Thursday, 11 September 2025

Bills

Domestic Building Contracts Amendment Bill 2025

Second reading

Debate resumed on motion of Lizzie Blandthorn:

That the bill be now read a second time.

David DAVIS (Southern Metropolitan) (09:59): I am pleased to rise and make a contribution to the Domestic Building Contracts Amendment Bill 2025 and note that our response on this was led by Dr Heath, and it made a number of very clear points about the bill. Obviously this is a bill that we are not opposing. It is a bill that we think there are some useful points in, so we are in a position where we are quite prepared to not oppose. The industry has noted a number of significant objections, and the bill is a consequence of the poor business practice and unforeseen circumstances that cost many families their life savings. The government botched these matters around building contracts. They botched the arrangements for so many young families that have been left high and dry, and I do not need to, as many in this chamber have, go over those many examples of families and firms that have really struggled under the government’s arrangements for domestic building contracts.

The point I would make here is that this is part of a wider failure of the Andrews first and then Allan Labor governments to manage construction and building in this state, and we know that the CFMEU has had far too much power, far too much say. We know that the government has botched so many of these issues.

I just want to draw the chamber’s attention to the front page of the Age today: ‘Leaked files show Big Build went bad years ago, as former corruption chief calls for major inquiry’. The Age and the AustralianFinancial Review, with a trove of leaked documents, have been able to make it very clear that the government ministers knew about these matters and they knew about them a long, long time ago. The trove indicates:

… government correspondence that, for the first time, shows government officials –

and I am quoting from the Age here –

were repeatedly warned of Big Build corruption from early 2023 to as recently as June this year.

Some of the wrongdoing was reported in detailed spreadsheets maintained by the state government’s multibillion-dollar Level Crossing Removal Project …

I have asked questions in this chamber about level crossing removal corruption, CFMEU links to that and some of the social procurement programs over a number of years. The government has always flippantly tried to say that these things were not happening, that there was no problem and that any minor thing that happened was quickly swept away. Well, of course that is not true. Of course these projects are running over time and over budget massively. They are adding to construction costs more generally and thereby impacting even domestic construction costs, which is the subject of this bill.

So the concern I think many of us have is the government’s failure is spilling over into domestic construction. But the Age went on to say:

In the confidential spreadsheets, government level crossing officials were told repeatedly throughout the first half of 2023 about extortion and “blackmail” tactics by a cabal of subcontractors “aligned” with the CFMEU.

This was clearly unlawful behaviour but unlawful behaviour that the police did not take any action on and the government did not take any serious action on.

The article continues:

Another internal file from June 2023 complained of a significant cost to the Big Build because of unlawful behaviour …

Every single Big Build project has blown out. Many of them are behind time, but every single Big Build project has blown out, some massively – $50 billion of cost blowouts. One of the Labor members, Mr Batchelor, in this chamber yesterday, when we said we could remove some of the taxes that are burning and hurting so many families and businesses, said we would have to do cuts. Well, I will tell you what, the point I made at the time and I remake now is we would actually run these projects properly. We would root out the corruption in these projects. We would make sure that these cost overruns do not occur in this way. I mean, it is actually scandalous that we have got these massive cost overruns. This is taxpayers money that is being spent here – taxpayers money – entirely because the government is incompetent, entirely because they are captured, they are held tightly, by the CFMEU. The CFMEU has got real, tight control on this government, and the government has failed to act on these corruption issues. Corruption is riddled through these Big Build projects, and it is adding to the cost. We could do more with construction if we did not have these cost blowouts. We could do more in other areas if we did not have these cost blowouts. As Mr Mulholland made the point and I made the point yesterday, there is more than $50 billion in cost overruns. That is not the original cost of the project. The North East Link started at somewhere under $10 billion and has run up to now more than $26 billion. How on earth do you get by with a project cost overrun of that scale? It is just rampant incompetence, rampant failure to deal with proper cost control, and these costs are being sheeted home to everyone in the state.

Another internal file, as I said, complained of the significant cost of Big Build because of unlawful behaviour, and the article continues:

Among the workers on this payment list, which has been separately seen by this masthead, are several bikie gang members.

So we have got the CFMEU and we have got the bikie gangs deep inside this process. We have got the social procurement program where certain Indigenous groups are favoured over other Indigenous groups. We have got certain requirements for people, and you have got to get the tick to get through the chicane of controls here. One of the ticks is that you have got to pay off people on the way through. This is corrupt. It is mafialike. This is the sort of stuff that you would expect to see in some of the countries where there are not proper cost controls and are not proper financial controls and there is frank and outright corruption. This is what we are increasingly facing in Victoria – frank and outright corruption that is costing a huge amount.

Transparency International makes a number of good points about the cost of corruption. A set of papers I looked at in recent times argues that between 3 and 8 per cent is the likely figure for corruption in most countries. I might say in Victoria it is probably much greater than that. Corruption is actually skimming off, scooping off money from major projects to fund crooked, corrupt groups that are able to exercise political and industrial power. This is a disaster. When Transparency International look at this kind of corruption, one of the things they say is that actually it has a disabling effect across the whole economy. These costs are amplified across the whole economy in a very, very unhelpful way, so countries that have these sorts of corruption problems are less likely to be able to get high productivity levels and high standards of living. It actually saps the outcomes for the community, and that is what we are seeing. In Victoria because of these huge costs we have got massive new taxes, 63 new taxes. Victorians are paying the price of this corruption. They are paying the price directly of this corruption. Corrupt behaviour means Victorians pay more in tax. It means we get less infrastructure. It means that we are unable in new estates, for example, to put in the infrastructure that is needed, because the money has been scooped off and paid to corrupt individuals in construction or associated with the construction industry. This is a really very serious problem for Victoria into the future.

I was struck also by the complaints that have clearly gone to IBAC, and I am not sure that IBAC has dealt with these points satisfactorily. I have myself referred some of these allegations and issues that have come to my attention to IBAC, and I do not believe I have got a satisfactory response. In one case they waited some very, very lengthy period of time, well over a year, to come back and say they would not investigate these complaints. Ms Shing in this chamber likes to point around and say, ‘If you’ve got information, you should refer it.’ I am telling you that many of us have referred information. What is concerning is that government ministers, and Jacinta Allan is amongst them, are involved with these Big Build projects, whether it be housing or the large tunnels or roads of various types or the Level Crossing Removal Project. The truth is that these large construction projects have become the plaything of corrupt groups. The government ministers have known; they have not acted. They have not done what they should have done. That is a damning indictment on this government.

Nothing saps governments more than to be seen by the Victorian community as corrupt to the core, and that is what I think is going on here. In the case of Jacinta Allan I have an FOI which will be heard soon at VCAT. We did the obvious thing; we asked for copies of briefs provided by the department to Jacinta Allan, the then Minister for Transport and Infrastructure. That seems a very reasonable request. They came back and said there are three briefs – I think that is the number – and they gave us a couple of the briefs, which were very skimpy. But the key documents – two documents, one large, one 27pages long – were redacted, and they said the reason we could not see these is because they were personal information.

This is a brief with an attachment provided by the department to Jacinta Allan in her capacity as transport infrastructure minister, so her department providing a brief about corruption and the CFMEU to her as the relevant minister. I ask the question: what could possibly be in briefs of that nature, in the one document that I think is seven pages; the other is 27 pages, and the redactions there – we cannot have those documents at all, because they relate to personal information. I can understand if this information had come to the minister from some other source. Perhaps it is an individual, or perhaps there is a reference in those documents to a medical condition, for example. I would get that that is personal. But 27 pages in a document that is provided by the department to the minister in a formal capacity? One of the consequences of these sorts of corruption issues is that costs spill across the economy. Taxes go up; the costs in domestic building go up and up and up. If you lift the costs in the construction sector where government is procuring, government is purchasing, that has a necessary consequence. It spills over into costs and charges in the rest of the economy.

You will appreciate, President, as a former tradesperson yourself, that the tradie market is a very fluid market. And that market, if it is higher in one area, will drag wages up in other areas, and that is where some of the cost blowouts are coming from, because the state government has not managed these projects properly. They have not kept proper control on these projects, and we say there should have been better parliamentary oversight over many of these large construction projects. We have moved in this house on a series of occasions before for a parliamentary committee, an old-fashioned Public Works Committee. The old-fashioned Public Works Committee had its own act, and the old-fashioned Public Works Committee was able to help control costs. The Public Works Committee members of both sides actually under the act had power to go onto any site and to get to documents and to ensure that the project was proceeding in a constructive way, and many of the large construction projects done in this state in earlier times were oversighted by that Public Works Committee. The city loop tunnel was one of those; the large dams in the country were oversighted by the then Public Works Committee. Now, the state government has refused to restore that committee, and we say that that is one way that you can root out some of this corruption.

