Builders insurance legislation reaches Legislative Council

The Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023 also gives the Victorian Building Authority (VBA) greater enforcement powers.

'This bill will introduce the first initiative to reform the regulatory framework to ensure that consumers and the money they pay builders for domestic building work are protected, and to ensure builders are incentivised to obtain insurance when required,' Western Metropolitan MP Lizzie Blandthorn said. 

Two new offences would be created for builders who fail to comply with insurance obligations, through amendments to the Domestic Building Contracts Act 1995 and Building Act 1993.  

This follows the collapse of Porter Davis Homes Group and other builders including Snowden and Hallbury Homes, which failed to obtain insurance to protect their customer’s deposits.

The bill was first introduced into the Legislative Assembly in November 2023 and passed the lower house during the first sitting week of February 2024. 

Brighton MP James Newbury acknowledged the debate would be difficult for many people.

'There is no greater dream perhaps than being able to buy your home, to go into a home and to – if you choose to – have a family in that home,' he said.

'That dream is crushed in many cases because of bad behaviour. We have seen that play out publicly, unfortunately, especially over the last year.'

Mr Newbury said the proposed changes don’t go far enough.

'The Coalition will not be opposing the bill, because it does do something, but it does not do anywhere near enough,' he said.

Laverton MP Sarah Connolly said the proposed penalties are harsher, but they need to be.

“ 'Builders without the necessary insurance in place are effectively gambling with their clients’ money, sometimes to the tune of millions of dollars.' ”

Sarah Connolly, Laverton MP

'When the offence is committed knowingly or recklessly the maximum penalty will be about $96,000 for an individual or about $480,000 for a body corporate,' she said.

'In the instances where the offence is committed under a standard of strict liability the maximum penalty for a person is about $46,000 and the maximum penalty for a company is about $230,000.' 

Gippsland South MP Danny O’Brien said there are existing requirements for builders to provide warranty insurance.  

'Whilst this bill introduces penalties for builders who do not do the right thing, it is a concern to me that there were rules around before this and they simply were not being adhered to,' he said.

'It is about enforcement. I appreciate it is a difficult area to enforce, but it is important that the government gets it right, because we know we have a housing crisis in this state on almost every level.

“ 'Whilst this is a step in the right direction, I certainly do not think it goes far enough.' ”

Danny O'Brien, Gippsland South MP

Dandenong MP Gabrielle Williams said the legislation is the first in a suite of reforms.

'This legislation will provide the Victorian Building Authority with stronger powers to take action against builders who accept deposits without first taking out that required insurance,' she said.

'It enables the VBA and Consumer Affairs Victoria to work together more effectively to crack down on dodgy building practices and exercise their respective regulatory powers and functions to that end.'

Narracan MP Wayne Farnham suggested the government could ‘tear this up and start again’.

'The best solution for people not to lose their deposits is for the deposits to go into trust through the VBA – very simple,' he said.

'The deposit goes into trust. The consumer pays the deposit into the trust; it does not go to the builder.

'When you generate the Victorian Managed Insurance Authority insurance, that deposit is released to the builder. That is 100 per cent protection.'

The Opposition moved a reasoned amendment in the lower house which obligated the government to do more. It was defeated 55-25.

You can follow the Legislative Council debate live and read full transcripts of the Legislative Assembly debate in Hansard.