press conferences, the vast majority of businesses –

Ryan Batchelor interjected.

Renee HEATH: ‘Leave him alone’? Isn’t he in China? While Daniel Andrews fronted daily press conferences, the vast majority of businesses were brought to a grinding halt, often with little notice, and even less logically, leaving people baffled, mentally broken and financially decimated.

Jacinta Ermacora: That was your prime minister that did that.

Renee HEATH: Gosh, there is some excitement from the other side, isn’t there? I shall soldier on.

Then the government’s Big Build infrastructure projects, its colossally priced vanity projects, acted like a giant vacuum sucking up what was left of trades, materials and labour away from the residential sector. As one industry put it, the Big Build was:

… sucking up resources from our industry and making things even more difficult.

This again drove up costs, worsened shortages and left home builders unable to compete on labour and material.

The lockdowns exposed our fragile reliance on international supply chains, again driving costs through the roof. But did the government respond by strengthening local manufacturers? No, absolutely not. Instead this year we also saw the collapse of Oceania Glass, Australia’s largest architectural glass manufacturer. Since 2022, 415 Victorian manufacturers have gone under – this is a fact. In 2024 Victoria recorded another 223 manufacturing insolvencies, nearly a third of the national total. South East Melbourne Manufacturers Alliance CEO Honi Walker has repeatedly warned that the government continues to ignore the local manufacturing sector, the very foundation of the building industry. This will only ensure a loss of more jobs while adding to the cost of everything.

The most damning are the documents obtained under freedom of information showing that in July 2022, a full eight months before Porter Davis went into liquidation, the then Minister for Housing, Danny Pearson, was briefed on the risk of potential insolvencies and was provided with options to de-risk. That is significant. He was provided with a brief of the insolvencies, he was provided with options to de-risk and he did absolutely nothing. It proves the government had advanced warning and clear options to mitigate the collapse, yet it chose not to act, even when Porter Davis requested a $25 million loan. To put that into perspective, $25 million is less than the interest we pay in this state in one day under this government. It has racked up so much debt that that is less than what we pay in interest alone, yet even when Porter Davis requested a $25 million loan, repayable with interest, the government refused, deeming it not worth saving. The results: collapse, insolvency and a cascading impact across the sector, including the eventual $15 million taxpayer bailout, a cost far exceeding the loan requested. Meanwhile organisations like Netball Australia received a $15 million lifeline, and Metricon, another major builder that was under financial strain, received indirect support through accelerated state contracts. But Metricon was not just any builder; it was one of the largest contractors for Victoria’s social housing, and it would later pick up hundreds of homes left unfinished from the Porter Davis collapse.

This is not an even playing field, because while private builders collapse, this government continues to pour billions of dollars into its own Big Build infrastructure projects that are drowning in cost blowouts and overspending. It shields its own failures while abandoning the businesses and families that drive our economy. It picks winners and losers not based on economic merit or public interest but on political convenience. Meanwhile the Victorian Managed Insurance Authority, which should have been the final safety net, was itself in dire straits, posting a $250 million operating loss even before the Porter Davis collapse began to mount. It followed with a $98.6 million loss in 2023–24, and it has repeatedly come under fire for underquoting contracts, withholding internal reviews and diverting claims to VCAT in ways that limit the Ombudsman’s oversight.

Then there is the VBA, or the Victorian Building Authority. It has faced years of criticism for systemic failures. It routinely failed to investigate complaints, with only 0.3 per cent of practitioners disciplined between 2013 and 2015, even allowing unqualified or insolvent builders to maintain registration, sometimes under new names, after bankruptcy. Inspections were at times conducted remotely by FaceTime, or builders supplied photos. Repeated Auditor-General warnings since 2000 describe the consumer protection framework as ‘utterly inadequate and entirely ineffective’. Even by 2023 enforcement and complaint tracking still relied on spreadsheets. This is a striking example of regulatory dysfunction in an industry critical to Victoria’s economy, and this bill both consolidates and then hands over even more power.