It is also the case that Robert Redlich has made the point that IBAC has got to step up a bit on this and that we need another sort of inquiry, perhaps even a royal commission. I think these are very worthwhile suggestions from Robert Redlich. He is a person who understands these matters, and we do need proper scrutiny in this area. Clearly what is in place now has not been able to control the corruption inside this government, the corruption of these major projects or the corruption in procurement, and we are all paying a massive price, including in higher taxes and less services.

David LIMBRICK (South-Eastern Metropolitan) (10:14): I am also pleased to speak on the Domestic Building Contracts Amendment Bill 2025. Yet again we see a bill that is giving authorised officers – these mysterious authorised officers that seem to keep popping up all over the place – powers of entry without warrant. Yet again the Libertarian Party will say no to this. In division 3(68F) it gives extremely broad powers to these authorised officers basically of search and seizure. This should never be done without some sort of warrant. The government – I do not know why they keep doing this. It makes it easier, I suppose, but there have to be checks on the power of the bureaucracy – and if they want to limit people’s rights by entering and searching and seizing property, then get a warrant.

Jacinta ERMACORA (Western Victoria) (10:15): I am pleased to speak on the Domestic Building Contracts Amendment Bill 2025. The Allan Labor government is driving reforms that are transforming Victoria’s building system. We are ensuring homes are safer, more compliant and built to last for Victorian families by establishing a system that is safe, modern, durable and above all fair, as it should be.

Building a home is the largest investment many Victorians will undertake in their lifetimes. It is often the only time that people enter into a contract and have to negotiate along the way. There are both substantial financial and emotional investments in the choices that are made. A home is a place where children take their first steps, major events happen and life milestones are celebrated. It is where people put down roots into communities that often last for decades. Everyone should be able to make those choices with confidence in our building system.

That is the aspiration that families have, and often young couples have, when they are building their first home – the hope that they will build a beautiful home in a lovely street in a wonderful community that they then can bring children into and belong and contribute to. That is why it is critical that the regulatory framework for domestic building contracts is clear, effective and modernised. This protects the interests of consumers and meets the needs of a dynamic building industry, an industry that contributes to innovating and adopting new construction methods, including modern methods of construction, to deliver more housing for Victorians.

The building industry is under pressure at the moment. State and federal Labor governments are fully aware of the housing shortage and are thundering away as we speak. The Allan Labor government is taking very seriously the responsibility to ensure that families can enter into building contracts with confidence. After the collapse of Porter Davis, the government committed to reviewing the Domestic Building Contracts Act 1995 (DBC act) to ensure it remains fit for purpose. This bill reflects the outcomes of that review. It is focused on bolstering consumer protections while supporting Victoria’s building sector, particularly at this time as the building sector plays such a vital role, as I said, in achieving the housing supply targets set out in the government’s 2023 housing statement. The review highlighted a message from every corner of the industry: the Domestic Building Contracts Act 1995 is outdated, confusing and rigid. Consumers wanted greater protection and clearer rights, builders wanted greater flexibility and less red tape, financiers wanted certainty so loans could be advanced with confidence and lawyers pointed out that the act no longer kept pace with broader developments in consumer law.

The core purpose of this bill is straightforward: to deliver a modern, flexible and fair regulatory framework for domestic building contracts in Victoria.

There are several key reforms in the bill. The first will mandate contemporary and flexible payment timing requirements. Payment arrangements under the building contracts have not been updated in nearly 30 years. They are out of step with modern industry practice. To enable a contemporary payment framework to be established, the bill will amend the act to insert a new regulatory head of power. This will enable the regulations to prescribe deposit limits, progress payment stages and limits specific to different types of contracts. A brick-and-mortar home is very different from a modular, prefabricated dwelling. This amendment will provide for several contract types for building a home. For each contract type, the payment stages and their limits will be set out in regulations allowing them to be updated over time, and at each payment stage builders will not be permitted to demand or receive more than the limit prescribed in the regulations or more than any amount that directly relates to the progress of the work, whichever is the lower. For families this is a safeguard against hardship when payments run ahead of progress. For builders it provides clarity and certainty. For renovation and extension projects, parties will be able to agree on tailored payment stages, providing flexibility while keeping consumer protections in place.

The second key element will enable cost escalation clauses with strong consumer protections. The volatility of recent years has left both builders and families exposed. We saw material prices surge during COVID. Labour costs also rose sharply due to skill shortages. Builders have consequently advocated for the ability to use cost escalation clauses to enable the price of a build to be increased to reflect the unexpected increases in the costs of materials or labour as well as unforeseen delays. As such, a key reform will be to permit cost escalation clauses in major domestic building contracts with a value of $1 million or more and for an increase no larger than 5 per cent. So this bill strikes a careful balance. Cost escalation clauses will be permitted but only for contracts worth $1 million or more, representing around 6 per cent of builds. For the vast majority of families building a home under $1 million, builders will need to price in cost risks up-front. Where escalation clauses are permitted, increases will be capped at 5 per cent. This protects consumers from negative equity and loan defaults while giving banks the certainty they require. These clauses will exist as exceptions, not the norm – controlled, capped and monitored.

Thirdly, the bill facilitates preliminary works and agreements. At present the act makes it cumbersome to contract for preparatory work even though accurate pricing depends on it. This change will allow builders to be fairly paid for up-front planning while giving consumers clear, more detailed contracts. It will reduce disputes and bring Victoria in line with jurisdictions like Queensland and Western Australia. Better planning at the start means fewer disputes at the end.

Another key reform is the establishment of a new Building and Plumbing Commission. This new powerful watchdog will be created by transferring powers from Consumer Affairs Victoria to the Victorian Building Authority. This will bring together all aspects of building quality control, regulation, insurance and dispute resolution into a single agency. How many times do we hear stories of regulatory black holes where there are just multiple regulators relevant to the problem at hand, and it really can be quite overwhelming for mums and dads who are just simply wanting to build their house.

Consumers will know exactly where to go for help. Builders will know where to find their guidance, and regulators will have a stronger platform for accountability. The reforms also seek to manage cost and completion time blowouts. Too often families have been trapped when builders drag on endlessly or costs spiral out of control. This bill changes that. If completion times blow out by more than 50 per cent or if costs increase by more than 15 per cent, owners will have the right to terminate the contract. They will not have to prove what a builder could reasonably have foreseen.

The bill will also close loopholes and strengthen consumer rights. It tackles contract splitting, strengthens cooling-off periods and extends statutory warranties to verbal and unsigned agreements. It will also provide a single, clear contract variation process for plans and specifications for major domestic building contracts, regardless of who initiated the variation. I just want to say that there is a stark contrast between the skill set required to negotiate the one contract that a young couple might enter into in their life and some large companies whose major business is to contract major capital works. Some of the big companies have contract managers with legal qualifications and decades of experience whose entire day and entire career are spent negotiating variations and changes in scope to major capital projects. Often they have longstanding relationships over multiple contracts over many years. Building a home is often the only construction contract mums and dads and couples will ever have in their life, and that is why this bill is needed. It is to provide consumer protections for those that do not do this every day.

The bill will remove consumer protections from commercial arrangements between developers and builders. It will also modernise the statutory warranties in the DBC act so they are consistent with the Australian Consumer Law. It is important to recognise that much consultation and collaboration has formed the backbone of these reforms. They have not been developed in isolation. Wide public consultation took place between November 2023 and February 2024. We heard from families, from small builders, from large firms, from financiers, from consumer advocates and from legal experts. We worked closely with the Housing Industry Association, the Master Builders Association of Victoria and the Consumer Action Law Centre. The building special advisory panel provided expert advice in October 2024 and again in May 2025. Once this bill passes, consultation will continue as regulations are developed.

This is reform shaped with industry, not imposed upon industry. It modernises a framework that has been frozen since 1995. It strengthens protections for consumers. It supports innovation and flexibility for industry, and it ensures that Victorians can enter into building contracts with confidence, knowing that they are protected by this bill and knowing that there are clauses that will assist them in the event of the need to change the contract. The bill represents Labor values in building trust, building fairness and building the future for Victoria. I wholeheartedly commend this bill to the house.

Evan MULHOLLAND (Northern Metropolitan) (10:30): I also rise to speak on this bill. There are a few things I want to address. This government has a very dark and sorry history when it comes to building contracts in this state – allowing for the stealing of deposits, allowing a small minority of dodgy builders to take deposits off young families and phoenix themselves or go into administration only to pop up elsewhere in another state – because of this government’s inability to manage this crisis, from the Porter Davis collapse to Montego Homes and Chatham Homes. One thing that I did at that time was sit down with many families who had lost everything, and they had really lost everything because of this government’s incompetence to enforce existing law that meant that builders were not to take deposits.

