Amendments to the Domestic Building Contracts Act 1995 (Vic)

In 2023, the Victorian Government announced a comprehensive review of the wider construction industry, including its legislative framework, that primarily consists of the Building Act 1993 (Vic) (Building Act), and the aging Domestic Building Contracts Act 1995 (Vic) (DBC Act). Among the key aims of this review was to evaluate and assess the ongoing fitness for purpose of the DBC Act, and to ensure that the DBC Act continues to appropriately protect consumers, while addressing dynamic market conditions, and supporting modern building and construction practices.[1]

On 18 June 2025, the Domestic Building Contracts Amendment Bill 2025 (Vic) (Bill) was introduced into the Legislative Assembly. The terms of the proposed Bill, if passed, will introduce a raft of reforms to the DBC Act.

These DBC Act reforms complement broader reforms taking place in Victoria, as evidenced by the recent passing of the Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) (Buyer Protections Act) – refer to our recent article here for more details: Proposed Changes to the Domestic Building Industry to Protect Consumers.

If this Bill is passed, this would mean that both the Bill and the Buyer Protections Act will come into full operational status by mid to late 2026, unless proclaimed sooner.

Unless or until further amendments are made, the current provisions of this Bill suggest that it will only apply to domestic building contracts entered into on or after commencement. Put another way, it is unlikely that there will be retrospective application, thus, allowing industry to prepare with some levels of certainty as to enforceability timelines.

Below, we summarise the key changes to the DBC Act, as contained in the Bill:

New Terms

The Bill introduces several new terms, all of which have been used extensively within the building and construction industry and they are therefore largely uncontroversial. They include:

‘developer’ – is a person that is in the business of selling new homes, and a person that enters into one or more domestic building contracts with a builder on the same or on different building sites, for the construction of those homes.

‘variation’ – means a variation referred to in section 37. More on this term is set out below.

Formalities

More than one contract: If a builder and a building owner enter into multiple domestic building contracts, and those contracts could be realistically subject to a single contract, and if they were, they would be classified as a major domestic building contract, then those contracts will be taken to be a single contract. The introduction of this section is intended to prevent contracts from being split up to avoid obligations under the DBC Act.

Builder and developer: A new section 3A sets out what sections of the DBC Act are applicable to dealings between a builder and a developer. Further, amended section 31(2) sets out a separate list of formalities that are required in a major domestic building contract between a builder and a developer. These contracts will be exempt from certain rights and requirements under the DBC Act, that would otherwise be mandatory in a major domestic building contract between a building owner and a builder (refer to section 31(1)). A 50 penalty unit fine will apply to sub-section (2), also.

Domestic building contracts: A new section 7A introduces another set of formalities for (non-major) domestic building contracts. The intention of this change is to cover the remaining types of contracts likely to be entered into within the domestic building space (less than $10,000). The DBC Act will now cater to each contract type, and will set out a mandatory list of inclusions to satisfy the formality requirements. A failure to adhere to these requirements carries a penalty of 50 units, as is the case for section 31(1) and (2).

Partnerships?

Given the prevalence of licence lending in the industry, new section 31(3)(c) of the DBC Act requires that where the registered building practitioner is to enter into the domestic building contract on behalf of a partnership, all the names and addresses and registration numbers of each member of the partnership must be listed in the domestic building contract.

Building work under the DBC Act

The preparation of:

1. Plans and specifications; and
2. A bill of quantities,

will no longer be subject to the DBC Act, as it will no longer be considered domestic building work.

Above item (a) and (b) will now be expressly recorded as newly excluded items under section 6.

These changes seek to align the legislation with current industry practices in the domestic building space, particularly with respect to preliminary work agreements, removing the constraints of the DBC Act.

Warranties

The first paragraph of section 8 is amended to incorporate the words, ‘and agreement entered into by a builder and a building owner in connection with a domestic building contract’. This change is significant, because it will ensure that section 8 implied statutory warranties will cover agreements entered that are not major domestic building contracts because they do not meet the formality requirements under section 31 or 7A. In some situations, this means that the implied statutory warranties may also apply to preliminary work agreements.