It is against this backdrop of failures that we must assess the bill before us. While we support strong consumer protections, this bill must also address the source of the illness, and the critical gaps that remain will likely exacerbate the very problems the bill claims to be fixing. Taken together with Victoria’s fragile and shrinking economy, this failure could be catastrophic. Families today are facing unprecedented cost-of-living pressures, and unemployment is rising fast. The building and construction industry is not just under pressure, it is in freefall. In the year to June 2023, 619 Victorian construction and building firms went into insolvency. That is a 73.9 per cent increase, reaching levels described as ‘overall historically high’.

One of the most contentious aspects of the bill is the treatment of cost escalation clauses. For instance, under clause 11, builders can adjust contract prices in response to rising material or labour costs, but this is banned in contracts under $1 million, a threshold that excludes the vast majority of domestic builds. While Master Builders Victoria (MBV) welcomes the government’s decision to allow cost escalation clauses in contracts over $1 million, it has warned that this will ‘incarcerate the majority of builders’. The MBV stresses that this reform does not go far enough. It says:

… we will continue to lobby on behalf of our members for cost escalation clauses for contracts under $1 million, which represent the vast majority of contracts annually …

This limitation means that most builders will remain trapped in fixed-price contracts and unable to respond to increasing market instability, the very reason that precipitated hundreds of these builder collapses. In the current environment of soaring costs and supply chain disruptions, this is not just impractical but financially hazardous. Master Builders Victoria goes on to warn that banning cost escalation clauses for contracts under $1 million will force builders to inflate prices upfront – that is quite scary, and I think it is something that we should be considering – while small and medium builders already on the brink will face higher compliance costs with little flexibility to absorb shocks. This adds another layer to the many concerns about out-of-control building costs dealt with earlier, including concerns stemming from the buyer protection act and the legislation for the developer bond scheme, compounding compliance burdens and pushing up housing costs.

The bill also introduces new obligations using vague and undefined language. Terms such as ‘modern methods of construction’, ‘due care’ and ‘exceptional circumstances’ are left open to interpretation. This lack of clarity invites legal disputes, delays and increased costs. Another major concern is the deferral of another key detail to future regulators. For example, the percentages for progress payments that are critical to managing building cashflow are not specified in the bill itself but will be set further on down the track through regulation. Parliament is being asked to pass a law without knowing the details and trusting that the government will work it out later and do the right thing. It is backward, as it creates an atmosphere of uncertainty in that builders are being asked to prepare for reforms without knowing the full scope of their obligations.

Clause 19 allows an owner to terminate a contract if the price increases by more than 15 per cent or the completion is delayed by more than 1½ times its agreed timeframe. But it raises the question: what happens to those houses if they are half finished? Who has the right to possession of those, or will the shell left on a block of land be subject to a lengthy legal dispute?

A core problem also remains that this bill hands more power over to regulators which have already failed Victorians, even after the collapse of Porter Davis Homes. The Auditor-General’s report in May this year found the VBA – now the Building and Plumbing Commission, BPC – is still not ensuring that all building permits carry the legally required domestic building insurance. As my colleague Richard Riordan noted, many families affected by the collapse of Porter Davis are still waiting, and some have been living in rentals for years as they battle insurers and regulators. We saw in January 2024 the collapse of Montego Homes, who once again failed to take out mandatory insurances before accepting deposits. This one affected 60 families, and they were not eligible for government financial assistance – 60 families that really have faced a lot of financial loss and potential ongoing devastation.

I will close on this note. The opposition will support this bill because home owners deserve protection, but let the record show the correct context and the proper diagnosis: this is an issue that the government was aware was coming and did nothing to stop. Without significant reform to the balance of rights of builders and consumers and correcting the structural reasoning for higher building costs, the pattern of collapse will continue, leaving more families and businesses to bear the cost, while home ownership will remain a distinct, far-off dream for many young people. For this, there must be accountability.