One thing that I found quite sickening – I think it really highlights this government – is that they had a deposit scheme where you could get your deposits back from the government. Instead of freely enabling young Victorians and families to take part in that scheme, whether it was Porter Davis, Montego Homes or Chatham Homes – each time, by the way, they opened that scheme after the advocacy of the Liberals and Nationals – in order to try to minimise the cost of that scheme, what did the Victorian Managed Insurance Authority do? They called in very expensive law firms in order to stonewall young families who had lost everything. They were told, ‘You can no longer speak to anyone here. Speak to someone over there at MinterEllison, over there at this law firm in particular’ – an absolute disgrace. You had young families who had lost everything, and the government’s response – we see them outsourcing consultants at the Victorian Infrastructure Delivery Authority today – in this case was they went to the top lawyers in town and said, ‘Get rid of this political problem for us.’ That political problem was young families, like Jess from Doreen, who lost everything because of the failure to enforce existing laws by this government. The government knows that it was the wrong thing to do. They know that they have spent probably millions on lawyers trying to screw young Victorians out of deposits.

We actually put in an FOI to ask how much it cost, to ask for the invoices. They could even redact a whole bunch of other information, but ‘What is the total cost of the lawyers you are using against young families?’ Of course they rejected it, so I went off to the information commissioner over a year later. Often the information commissioner goes a bob each way, but this was quite clear: a determination that the government ought to release how much it had spent – basic transparency – ‘How much did you spend on lawyers to screw young people out of deposits?’ And what was the government’s response after the information commissioner said to the government that it needed to release this so Victorians can know? The government’s response was to take me to court to try to prevent that information from being made public – because those on that side of the chamber know they will look very bad if that information is released, that they have spent millions of dollars screwing young families out of deposits through a scheme that was set up to help them. The government is now trying to screw them. So I call on the government to just release the documents. From the information commissioner it was a clean, one-sided determination – it took over a year – saying, ‘You ought to release those documents. You ought to provide those documents and make them public.’ The government’s response, after spending millions of dollars trying to screw young families, was to spend even more money taking me to court to try to prevent the release of those documents.

That is what this government does. They kick the can down the road for anything they do not like – for anything that exposes them for being the awful government that they are, that would try to screw young families. This is what they do; this is Labor. I think the government ought to release those documents. This whole tawdry affair has been incompetence of the government’s own making. It has nowhere to hide in regard to issues to do with domestic building contracts and domestic building insurance.

Of course we particularly see today shocking reports in the Age newspaper of just how bad the building industry has become in terms of infiltration into government housing projects and government infrastructure projects. We saw a worthwhile intervention from the former IBAC Commissioner, the highly respected Robert Redlich, basically saying there is no government authority at the moment that has the ability to stamp this out. We saw that government level crossing officials were told repeatedly throughout the first half of 2023 about extortion and blackmail tactics of a cabal of subcontractors aligned with the CFMEU and that the government was told three times – March, April and May 2023 – that unlawful behaviour was causing major financial impact to taxpayers. Another internal file from June 2023 complained of a significant cost to the Big Build because of unlawful behaviour.

Let us break down that significant cost, almost $50 billion in infrastructure cost blowouts over the last decade, and for that entire time Jacinta Allan has been the responsible minister or the Premier. We know that she was warned and failed to act, and she just claimed when the first stories came out that she was completely blindsided. ‘How could this be happening? I’m so angry. I’m going to act.’ Rubbish, absolute rubbish, because it is still happening. Her wet lettuce Wilson review failed to stop and prevent what is going on at Victorian construction sites. I mean, you have got First Nations Traffic Management reporting issues on the government’s Big Build. You have got gangland figures, crooked CFMEU officials and companies rorting the government’s social procurement program. A program that is meant to help Indigenous Victorians and vulnerable cohorts, veterans and the like is being rorted by crooked officials and is being rorted by gangland figures. How can the government just accept this? Even after all the government’s talk almost a year ago, it is still happening to this very day. I meet regularly with people who bring me new reports. They are afraid to speak out because if they speak out they are dobbing in a gangland figure. It is extraordinarily difficult for people to just go report it to the authorities. How about the government actually does something about it, listens to Robert Redlich and calls a royal commission.

We saw that an Indigenous firm NLA Trucking has accused a fellow Big Build contractor of agreeing to unlawful demands made by the CFMEU’s Joel Shackleton. Joel Shackleton, who is meant to be banned – and the government banned him from all Victorian construction sites – is still to this day pulling the strings on who gets on and off Victorian construction sites: ‘You can’t work on the Mordialloc Level Crossing Removal Project.’ He is clearly still pulling the strings when he can tell a contractor for the Mordialloc Level Crossing Removal Project, ‘You can’t hire this Indigenous firm, or we’re going to black ban you from the North East Link.’ I know, because I meet with people on almost a weekly basis who have these kinds of stories, that the North East Link is being used as a giant hook to control the entire Big Build in Victoria – ‘Unless you do this on this smaller level crossing removal project, you don’t get onto the North East Link.’ It is being used for corruption, for extortion and for the fleecing of taxpayer money. No wonder this North East Link project has gone from $10 billion to $16 billion to $26 billion – and the government has enabled this. The government is continuing to shrug its shoulders when asked about this and asked what further action it is going to take – ‘Oh, we’ll just refer it to the authorities,’ even when you have respected figures like Robert Redlich saying that that has failed and more needs to be done.

We were asking the government right here yesterday. Their response was basically to invite us all to go down to a construction site or ‘Report it yourselves.’ You are the government, and the government ought to do more to stamp out this corruption on the Big Build. And I feel terribly sorry particularly for the stories we saw yesterday about veterans that were forced to pay gangland figures for a pay to play – ‘You can’t work on the Big Build unless you pay us to get in.’ Favoured union-backed firms with what clearly is no link to the Indigenous community are getting on worksites, like they did in the Mickleham Road project, and kicking out good, decent Indigenous businesses. I know Kinaway had a lot to say about that particular project, as did many Indigenous leaders, because it is wrong, it is extortion and it is the fleecing of taxpayer money, and the government to this day are still not doing anything about it.

We know that the CFMEU’s next endeavour is housing, and we know anything above about six storeys has to be – because they have forced their way in – a CFMEU project. We have seen countless stories by Nick McKenzie about housing projects here in Melbourne where builders are being extorted, fleeced and then called by Mick Gatto with a ‘How about it?’ This is their next endeavour, and it is going to be corrupted and is being corrupted in the same way as the Big Build is being corrupted. I mean, with almost $50 billion of cost blowouts on major projects in the last 10 years under Jacinta Allan, when you blow out the budget by $50 billion it means you have to cut $50 million from the police budget; you have to cut Parentline, a great service; you have to cut maternal and child health services in our growth areas; you have to cost shift onto local government; you have to introduce a massive new emergency services tax; and you have to introduce massive new land taxes, as the government has done. All Victorians are paying the price for the massive cost overruns, corruption and acquiescence of this Labor government when it comes to stamping out union corruption on Victorian construction sites.

Sheena WATT (Northern Metropolitan) (10:45): Thank you very much for the opportunity to speak in strong support of the Domestic Building Contracts Amendment Bill 2025. For many families across Victoria, their home is the single largest investment they will ever make. A home is more than bricks and timber; it is a foundation of security, stability and a future for children and generations to come. It is where people raise families, build lives and become really a part of their communities, yet in recent years too many Victorians have seen this dream not happen, not through any fault of their own but because of failures in the regulatory system. The collapse of Porter Davis Homes in 2023 left thousands of families devastated. They were left stranded in half-finished homes. It truly was a pretty desperately sad situation. They were dealing with disputes over deposits, cost blowouts and uncertainty about what rights they had to protect themselves. The Allan Labor government has listened to those families. We made it clear in 2023 through a commitment to review the Domestic Building Contracts Act 1995 and ensure it is fit for purpose in today’s housing market. This bill delivers on that commitment.

The Domestic Building Contracts Amendment Bill 2025 strengthens protections for consumers, modernises the framework to reflect modern building practices and supports a stronger, fairer building industry. We cannot underestimate the scale of the housing task facing Victorians. Our government’s housing statement sets ambitious but necessary targets, delivering more homes faster to keep up with demand and to keep housing affordable. Achieving this requires an industry that is not only innovative and productive but also trustworthy and accountable ultimately to Victorians. Victorians should never have to second-guess whether their contracts protect them. They should not be left vulnerable to hidden clauses, unfair cost escalations and builders who game the system. The bill is about ensuring confidence – confidence for families who sign a contract to build their home and confidence for an industry that knows the rules of the game are fair, modern and enforceable.

