Building Legislation Amendment (Buyer Protections) Act 2025

The New Rule Changing the Game for Multi-Res Developers in Victoria

Compliance Just Got Personal for Victorian Developers

From mid-2026, multi-residential developers in Victoria will be required to lodge a developer bond equal to 2% of the total build cost before an occupancy permit can be issued. This is laid out in the recently passed legislation – Building Legislation Amendment (Buyer Protections) Act 2025.

The bond must remain in place for at least 18 months after the permit is granted, and it may be drawn upon to rectify defects or other non-compliance issues. The developer must procure and pay for the building assessor, who may determine rectifications required, prior to a final inspection if the initial inspection is unsatisfactory. This is all part of a raft of changes and the establishment of the BPC (Building and Plumbing Commission) with greater enforcement powers to order building rectifications.

This also flips the timing for involvement of VCAT (Victorian Civil & Administrative Tribunal), as rectifications can be ordered without their involvement, although appeals may be made by either developers or builders seeking to challenge such orders, or made by the PBC themselves to extend the liability periods on residential builds beyond the 10 year statutory liability period that currently exists.

On the surface, it looks like another compliance cost. In reality, it is a major shift in accountability, one that will push developers to take an active role in the quality of the finished product long after the project team has moved on.

The Big Question: Who Will Provide the Bond?

The draft legislation does not explicitly require that the developer personally provide the bond.

It states that the developer must arrange for the issue or execution of a developer bond equal to 2% of the total build cost, which leaves open the possibility, at least technically, that the bond could be issued by the builder on the developer’s behalf.

The legislation also refers to prescribed forms of security, so the final regulations will determine how this works in practice. On paper, passing the obligation to the builder might seem straightforward. In reality, it is not.

Some head contractors will lack the balance sheet or bank guarantee headroom to take on a fresh obligation without reducing their capacity to secure other work, particularly after several difficult post-pandemic years. Even well-capitalised contractors may be reluctant to tie up capacity that could otherwise support new projects and move away from delivering residential projects if possible.

An alternative that may be pursued is to swap existing DLP security for a replacement instrument that satisfies the developer bond requirement. This would still require financiers to accept a change to the security regime immediately before the occupancy permit is issued, with the principal beneficiary moving from the developer to the Building and Plumbing Commission.

This would be the most elegant solution in terms of reducing security double-ups and project cost, but requires a mindset shift in financiers and developers, which they may be unable to make quickly. It also materially reduces their security, albeit that the security is still there for its ‘intended’ purpose – being the functional integrity of the building delivered.

The BPC: Victoria’s New Watchdog with Sharper Teeth

The Victorian Building Authority has been rebadged as the Building and Plumbing Commission. With the name change comes an expansion of powers that follows the approach used in New South Wales.

The BPC will be able to issue rectification orders for serious defects for up to 10 years after occupancy, including on projects completed before the bond regime begins. These orders can prevent an occupancy permit being issued, pause off-the-plan settlements, and stop a subdivision from being registered.

For developers, scrutiny will not stop at completion. It could follow a project for a decade.

Developer Challenges

If the developer holds the bond directly, several hurdles emerge:

• Higher upfront commitment: a bond equal to 2% of build cost, locked for a minimum of 18 months after occupancy.
• Possible duplication of security: the bond may sit alongside existing DLP retention rather than replacing it.
• Financier approval: needed if substituting existing DLP security for the bond, close to completion

The SPV model adds another layer. Many projects are delivered via special-purpose vehicles designed to minimise equity input by leveraging a margin of gross realisable value, often 50% to 70%, frequently met through land value uplift after permit.

With margins already tight, underwriting an additional 2% of construction cost with developer-backed security erodes feasibility. Trying to raise bonding against property that is already securitised for project delivery complicates matters and risks costly delays with lenders.

From One Year to Two: Extending the DLP Window

Traditionally on commercial builds over 4 storeys, developers retain about 2.5% of the contract sum until the end of a 12-month defects liability period. The new bond extends the security period to at least 18 months after occupancy, which in many cases stretches the security tail to two years or more.

If the obligation is passed to the contractor, that means longer security exposure, tied working capital, and reduced bonding headroom.

From a Contractor’s Perspective

Longer security periods typically bring:

• One to two per cent per annum cost on the secured amount
• Ongoing instrument fees
• Additional collateral requirements behind the instrument

For contractors and subcontractors, this reduces capacity to tender for new projects. With fewer bidders in the market, underlying costs tend to rise and margins come under pressure.

Industry-Wide Impacts

The implications extend beyond a single contract:

• Reduced subcontractor competition – subcontractor headroom may be restricted if the extended security provisions are passed down.
• Increased construction costs – through direct and indirect impacts.
• Lower workbook capacity across the market
• Longer accountability for quality outcomes

From 2026: The Need for a Body of Evidence

From 2026, anyone delivering multi-residential projects in Victoria will need an organised, documented approach to compliance of the finished product. Those who cannot present a credible body of evidence will struggle to defend against defect claims or regulatory intervention.

Visibuild has already helped major property developers get ahead of this by embedding quality and compliance tracking from day one. Those who continue to ignore the issue will learn the hard way.

How Visibuild Delivers Quality and Compliance in Practice

Visibuild works by making the entire quality process transparent, consistent, and evidence-driven from the earliest stages of construction through to project handover and beyond.

In practical terms, this means:

• Every critical inspection, test, and approval is recorded in real time with supporting photos, documents, and sign-off history
• Trade contractors can be assigned specific quality tasks with deadlines, creating accountability at every level of the supply chain
• Non-conformances are logged instantly, allocated for rectification, and tracked until closed, ensuring no defects slip through unnoticed
• Quality data is organised so that project teams, financiers, and owners’ corporations can instantly see what has been completed, approved, or flagged
• The platform creates a permanent, date-stamped audit trail that shows exactly when and how compliance was achieved

By the time the project reaches the occupancy permit stage, the developer has a complete, defensible record of quality and compliance that can be presented to regulators or used to protect against disputes. This approach not only reduces the likelihood of bond claims but also shortens defect rectification cycles and improves relationships with contractors by resolving issues early.

The Takeaway for Developers

This is not just about meeting a new compliance requirement. It is about adapting to a new era of accountability. Active oversight, documented proof of quality, and early defect detection will separate successful developments from costly mistakes.

With Visibuild, developers can maintain full transparency over quality and compliance, protect their security position, and navigate the bond regime with confidence.