Ryan BATCHELOR (Southern Metropolitan) (18:02): I am very pleased today to rise in support of the Domestic Building Contracts Amendment Bill 2025. We know that Victoria is building more homes than anywhere else in Australia. We are approving more homes to be built than anywhere else in Australia. And when you have got a building sector producing more homes than any other jurisdiction in the country, you have got to make sure the consumers are protected too. We have got to make sure that the homes that are being built are of high quality and that the industry conducts itself in a manner that is fair to consumers, because we know that for many – probably for most people – building a home and buying a home are the most significant purchases that they will make in the course of their lifetimes. That is why this government stands with those who want to build their own home and those who want to buy a new home. We have already legislated to increase protections for buyers of new apartments and houses through the Building Legislation Amendment (Buyer Protections) Act 2025, which ensured developers are building quality apartments and homes that Victorians expect and deserve, fostering the confidence in both buyers and developers to continue buying and developing. That is what we have done previously. This bill goes further, protecting more Victorians who are building their own family home, because for many, investing in their own home is the biggest investment they are going to make in their lifetime, and it is only right that they can be assured that their rights and the quality of their homes are protected.

The legislation that we see before us today comes about following a process that was initiated after the collapse of Porter Davis Homes in 2023, a sad and distressing event for many Victorians, which left them with unfinished homes and necessitated government intervention to protect consumers from significant financial losses. As part of that process, this government made a commitment to review the Domestic Building Contracts Act 1995, which we are amending today. The amendment bill we see before us is a result of that review, because no-one, neither consumers nor builders, wants a repeat of the Porter Davis Homes collapse in 2023. The bill before us today strengthens consumer protections and breeds confidence into the industry to advance the state towards meeting its necessary and ambitious housing targets, because that is what Labor wants to do, and that is what Labor governments do – protect consumers and back the industry. The government knows that certainty in the building industry, as the industry itself has told us, is critical to giving confidence to both consumers and developers, which will ultimately lead to more homes being purchased and more homes being built. And I think this government’s track record on supporting the building sector, on supporting the supply of more homes and on supporting consumers to build their homes with confidence stands in stark contrast to the policy prevarications and frustrations that those opposite have led.

The bill today, the latest bill from the government, makes a number of key amendments to the Domestic Building Contracts Act. It makes clear that the rules around domestic building contracts are clearer and better protect Victorians. It updates rules around how and when builders get paid. Some of these rules have not changed since the passage of the Domestic Building Contracts Act in 1995, a mere 30 years ago. We can all reflect I think on how much has changed in the last 30 years and why it would be necessary for the government, 30 years on, to make some changes to the rules, some of which have been around since 1995.

The legislation today will facilitate a more modern payment framework, enabling regulations to prescribe deposit limits, progress payment stages and progress payment limits specific to different types of contracts, central to the principle that you should only be paying for work that has or is being done on your property – because what we saw in the collapse of Porter Davis Homes was that many Victorians were facing losses of money that they had put towards work that had not yet been completed. This bill has amendments to prevent consumers being charged for work that has not been completed, and the bill provides provisions that a builder will not be permitted to demand or receive any amount or instalment of the contract price that is not directly related to the progress of work actually being completed as stipulated in the contract. So if 50 per cent of the work has been done, a builder can only demand payment for up to 50 per cent of the total work under the contract, and for domestic building contracts that are not specified – for example, renovations or extensions – the bill will enable owners and builders to use custom payment stages and amounts.

Recent years have demonstrated the volatility of prices for building materials across the state, and this price instability provides an environment of uncertainty for builders and consumers alike. One of the aspects advocated for by the building industry is the ability to use cost-escalation clauses to enable the price of a build to be increased to reflect unexpected increases in the cost of raw materials, many of which are obviously outside the control of both the builder and the consumer and, as we have seen in recent years, subject to vagaries of the international markets. The bill therefore permits these clauses in major domestic building contracts valued at $1 million or higher for an increase of no larger than 5 per cent, giving the industry flexibility to adjust to fluctuations in cost and to avoid circumstances where increases in costs can put financial pressures on a developer, something that has in the past led to some reasonably serious consequences. These clauses are only permissible in contracts of $1 million or more, protecting the small-scale owner from what may be unviable increases in costs.