One of the most significant reforms in this bill concerns the timing of payments in major domestic building contracts. The rules governing when and how builders are paid have not been updated since 1995. That is 30 years of industry change without reform. In that time, construction methods have evolved dramatically, including modern methods of construction such as prefabrication, modular housing and these kit-based builds. These are quicker and they are more efficient ways of delivering housing, but the outdated rules around payment staging really have not kept up. This bill introduces a new contemporary framework. Regulations will now be able to set deposit limits and progress payment stages that are specific to different types of contracts. This flexibility means payment stages can evolve alongside industry practice, ensuring customers are not left and consumers are not left exposed to front-loaded contracts where builders take too much money before sufficient work is actually done. The general proportionality safeguard is also introduced in this bill. Builders will not be able to demand or receive more than the value of the work that has actually been completed. That means consumers pay for what they get, no more and no less. I am pleased to say that this reform alone will give families enormous confidence that their investment is protected.

Another major reform in this bill is the introduction of cost-escalation clauses but with very strict consumer protection. In recent years the building industry has been hit by surges in the costs of timber, steel and labour. Builders have rightly argued that they need to be able to manage unexpected and extraordinary cost increases, but for consumers these clauses carry real risks. Without limits, families can be forced into contracts they can no longer afford, facing mortgage stress or even losing their homes. The bill takes a balanced approach. Cost-escalation clauses will only be permitted in contracts worth $1 million or more, and any increase will actually be capped at 5 per cent. ‘Why this threshold?’ some may ask. Because contracts at this value represent the top 6 per cent of home builds in Victoria. These are high-value builds where both parties are better equipped to negotiate risks and absorb additional costs.

For everyday families building homes, cost escalation clauses will remain prohibited. Builders in these circumstances must factor potential price changes into their up-front contracts rather than shifting the risk onto the consumers. Where escalation clauses are used, the bill introduces strict consumer protections. Builders will need to provide a clear, written warning of the clause before the contract is signed, obtain the home owner’s initials or signature next to that clause and justify the increase with invoices or receipts. They also need to warrant those increases as being calculated with due care and with skill. If these steps are not followed, the builder cannot enforce the clause. That is accountability in action for Victorians.

The bill will also make important changes to facilitate preliminary works and agreements. Right now the law makes it extremely complex for builders and home owners to contract for preparatory work like plans, designs or even soil testing. These works are vital for pricing and preparing contracts to that professional standard, but under current law they are caught up by the definition of ‘domestic building work’ and are subject to the full framework of the act. The actually removes those barriers by aligning us with jurisdictions like Queensland and Western Australia, where builders and owners will be able to enter into preliminary agreements for plans and specifications without triggering all the requirements of a full domestic building contract. This reform means fewer disputes, better prepared contracts and more certainty up-front. It also means consumers are paying for high-quality plans and specifications that make the later building contract clearer and fairer.

Beyond payment timing, escalation clauses and the preliminary works, the bill delivers a broad range of reforms that lift standards and protect Victorian home owners. These include ending contract splitting, so builders will no longer be able to avoid obligations by splitting projects into smaller contracts, a practice that was exposed in fact during the Porter Davis collapse. There are cooling-off rights, where owners will be able to exit a building contract during the 5-day cooling-off period even after obtaining legal advice. We have also got statutory warranties being extended. Protections will apply even to verbal or unsigned contracts or poorly defined written contracts so that builders cannot exploit loopholes. There are clearer variation processes. These will now be a single, transparent process for varying plans or specifications, regardless of whether the owner or the builder initiates that change.

In relation to completion and cost blowouts, owners will be able to terminate contracts if the agreed completion time blows out by more than 50 per cent – extraordinary – and if costs rise by more than 15 per cent. Owners will be able to terminate contracts with those conditions, either a more than 50 per cent time blowout or if costs blow out by 15 per cent. Importantly, owners will not have to prove whether the builder could have reasonably foreseen the increases.

Each of these reforms speak to a single principle that this side of the chamber cares about when we are legislating, and that is fairness – fairness for consumers, fairness for families and fairness for an industry that wants to do the right thing but really has been undermined by loopholes and bad actors. Another key part of this bill is the creation of a new integrated regulator, the Building and Plumbing Commission. We have spoken about that in this place in recent months. Currently regulatory functions are split up. Consumer Affairs Victoria, the Victorian Building Authority and Domestic Building Dispute Resolution Victoria all play different roles, and this has created silos where Victorians are meant to go to get the help or information they need when the problems arise, and that adds additional complexity. By consolidating compliance, enforcement, insurance and dispute resolution into a single powerful watchdog, we are giving Victorians a regulator that is clear, accessible and effective.

The commission will be able to monitor standards, issue orders and resolve disputes in one place, cutting through red tape and ensuring accountability. These reforms have not been developed in isolation. The review of the Domestic Building Contracts Act 1995 includes public consultation from November of 2023 through to February of 2024, and this was supported by some targeted engagement with industry, financial institutions, legal experts and consumer groups. Stakeholders such as the Housing Industry Association, the Master Builders Association of Victoria and the Consumer Action Law Centre have all provided feedback. Consumer groups have supported measures that clarify rights and strengthen protections. Industry has welcomed reforms to payment timing and the preliminary works that I spoke of earlier. Banks and lenders have supported the safeguards, particularly around the escalation clauses. It is safe to say that this bill is shaped by the voices across the sector, from families to financiers, builders to consumer advocates.

I have touched on some of the great things that the Allan Labor government is achieving with this bill for Victorian home owners, and I wanted to touch on some of the criticisms that have been heard from those opposite, who may say that consultation has been limited. I have heard some remarks during this debate, but I just want to say that in July of 2025, only now a couple of months ago, 81 submissions had been received during the consultation period for this bill, and there were more that came through. I have got to say that this is really a clear sign that Victorians care deeply about these reforms.

Some have raised concerns about the treatment of kit homes and other modern construction methods. The answer to those concerns about how the law will in fact treat kit homes and other modern construction methods is simple. The bill’s framework is flexible. Definitions of modern methods of construction will be set by regulation, allowing government to adapt as technology evolves. Many kit homes involve prefabrication and will fall within the protections provided by the act. The Guide to Standards and Tolerances is also being updated, ensuring that builders meet modern best practice and that regulators have robust tools to enforce quality.

Some have suggested we should require all deposits to be held in trust accounts, but that is not the most effective way to protect consumers. Instead our government has introduced a first resort statutory insurance scheme for contracts over $20,000. This allows owners to claim lost deposits immediately if a builder collapses without costly and complex trust structures.

The Domestic Building Contracts Amendment Bill 2025 is not an isolated piece of legislation. It is part of the broader building reform program, which includes the establishment of the Building and Plumbing Commission, the introduction of the first resort insurance scheme and measures to drive the uptake of modern methods of construction. Together these reforms will give Victorians the most modern, consumer-focused and resilient building regulatory system in the nation.

This bill is about more than just some amendments, I have got to say. It is about trust and it is absolutely about fairness. It is about giving Victorians confidence that when they invest in a home, they are investing in a future that is secure. It balances the needs of families and the needs of industry. It recognises that builders need flexibility, but it also insists that flexibility must never come at the expense of consumer protections.

The Allan Labor government made a promise to Victorians in the wake of the devastating collapse of Porter Davis to fix the system, to lift standards and to ensure that families are never left again in the dark. This bill delivers on that promise. It gives families confidence in their contracts, it gives industry clarity in its obligations and it gives Victoria a building system worthy of the people it serves.

With that, can I say that I absolutely commend to the chamber today the Domestic Building Contracts Amendment Bill 2025.

John BERGER (Southern Metropolitan) (11:00): I rise to speak on the Domestic Building Contracts Amendment Bill 2025. I want to thank the minister in the other place for his work on this important issue, which goes directly to the rights of consumers and home buyers as well as supporting our building industry. It is no secret that Australia needs more homes. It is no secret that Victoria needs more homes. It is also no secret that the Allan Labor government has a very strong record on housing construction. From June last year to May of this year we saw 55,560 residential building approvals. That is 9500 more than in New South Wales. And we do not have any intention of keeping secret the fact that Melbourne is the build-to-rent capital of Australia, with more build-to-rent projects here than in any other capital city.

It is also not a secret that the new housing activity centres will facilitate the construction of 300,000 new homes by 2051 in areas already well serviced by infrastructure and where people most want to live. Further, while the bill we are debating today goes to the issue of private sector development, it is important to remember the role that the Allan Labor government is playing in building more social homes. Between the Big Housing Build and the Regional Housing Fund, we are investing $6.3 billion in building more than 13,300 social and affordable homes. Taking it all in, we have a dynamic, fast-moving building sector, with homes and apartment blocks going up all over the place.

Under these circumstances it is important that we continually update our laws and regulations to ensure that systems run efficiently and honestly. That is why this bill makes sure that building owners get a fair deal and that developers are getting the support they need to continue building the homes that Victorians need. We know that construction costs have gone up all over the sector over the last few years. That is what led to the collapse of Porter Davis Homes in 2023, which left 1500 in-progress homes uncompleted. The collapse of Porter Davis, one of Australia’s biggest development firms, was difficult for many workers and many families. The Victorian government had to step in to help families who were suffering as a result of the collapse. But stepping in to offer help after the problem occurs is not enough by itself. We changed the law to mandate that builders must have building insurance, and we introduced new penalties for builders who accept deposits without taking out insurance. We did this because we believe that nobody deserves to go through what that collapse put so many families through. We also believe that while we cannot change the past, we can make changes to prevent this from happening in the future.

This bill follows up on changes we made previously but also comes in response to the findings of the review into the Domestic Building Contracts Act 1995, which began following the collapse of Porter Davis Homes. We waited for the outcomes of the review before pushing forward with these changes, because it is important that we get them right. People’s homes are too important for this to be rushed through as a knee-jerk reaction to one company’s collapse, but at the same time these reforms are too important to put off again and again. That is why we have gone through the consultation process with relevant stakeholders. These include the Housing Industry Association, the Master Builders Association of Victoria and the Consumer Action Law Centre. It is through this sort of process that the Allan Labor government has balanced the interests of workers, building owners, homebuyers and housing developers in writing and producing this bill, because the Allan Labor government is a government for home ownership, for supporting first home buyers and for protecting the family home.

For so many families the idea of home ownership represents the most important asset. For others it represents the most important aspiration. And for others it simply represents safety, security, a roof over their heads and a place to call home, things that we on this side of the chamber believe that all Victorians deserve. One of the ways the Allan Labor government has sought to achieve this for our state is through something resembling an all-of-the-above housing strategy. Ultimately, we want to give people choice and give them security. We want to get to the point where people make choices about whether they prefer to rent or own their own home, because both have their own benefits. That is why we became the build-to-rent capital, in Melbourne. That is why we invested so much in social and affordable housing, and that is also why we have done everything from creating the new activity centres to offering off-the-plan stamp duty concessions to help stimulate new private development. While social housing is an important part of the make-up of our housing sector and the Labor government’s housing policy, this bill primarily goes towards the issue of private development.

Essentially we recognise that navigating the housing market can be difficult and confusing, especially when buying off the plan. We certainly do not want things to get to the point where you need a degree in property law before you can think about making a purchase. We want the housing market to be accessible to all Victorians, not exclusive to those at the very top, so it is especially important that buyers have the confidence to know that the law is on their side and that any developer who tries to cut any corners, as certain developers have done recently, will be punished severely.

The process of building a new home or a new apartment block is a difficult one. It takes a long time; it takes years. Planning takes time, planning approvals take time and construction takes time, and as often happens, the longer it takes the more expensive they become. This means that, like in any other industry, confidence is currency. Developers will only build new houses if they can be confident that someone will be out there to buy it. Buyers, on the other hand, will have the confidence to put down a deposit if they know what they are dealing with – a reliable developer who does not cut any corners and who will deliver a high-quality house. Bills like this one are important to help us restore buyers’ confidence in developers, which was understandably shaken following the collapse of Porter Davis Homes as well as a number of other developers in recent years.

There are a number of changes being made by this bill. One important change is the new ability to regulate deposit limits, progress payment stages and progress payment limits. These will ensure a level of proportionality and that payments can be made that correlate directly to the work as it is completed. It is important to make changes here, because for all of the changes that have come to the construction industry since the 1990s, the regulations surrounding how builders get paid have not been updated since 1995. Under the changes in the bill, payment can no longer be demanded unless it relates to the work already completed.

Another change in the bill are the reforms to cost escalation clauses. It is understandable that given uncertainty in the prices of materials and labour, costs may vary from original estimates in some circumstances. However, it is important that any cost flexibility is calculated in a transparent way, is motivated by genuine necessity and is not being done in a way that is exploitative. As such, cost escalation clauses will only be valid on constructions worth more than $1 million and will only allow for a 5 per cent increase in the cost of the contract. Further, there are stricter requirements being placed on builders who seek to activate a cost escalation clause to prove that it is being done in a way that is transparent and honest.

While this is a bill which introduces regulations to the building sector to protect consumers, there are also some areas where we are seeking to remove regulations so they can better support developers and better facilitate new development. One area where we are doing this is removing some types of preliminary works from the scope of the act. This is building on a principle that already exists, where preliminary works such as architectural designs and soil testing are already exempt from the existing regulations in the act. This is because often these works must be done before the contract can reasonably be signed or before an accurate estimate of the cost can be given, so they are regulated elsewhere, just not under this act. The bill will remove preparation plans, specifications and builds of quantity from the scope of this act to ensure that the government is not getting in the way of the planning process. This will bring Victorian law in line with other states and follows a fairly simple idea that the planning process should be governed by the planning code more than by contract law. It is important that while we are placing additional regulations on developers in order to protect consumers and building owners, we are not seeking to punish those developers who are doing the right thing. That is why this bill is as much about supporting developers and supporting development as it is about implementing new regulations to protect Victorian families.

There are a range of other changes to the act as well which seek to clarify contractual requirements for all the parties involved. One example of this is cracking down on contract splitting – the practice of creating multiple contracts where a contract should be serviced by only one. Developers use this as a way to avoid the classification of ‘major domestic building contract’ and the additional regulations that come with it.

This practice can be dangerous. It was used by Porter Davis Homes before they collapsed. Often loopholes like this, which developers use to skirt around the edges of regulations, are sources of danger for the building owners and homebuyers, and in some cases for the developers themselves. Further, to avoid any incentive to clarify a project which should be made under the major domestic building contract under just a normal domestic building contract, we are making sure that several existing regulations will apply equally to both. This is to prevent misunderstandings and ensure that parties are always clear about their requirements and their obligations.

Another important provision is implementing the new rights for building owners to end contracts in the event of completion time blowouts of more than 50 per cent or cost blowouts of more than 15 per cent. Previously a building owner could only do this in the event that they could demonstrate that these blowouts were foreseeable. This bill will remove this requirement. We also are ensuring that building owners are covered by statutory warranty, even in circumstances where their contracts are verbal, unsigned or poorly written. This is an important reform, because you should not have to hire a lawyer to get your home renovated. The bill will also provide a transparent contract variation process to prevent consumer protections for individual homeowners from applying to commercial property and to improve the relevant dispute framework.

There are several areas of reform which are being touched on by this bill, but one that is particularly important is laying the background for the implementation of the new Building and Plumbing Commission. This will be done by transferring powers from the director of Consumer Affairs Victoria to the Victorian Building Authority as the first step in creating the Building and Plumbing Commission as the state’s single regulator for the construction sector. The Building and Plumbing Commission was announced in October last year by the Minister for Planning in the other place. Its aim is to be a more powerful regulator than the existing Victorian Building Authority. It will have new powers to protect the rights of home owners. Currently the VBA can only instruct work to be fixed by the developers before occupants move in. The new commission will be able to do so even beyond that time. This is an obvious reform. Often defects in a home only become apparent after someone has lived there for a while. Other powers will be to increase reporting requirements before attaining an occupancy certificate and to stop seriously defective apartments from being sold.

I spoke earlier on the issue of confidence in the housing market. For so many, their home is the biggest and most important investment that they will ever make. When families save up for years and put down a deposit and take on a mortgage, they deserve to have the confidence that the house that they will buy will be well built by qualified and professional developers and builders. Unfortunately, when developers cut corners, defects occur. This can undermine confidence in the sector as a whole. If people do not have the confidence to buy new homes, developers will have no reason to build them. And if nothing gets built, the cost of housing will only increase and ordinary Victorian families will suffer. That is why it is important that the new Building and Plumbing Commission is brought about, so that it can help ensure that there is accountability and integrity in the construction section. While this bill does not establish the commission itself, it does change the law around which powers lie where so as to help facilitate the creation of the commission.

All in all, this bill is about supporting our construction sector as it works to build the homes that this state needs, that Victorian families need. It is about helping to repair any damage or trust between developers and Victorians following the collapse of several development firms in the last few years which left many Victorian families in the lurch. It is about regulating the sector so that we can prevent these collapses from occurring in the future. It is about cracking down on dodgy developers who cut corners while supporting developers who are doing the right thing. And it is about providing building owners, homebuyers and anybody who works in the construction industry with the security that they need to do what they are doing and get a fair deal. With that, I commend the bill to the house.