There are consumer protections in place with this bill to prevent developers from abusing the clause. One such protection, in addition to the 5 per cent ceiling on price increases, is an overarching 5 per cent cap on the increase of a price in the original contract through the use of these clauses. The bill also allows owners of buildings to end contracts under the act if the agreed completion time for the work extends past more than 50 per cent of the contract price and the contract price increases by more than 15 per cent. The amendment here specifies that consumers will no longer be required to determine whether the builder could have reasonably foreseen the cost increase; it is about flexibility and clarity while protecting consumers, and that is the heart of what we are trying to do here.

The bill will also provide for reforms around preliminary works and agreements, enabling consumers and builders to more easily enter contracts on preliminary works, by amending the definition of ‘domestic building work’. This is to allow builders to obtain up-front payment for this preliminary work. It contains tasks which can require substantial work to be undertaken to accurately price a contract and prepare it. We know that a more accurate price means less scope for unexpected price increases, so facilitating the payment for preliminary works will lead to more clarity and more certainty in the final contract. It also will reduce the regulatory burden on builders.

The bill, as with others that we have passed previously, supports the establishment and new operations of the Building and Plumbing Commission. The Building and Plumbing Commission is a new more powerful watchdog for the building and plumbing industries in Victoria. It inherits powers transferred from Consumer Affairs Victoria to the Victorian Building Authority, which is now the Building and Plumbing Commission. It brings together under one umbrella all aspects of building quality and control, including regulation, insurance and dispute resolution. The bill transfers compliance, monitoring and enforcement functions and the powers currently contained in the Domestic Building Contracts Act 1995 to the Building and Plumbing Commission. The bill also transfers administrative capabilities such as the administration of the Domestic Builders Fund. Functions will be conferred on the new commission to provide information and advice to builders and owners on their rights and obligations under the act, which we are amending today; it all means that the Building and Plumbing Commission becomes a one-stop shop for builders and owners to get the information that they need to ensure compliance.

The bill is part of a comprehensive suite of reforms developed through the review and extensive consultation with both the public and the industry that the Labor government is introducing. The measures will make rules and obligations around building clearer and fairer, meaning consumers are protected and the industry has the confidence to build. It lifts building standards and provides consumers with the belief that their product will be of a high quality, and the bill, as is the theme through our reform in this government, puts Victorians first and foremost. We are delivering modern reforms for a modern society, protecting Victorians who want to own and build their own home. As we go, I commend the bill to the house.

Moira DEEMING (Western Metropolitan) (18:11): Victoria’s building and construction industry is one of the largest parts of our economy. It touches almost every family, from first home buyers trying to build a house to tradies earning their livelihood to subcontractors keeping projects moving. It is also one of the most heavily regulated sectors in the state, with layers of rules and regulators and insurance schemes that are supposed to give families confidence that in Victoria, if they sign a contract, their home is going to be safe and their investment, secure. Yet despite all of the laws and all of the regulators, Victoria has been hit again and again and again by building disasters that have left families absolutely devastated, subcontractors unpaid and communities broken.