Sonja TERPSTRA (North-Eastern Metropolitan) (11:14): I rise to make a contribution on the Domestic Building Contracts Amendment Bill 2025. It is an important bill. I had the benefit of listening to Mr Berger’s contribution, which was a great contribution. It certainly underscored the importance of what these reforms are about. At the heart of these reforms, it is really about making sure that our laws are modern and fit for purpose and come into line with changes in other jurisdictions, but also provide consumer confidence. In a moment I will go through and talk about some of the things that have happened.

For anybody who may be watching along at home on the live stream, in regard to this debate many people will know and will remember what was reported on in the media. When builders collapse, it is always heartbreaking when you have families who have saved up their lifesavings for a deposit – or even young people, for that matter – to build a home. It is their dream home, something they have thought about and dreamed about for a long period of time, only for that builder to collapse. Noteworthy was the collapse of Porter Davis Homes. That was a very harrowing period for people who were caught up in that building collapse. Obviously it was something that the government did step in at the time to provide some assistance to people who were caught up in it, but it did highlight the need for broader reforms in the industry, in the sector. There are a number of things that need to be amended through this legislation, and part of that is that we need to bring our laws into line with other jurisdictions as well.

Nevertheless, this act will enhance consumer protections and update rules for modern building practices. Key changes will include moving the payment schedules and deposit limits to regulations for flexibility, introducing tailored contract types for projects using modern methods of construction and consolidating regulatory functions. The reforms will apply to contracts entered into after the bill passes and comes into effect, with broader implementation expected around late- to mid-2026. Under the Allan Labor government, these ongoing reforms are reshaping the Victorian building system, delivering a safer, more compliant and more durable system for Victorians.

As I said, for many people who save for a family home, it is often their single largest investment that they will make within their lifetimes. It is the foundation for their future. It is a roof over their head, stability for their family, providing a place of warmth and comfort for their family to grow in. Nothing can be more distressing than watching your home being built, only for the builder to go bust. This is why it is critical that the regulatory framework for domestic building contracts needs to be clear and needs to be effective and modernised to protect the interests of consumers and meet the needs of a dynamic building industry that continues to innovate and adopt new construction methods, including modern methods of construction, to deliver more housing for Victorians. Because that is what this government knows and understands; we know there is a shortage of housing. It is something about which this government is doing everything it can, looking at all the levers available to ensure that it can build more homes for more Victorians.

As I touched on earlier, following the collapse of the Porter Davis Homes building group, the government committed to a review of the Domestic Building Contracts Act 1995 to ensure that it was fit for purpose and to strengthen the protections for building owners while supporting the needs of the building industry, so it is a balancing act. The bill is informed by the outcomes of that review, and it is designed to strengthen consumer protections while supporting the needs of Victoria’s building industry. Of course that industry is integral to meeting the housing supply targets that our government has set in the 2023 housing statement. As I touched on, the bill will deliver a modern, fit-for-purpose regulatory framework for domestic building contracts in Victoria to give consumers that greater confidence and security when building or renovating their homes. As I said, when you are going to buy a home or you are investing in a home to live in, it is often the single biggest purchase you will make. The financial implications if you have taken out a mortgage on a home to build it and then it goes bust and you do not have the income to pay your mortgage are just really, really devastating. The financial implications that can follow for anyone who has been caught in these situations would be immense and very distressing. We needed to act to do everything we could to improve consumer confidence but also to make sure that the modern framework that needed to be provided could continue to protect consumers. Importantly, at the heart of these reforms, although they are about consumer protection, they are also about fairness and lifting standards and making sure that Victorians can enter into domestic building contracts with confidence, because a loss of consumer confidence means that people will not invest.

The bill will make other minor amendments to the Australian Consumer Law and Fair Trading Act 2012, the Building Act 1993 and the Building Legislation Amendment (Buyer Protections) Act 2025. As I said earlier, the default commencement date for this bill is 1 December 2026. Some of the other reforms will come in a bit later on, but all of those will come into operation on or after the day that the bill receives royal assent.

Some of the key elements of the bill I will just touch on, because there are many, but one of the key ones – and this is something that we have heard a lot about in the media as well – is that when builders get paid under contracts, sometimes builders will be waiting on payments from other third parties, which then impacts their capacity to either pay or continue to do work. That has been a challenge for some time now, and particularly the rules around when and how builders get paid under a major domestic building contract have not been updated since 1995 and have fallen out of step with changes to industry practice. I just talked about some of the experiences of builders where they are waiting on payment for something or those payments are late and that then prohibits them from doing the next part or the next stages of their work. So to enable a contemporary framework to be established, the bill will amend the act to insert a new regulatory head of power that will enable regulations to prescribe deposit limits, progress payment stages and limits specific to different types of contracts. This will provide government with the flexibility to update payment requirements to respond to differing circumstances, such as the extent to which a build utilises modern methods of construction, and to adjust requirements as building methods continue to evolve. The amendment will provide for several contract types for building a home, and for each contract type the payment stages and the limits will be set out in regulations, allowing them to be updated over time.

We have all seen – there have been many, many social media clips – people who have noted that builders have been asking for payments for lock-up stages when clearly the requirements of what would be the criteria that meet the lock-up stage have not been met. Again, you cannot move into a house unless obviously your house has been completed and there has been a certificate of occupancy issued, so there begins a bit of a stalemate, for want of a better term. That set of circumstances is also distressing to consumers, and it is something that needed to be addressed. At each payment stage, builders will not be permitted to demand or receive more than the limit prescribed in the regulations or more than an amount that directly relates to the progress of the work, whichever is the lower. That clarifies those situations and circumstances, giving greater protection to consumers and greater clarity to the sector as well about how it should conduct itself in regard to such payments. The approach will make the value of timing of contract payments clearer for consumers and builders while allowing for these requirements to be flexible and more easily updated over time as construction methods evolve. Again, we wanted to ensure that consumers had the utmost protection, and we think this strikes the right balance. A general proportionality requirement will also be introduced as a safeguard so that a builder will not be able to demand or receive a payment more than the percentage of work that they have completed on a home or a renovation. Introducing this mechanism gives greater certainty and greater consumer protection as well. For domestic building contracts that are not specified, such as renovations or extensions, the bill will enable building owners and builders to use custom payment stages and amounts. Again, those things allow for customisation for builders and owners to agree on, and that is something that is important as well.

Additionally, building materials, labour costs and uncertainty around supply and materials have increased for the building industry in recent years. In fact we have seen that almost supercharged since COVID. COVID was a pretty challenging time not only for the building sector but for a range of sectors, but certainly what we saw was building materials shortages just increase exponentially. It has taken the building sector a long time to recover and a long time for more supply of materials to come back on line. What we have seen is when builders have potentially quoted on particular projects, the cost to the builder has increased because of cost of materials. That is something that when you are locked into a contract you cannot bear, and it has been a very challenging period for builders.

But in response to that, builders have advocated for the ability to use cost escalation clauses to enable the price of a build to be increased to reflect unexpected increases in costs of materials and labour as well as unforeseen delays, and that is what I just talked to. We saw COVID really impact the building sector and delays because of unavailability of materials really had an impact on that, so this key reform goes to addressing that particular challenge.

Also as such another key reform will be that the use of these escalation clauses will be in major domestic building contracts with a value of $1 million or more and for an increase of no larger than 5 per cent, so those cost escalation clauses will be permitted in those circumstances. Now, the $1 million threshold was chosen as it best balances the needs of both the building industry and consumers, so that came about through extensive consultation with the sector and with consumers. The threshold of $1 million has been set at this level to reflect the risk that these clauses carry while also reflecting that the $1 million figure outlined already accounts for approximately the top 6 per cent of home builds. Permitting these cost escalations in loans under $1 million unacceptably increases consumer risk, where buyers may be unable to obtain loans or afford the increase. Therefore in those circumstances it is more appropriate that builders cost any possible escalation into the initial contract, which is a really good feature because you can then forecast these things and say, ‘Look, perhaps if there are any problems, this is potentially what you may be liable for.’ To be forewarned is to be forearmed, and that is a very welcome change.

It is also important to allow flexibility to support the industry to manage unforeseen costs. As I said, it is intended to operate as the exception rather than the norm in domestic building contracts, as it is a high-risk mechanism for consumers. So again, the bill also introduces other consumer protections around the use of these clauses, including a 5 per cent ceiling limit on how far builders can increase the price of a contract. The protections in the bill will ensure consumers can manage price increases without entering a negative equity position or defaulting on loan repayments. We think these changes coupled with the 5 per cent ceiling on price increases also address concerns raised by financial institutions about the use of these clauses by improving price certainty in contracts when they are used. So you can see the extensive consultation that government has had with a number of key players in the sector, not only builders but also consumers and the financial sector, because everyone has a stake in ensuring that our building industry remains viable and that consumer protection is at the heart of making sure the industry remains viable.

Another key reform is around preliminary works and agreements. Again, this reform will enable consumers and builders to more easily contract around preliminary works. These reforms will amend the definition of domestic building work to allow building owners and builders to enter into preliminary agreements for plans and for specifications, importantly. This allows builders to obtain up-front payments for this work and gives flexibility to do works and draw up plans in a precontractual stage. Again, it gives greater certainty to see what might be in the pipeline and what is necessary for your build. Again, this reform is intended to reduce the regulatory burden for builders and reduce the risk for non-payment of this type of preliminary work while still providing protection for consumers.

It looks like the clock is going to beat me. There are many, many more reforms in this, and of course I was going to go into the detail around public consultation because it has been extensive. I have touched on it a little bit, but as I said, the clock is going to beat me and perhaps there will be other speakers on this who will also go to those reforms. I commend the bill to the house.

Harriet SHING (Eastern Victoria – Minister for the Suburban Rail Loop, Minister for Housing and Building, Minister for Development Victoria and Precincts) (11:29): It has been a really wideranging debate, and I am grateful for the opportunity to have listened to those who have contributed over the course of some pretty expansive discussion on not only the building industry and the need for reform but the way in which changes to the system of regulation and the work to strengthen the integrity of the domestic building system to place a square focus on consumers has enabled us also to talk to the work more broadly across Victoria to deliver fundamentally the outcomes that people are looking for – whether it is people who are buying their own home, making the largest purchase of their lives; whether it is people who are making changes to the homes that they have and the building contracts that we see being entered into every day, having such a focal role in that; or whether it is about providing the measure of certainty and confidence both within and in relation to the industry and the people who work in it.

I am very pleased to have been able to see discussions around this chamber about this legislation and indeed in the other place that have highlighted the need for improved protections for consumers, and I am looking to have some further discussions in the committee stage. In particular I think Mr Bourman, who raised a number of questions in relation to this bill, will be putting those in the committee stage, and I welcome an opportunity to talk to them on the record. This is and should be a collaborative effort to make sure that the beneficiaries of a strong system of regulation – that is, consumers – receive the outcomes that they need and deserve through the legislative process because of collaboration just like this. I want to thank the members of the crossbench in particular but also those from the opposition benches, who have provided confirmation that the bill is not opposed. That recognises the importance, again, of a certain, consistent and best practice approach to regulation in the domestic building system here in Victoria. There are a number of areas around the reforms and how they will benefit consumers that speakers have gone to in considerable detail. I do not intend to prosecute them again. Speakers have been fulsome in the way in which they have addressed the bill generally and how it will work. Again, to highlight a number of the components of a consumer focus, the prohibition on builders from demanding or receiving any amount or instalment of the contract price that is not directly related to the progress of work under the contract is one example of the practical realities that have highlighted the need for this bill and for the reforms more generally.

Enhancing community and consumer understanding of rights by clarifying and simplifying the regulatory framework is another really important component of reform, and to that end I want to commend the Building and Plumbing Commission, formerly the Victorian Building Authority. The work that has occurred through Anna Cronin and through the team at the Building and Plumbing Commission since it formally commenced its operations in July has been nothing short of transformative. This has served a number of purposes. It has not only enabled a broader piece on community and sector education and encouragement of best practice but also enabled a streamlining of the processes on everything from dispute resolution through to the way in which properties and practices are assessed, codes are developed, the importance of regulatory standards is understood and the solutions being offered and the policy changes being effected are fit for purpose. That is entirely down to a steadfast commitment from within the sector and the vast majority of builders and developers, who are good people, who do the right thing and who take great pride in their work. This is part of a suite of reforms, as people would know, further to the Building Legislation Amendment (Buyer Protections) Bill 2025. It was a shame that was opposed by those opposite, but to see that this particular bill has the support of those around the chamber who have previously not been on board with a consumer focus is a good thing.

So I do want to acknowledge that.

Making sure that we have benefits to the building industry more broadly is also really important, and modernising the act to ensure that the regulatory framework is clear and effective also reduces the administrative burden on businesses and enables them to adapt to a really dynamic industry that continues to innovate and to adopt new construction methods. This is also about accommodating the changes we know are taking place not just here in Victoria but around Australia and around the world. Modern methods of construction, the work which occurs in partial offsite builds, is something which we know is necessary. It is something which increases the efficiency of building and completion rates, but it is also then about making sure not only that standards are adhered to but that best practice is an expectation that is reasonably part of the way in which people enter into contracts, the way in which builds occur and the way in which they are completed.

I am also looking forward to, subject to passage of this bill in this place, ongoing industry and consumer stakeholder consultation and the way in which we develop regulations and the regulatory impact statement, and that is anticipated to occur on the development of regulations at the latter part of this year. We are looking forward to making sure that we can commence the act at its very latest at the end of next year, unless of course we do proclaim that act earlier as commencing. Those regulations will of course come into effect upon commencement of the act.

The proposed payment timing reforms are a really important complement to other legislation that we introduced in the other place this week, which is about making sure that there is timely and fair payment to subcontractors as part of the domestic building industry and making sure that we place limits on the amount of deposits that a builder can demand or receive under a domestic building contract and also restrictions on how builders can request progress payments under major domestic building contracts. We are making sure that there is an important consumer protection but one which is also contemporary. As a number of speakers have pointed out, this is an update which is sorely needed, because the act, as it commenced back in 1995, has really fallen out of step with those changes in the building industry and on-ground practice, which has evolved and necessarily so to meet the need and the demand but also codes, standards, rules, regulations and minimum expectations. Deposit limits, progress payment stages and progress payment limits will be prescribed in regulations instead of the act. That is also about making sure of course with that general proportionality component in that work that we do have a measure of flexibility and dexterity, again, to avoid precisely the situation that had arisen prior to introduction of this bill and the opportunity through regulation to have three different contract types to reflect different approaches to domestic building and also to make sure that building owners are not being charged for work that has not been completed. A prohibition mechanism on builders demanding or receiving any amount or instalment of the contract price that is not directly related to the progress of works will be an important component of this legislation, unless of course there is an exemption to the proportionality requirement through the regulations.

The three major domestic building contract types, as others have indicated in their contributions, were developed in consultation with the industry. So again, we are making sure we can distinguish between contracts involving a greater amount of offsite manufacturing, such as modern methods of construction, as these types of contracts will often have a front-loaded component of complexity or cost, and that may require higher earlier payments. The typology of build will be directly connected to the way in which earlier payment requirements might reasonably be anticipated. The contract types are all for building an entire home, and the regulations will prescribe progress payments stages and also the limits that builders need to follow for each contract type.

There will also be those general proportionality requirements to make sure that work that is completed is the nexus by which payment can be sought.

To provide certainty about which contracts are subject to which requirements, the types of modern methods of construction will be prescribed in regulation. This will, as I said, provide that much-needed flexibility. We have homes being 3D printed in Victoria. We have work going on to develop modern methods of construction, including partial builds, whether that is bathroom pods or whether that is panels or sections which can then be lifted into place. We want to make sure that, again, the industry is receiving that measure of encouragement and of consistency in order to make sure we are also aligned not only with practice but also the federal jurisdiction and the ongoing work of the Commonwealth government and the Australian Building Codes Board around that regulatory certainty. This is something which I know that other building ministers, other housing ministers and other ministers associated with the consumer focus and with planning reforms around Australia are really determined to address.

These challenges are not unique to Victoria, but the challenges that are not unique to Victoria are being incorporated into regulatory reform that is relatively unique to Victoria. We are setting a pace for significant reform that is enabling the higher level of quality and the better measure of confidence and certainty in the industry and in the sector that has a downstream impact on confidence through investment. We know that where we can provide certainty, where we can provide confidence, we then see more homes started, more building approvals and more construction and completion. The work that we are doing through the housing statement – those transformational reforms first foreshadowed in 2023 – is the reason that significant change is occurring and the reason that as a consequence of these changes those greater volumes of homes are being brought to market, but quality is of essential importance here.

The progress payment work and the way in which there can be contracting out is something that will be prescribed in the regulations. We want to make sure that builders using a custom payment schedule do not have less incentive to complete a contract and therefore a correspondingly higher level of consumer risk. We will not have any opportunity to contract out of requirements for major domestic building contracts to build a home, but for other contract types there will be a capacity for building owners to agree to custom payment stages and amounts using a clause and notice in forms that will be prescribed and published in the gazette.