This is the reality that we are dealing with again today, and that is the context for this bill, but the root cause has been clear all along. Our building system was designed with a fatal conflict of interest in it, where the very surveyors meant to hold builders to account depend on them for the next job. That conflict has been raised over and over for more than 30 years, one of many, and yet Labor has been in power for 21 of the last 25 years and they have never fixed it, and today we are witnessing that same failure on repeat yet again. Take the Lacrosse fire of 2014: a single cigarette on a balcony set off a blaze that tore up 13 storeys in less than 15 minutes. It cost millions in damages and left families living in fear and uncertainty for years. Why did it happen? Because surveyors who rely on builders for future work signed off on non-compliant cladding, because approvals were fast and oversight was weak, and accountability was absent. Not one regulator lost their job, not one surveyor went to jail, and not one official was held responsible. The families who were the victims carried all the loss. Then came the Porter Davis collapse – more than 2600 family contracts stranded, over $71 million owed to subcontractors, and another $18 million in unpaid wages. Porter Davis and the families begged for a $25 million loan just to keep their homes alive, and as my colleague Dr Heath pointed out, that is not even the same amount of interest we pay every day. The government said no, it was too risky, but then only months later they somehow found $15 million to bail out other builders. Why the difference? Again, no regulator resigned, no minister was sacked, no executive went to court – the people who had already lost everything were the only ones punished.

Then there is the insurance system – the last safeguard meant to protect families when everything else has failed. The most famous example is Montego Homes, which traded without holding the mandatory licence it was legally required to carry. Families signed contracts in good faith only to discover that the safety net they thought they had simply did not exist, and again no regulator was fined, no official was disciplined, and nobody faced criminal consequences; the victims, the families, alone bore the burden. The Victorian Managed Insurance Authority has lost hundreds of million dollars underwriting such defective builders, and instead of using those losses to drive reform it has shifted the costs back onto families through levies and higher premiums. Meanwhile, the Victorian Building Authority allows builders and surveyors to keep operating even when their insurance has lapsed or been restricted. Families relied on this government to ensure that they could trust the institutions that it set up, but they were betrayed. They found out too late that they were unprotected, that the government had not done its job, and they lost everything. This bill fixes precious little and perpetuates the core problems that resulted in these disasters in the first place.

Labor wants to restrict or ban cost escalation clauses. On the surface that might sound like it helps families, but here is the truth: builders themselves face real and legitimate risks. The costs of materials, the supply chain delays, the workforce shortages – these are pressures that are outside their control. They are symptoms of the broader economic crisis in this state, a crisis created and made worse by Labor’s endless taxes, levies and waste. As Dr Heath pointed out, earlier on in the chain the manufacturing industry, which is the basis of construction, was completely gutted. When Labor tell us that banning escalation clauses is going to somehow protect families, what they are really doing is just pushing the risk back onto the builders, who are already struggling. And when builders are forced to put that price in the up-front cost, it is again families who are going to be paying more for a home. Houses are going to be more expensive because of this – in a housing crisis.

And after all these failures, rather than fixing the system, the government have decided to give even more powers, through these entry powers, to these bodies. It is unbelievable. What is that famous saying? ‘I’m from the government, and I’m here to help.’ That is the worst, most terrifying saying in the English language. But of course this is the socialist way: declaring that risks can be outlawed and that the laws of economics and human nature can be defeated by some paper decree. But politicians are not gods; we are flawed human beings, and without restraint and without accountability we fall prey to the same old temptations: power, privilege and corruption. That is one of the reasons why I am a Liberal: because I believe in checks and balances, in rights and responsibilities that apply just as much to governments and politicians as to the people that they rule over. That is the only way to manage risks fairly, to protect families and to keep faith with both the people who buy homes and the people who build them.

The coalition is going to support this bill, but let us not pretend that it is actually any kind of reform. This is the minimum that Victorians are now forced to accept, because this Labor government refuses to deliver the maximum that they owe to the people. Real reform would mean breaking the cycle of failure and building in accountability. It would mean independent surveyors allocated without conflicts of interest; rigorous inspections carried out onsite, not on paper; insurance that truly protects families before the work begins; and regulators who are accountable, with serious consequences that reach all the way up to the very highest people when failures leave innocent families in ruin. That is what accountability looks like, that is what the rule of law requires, that is what families in Victoria deserve, and yet again, as per the norm, that is not what they are getting from Labor.

Lee TARLAMIS: I move:

That debate on this bill be adjourned until the next day of meeting.

Motion agreed to and debate adjourned until next day of meeting.