We do want to make sure that, while we regulate the amount of deposit that builders are permitted to demand or receive, building owner deposits are protected under the Building Act 1993 and that for major domestic building contracts above $16,000 domestic building insurance provides that measure of protection against financial losses. The buyer protection legislation, again unfortunately opposed by those opposite but passed nonetheless, introduces that first-resort statutory insurance scheme, a streamlined process for dispute resolution, a better measure of certainty on rectification orders and that educative function which is so important for the Building and Plumbing Commission as well. This is part of ongoing work, as many speakers have noted, to ensure that our building industry represents and reflects best practice and again does not shoulder the burden of bad practice by a few bad actors on the vast majority of builders and of operators in Victoria who do the right thing and take great pride in doing the right thing. I am looking forward to responding to, I think, only Mr Bourman’s questions in committee and to its swift passage from there.

Council divided on motion:

Ayes (38): Ryan Batchelor, Melina Bath, John Berger, Lizzie Blandthorn, Jeff Bourman, Gaelle Broad, Katherine Copsey, Georgie Crozier, David Davis, Moira Deeming, Enver Erdogan, Jacinta Ermacora, David Ettershank, Michael Galea, Anasina Gray-Barberio, Renee Heath, Ann-Marie Hermans, Shaun Leane, Wendy Lovell, Trung Luu, Sarah Mansfield, Bev McArthur, Joe McCracken, Nick McGowan, Tom McIntosh, Evan Mulholland, Rachel Payne, Aiv Puglielli, Georgie Purcell, Harriet Shing, Ingrid Stitt, Jaclyn Symes, Lee Tarlamis, Sonja Terpstra, Gayle Tierney, Rikkie-Lee Tyrrell, Sheena Watt, Richard Welch

Noes (1): David Limbrick

Motion agreed to.

Read second time.

Committed.

Committee

Clause 1 (11:51)

Jeff BOURMAN: Minister, what provisions in the bill specifically address the longstanding practice of project builders marketing house and land packages on the assumption of flat and stable sites, despite knowing the land is sloping or has unstable soil and then imposing costly variations – often tens of thousands of dollars – on unsuspecting clients, many of them first home buyers?

Harriet SHING: That depends on the nature of the contract, Mr Bourman. The sale of traditional house and land packages is excluded from the Domestic Building Contracts Act 1995, and these contracts are regulated under the Sale of Land Act 1962. But if the DBC act does apply to a contract, section 30 already requires builders to obtain foundations data prior to entering into a major domestic building contract if the work will require construction or alteration of the footings of a building or may adversely affect the footings of a building, and there are penalties for that. Section 30 also prohibits builders from obtaining any additional payment relating to foundations data after entering on that MDBC, if that amount could reasonably have been ascertained had the builder obtained the required foundations data.

Jeff BOURMAN: Minister, under modern methods of construction (MMC) provisions, the bill allows builders to claim up to 50 per cent of construction costs before any materials are delivered to site, particularly in prefab scenarios where the builder is also the supplier. What consumer protections are in place if the manufacturer enters administration or liquidation prior to delivery, and why does the bill not adopt the commercial contract safeguards, such as requiring insurance or bank guarantee to cover the value of unfixed goods?

Harriet SHING: The bill does not actually permit builders to claim 50 per cent of the construction costs before materials are delivered to the site. The amendment that the bill makes that relates to modern methods of construction is to enable progress payment stages and limits to be prescribed in regulations. and the contract types in the bill, as I said in the sum-up, are differentiated by what percentage of the cost incurred by the builder is attributable to one or more prescribed modern methods of construction. So that will enable progress payment stages and limits in the regulations to be tailored to contracts with low, medium and high levels or amounts of MMC. The bill will also prevent builders from demanding or receiving any payment or instalment of the contract price that is not directly related to progress of the work under the contract. Of course I mentioned MDBCs above $16,000, where there is protection against financial losses arising from incomplete or defective work carried out if a builder has died, disappeared or become insolvent.

Jeff BOURMAN: While the bill seeks to improve dispute resolution processes, why has the government not established a clear statutory timeframe to ensure disputes are resolved in a timely manner and consumers are not left in limbo?

Harriet SHING: The establishment of statutory timeframes to resolve those disputes will not necessarily have any impact on the timing outcome of disputes as a range of variables impact upon successful dispute resolution. The building and plumbing dispute resolution components focused attention on reducing the wait times for people to access dispute resolution services, and we do want to make sure that there is a significant reduction, as has occurred with the overall timeliness of the service under Domestic Building Dispute Resolution Victoria. The legislation, we do want to make sure, will lead to defects on insured building work being fixed more quickly, which will then lead to a reduction in consumers having to take their claims to VCAT and divert matters from the Building and Plumbing Commission dispute resolution services.

Jeff BOURMAN: I am going to roll a few questions into the next one. Why does the bill not impose penalties on builders who fail to disclose this mandatory information at the time of contract signing given it is required for a building permit? Also, why does the bill allow a builder to extend the contract period by up to 50 per cent before an owner can terminate whilst limiting cost variations to 15 per cent? Does this not risk enabling volume builders to deliberately delay projects such as seen in the collapse of Porter Davis, leaving consumers financially exposed by having to pay both rent and mortgage costs without any disincentive for builders to delay? And lastly, where does the government propose the home owner live for between six to 16 months before they can?

Harriet SHING: Section 30 prohibits builders from obtaining any additional payment relating to foundations data after entering into a major domestic building contract (MDBC) if that amount could reasonably have been ascertained had the builder obtained the required foundations data – and there is a requirement for a builder to give any foundations data obtained on payment of the amount owed by the builder for that data. There are penalties sitting in the act in relation to that work, and if geotech reports were prepared, they would be provided with the building permit application, but there is no explicit requirement that geotech reports are required for all builds, and under the Building Act 1993, an application will, if constructed, comply with the act and regulations, so if they are needed, they must comply.

The bill will remove a requirement for an extension period of up to 50 per cent to enable a building owner to end a contract if the contract price rises by 15 per cent or more and the contract has not been completed within 1½ times the period it was to be completed by, regardless of the reason for the increased period of time.

Finally, the protection for consumers means that we are doing work with key consumer and building industry stakeholders who have been consulted through the development of this bill, and we do want to make sure that in the course of that work the bill balances those interests and will help more homes get built by modernising the regulatory framework and by making sure that we can meet the needs of the building industry that continue to innovate and adapt new modern methods of construction and other construction methodologies.

Jeff BOURMAN: We are coming in for a landing, Minister. Domestic building contracts for home owners currently tend to only be loosely defined and written in favour of the builder or building company. This leaves consumers exposed to unfair practices. Unscrupulous operators rife within the industry have opportunity to deliberately underestimate provisional sums in key structural components of the work, only to present them as variations to the contract down the track.

The inclusion of a building permit in the contract would mean that the site and structure have been properly assessed and documented, removing the opportunity to mislead the consumer. So the questions I have are: if the intention of the bill is to protect consumers, why has the government not taken meaningful action to protect them? Can the minister confirm that under the Building Act 1993 the building works cannot commence onsite without a building permit? What is the legal obstacle preventing the inclusion of a building permit in all cases? What other options does the government propose to address these issues? Why has the government not made provision for liquidated damages to protect the consumer? And for context, the Housing Industry Association states on their website that the average build time in 2022–23 was 12.5 months for detached houses, 16.6 months for townhouses and 33.3 months for apartments. That is me done.

Harriet SHING: Thanks, Mr Bourman, for that omnibus of questions. The intention of the bill is to protect consumers, and so a builder is prohibited from entering into a domestic building contract that contains an estimated amount for a provisional sum that is less than the reasonable cost of carrying out the work and is required to set out the details of provisional sums in writing in the contract. There will also be variations to existing requirements in the act to provide for a single clear contract variation process, and in addition to that the bill includes new provisions that require contracts to be written in plain language and no escalation in contracts for projects under $1 million. We are also enhancing consumer understanding of rights by clarifying and simplifying the regulatory framework. In addition to that, building permits cannot be issued until a relevant planning permit, if required – noting the exemption – is obtained. Under section 31, a builder is not able to enter until an MDBC has included the plans and specs for the work and those plans and specs contain enough information to enable the obtaining of a building permit. Finally, the bill does not include a provision for liquidated damages, because the appropriate amount of compensation would depend on many factors, including the nature of the contract and the circumstances of the building owner; that also links into the recently passed buyer protections legislation.

Business interrupted pursuant to standing orders.