The implied statutory warranties in section 8(a) and (d) are further amended to replace, ‘proper and workmanlike manner’, with, ‘due care and skill’ as set out in sub-section (a), and similar wording has been incorporated into (d).   The effect of this amendment remains to be determined by the Courts and by the Tribunal. We think it likely that this warranty now requires that the works are not carried out negligently (i.e. with a failure of due care and skill) as opposed to a failure to meet the prior standard of being carried out in a ‘proper and workmanlike manner’ which might imply more than not being negligent in carrying out the works.

A further warranty at sub-section 8(da) is introduced, stating that if there is no completion date or period specified in a contract, the builder warrants that the work will be completed within a reasonable time.  This further incentivises a builder to include a completion date or a period of time to complete the works in a domestic building contract.

A separate warranty is found in section 20(2), that covers provisional sums. This warranty has also been amended, by replacing the word ‘reasonable’ with, ‘due’, so that it reads, ‘due care and skill’.

We understand that these changes have been incorporated to align with the existing wording of the consumer guarantees, as found in the Australian Consumer Law.

One-stop Variation shop

The Bill proposes to amalgamate section 37 (builder variations) and 38 (building owner variations) into a single variation section. Under this combined section, the builder and building owner may agree to vary the plans and/or specifications set out in a major domestic building contract. The builder will still be obligated to comply with the formalities set out in 37(2).  The requirements in section 37(2) are quite numerous and require a significant explanation for the variation to be provided by the builder to the building owner.  If the builder does not comply with the requirements of section 37(2), the builder will not be entitled to recover any money, unless on application to the VCAT, they can satisfy the Tribunal that their circumstances override their non-conformance with the formalities in section 37(2). If so, the Tribunal may allow the variation and this allowance may also entitle the builder to the cost of the variation plus a reasonable profit.

There is also a new section 38 which allows a builder to dispense with compliance with section 38(2)’s formalities in certain circumstances including if a building surveyor makes a building order or if the variation is urgent due to a risk of danger to health or safety or of a risk of damage to property (subject to a requirement for the builder to provide the building owner notice of the variation after starting to give effect to the variation).

Cost escalation clauses

The main changes proposed to section 15 of the DBC Act enable costs escalation clauses in certain circumstance. They include:

1. For a builder to claim increased costs resulting from delays in carrying out the work, they must demonstrate that the delay arose as a result of circumstances outside the builder’s control, or any prescribed circumstance (to be determined under the Regulations);
2. Cost escalation clauses can only be inserted in a contract if the contract price is more than $1,000,000 (or any higher amount fixed by the Regulations);
3. A cost escalation clause is void, unless the builder gave the building owner a notice explaining the effect of the clause in the prescribed form, and the building owner placed their signature, seal or initials next to the cost escalation clause, before the contract was entered into;
4. A builder that relies on a cost escalation clause warrants that the increased cost of the contract have been calculated with due care and skill;
5. The total contract price cannot increase by more than 5% (or any other percentage fixed by the Regulations) through a builder’s reliance on cost escalation clauses (a penalty of 100 units has been incorporated into this sub-section 5);
6. The builder must promptly give copies of all evidence forming the basis of a cost escalation clause to the building owner; and
7. If a builder does not comply with any of the above, the builder will not be entitled to recover any money under a cost escalation clause.

Ending a contract for cost blowouts or delays

The Bill seeks to amend section 41 by removing the words, ‘unforeseeable reasons’. This change means that a building owner can end a contract on the basis that the contract price has been increased by more than 15%, or the build period has been increased by one and a half times, without the need for the building owner to make an assessment about the builder’s state of mind as to what may or may not be reasonably foreseeable at the time that the major domestic building contract was entered into (and time and money were set in that document).   This makes reliance upon section 41 by an owner as the basis for cancelling a major domestic building contract significantly easier and less open to challenge.

Deposits and Progress payments

The proposed terms of the Bill set out that a builder can only claim (both as a deposit and progress payment) what is set out in the Regulations (which are to be determined).  Further, the progress payments will be those determined by the specified contract applicable to the major domestic building works, and the percentage of the cost of the works that is attributed to the use of a ‘prescribed modern methods of construction’. This term is not defined under the current Bill, but will likely be covered in detail under the Regulations.

A general proportionality requirement will also be imposed on all major domestic building contracts, so that a builder is prohibited from demanding, recovering or retaining any amount that does not directly relate to the progress of the building works or the prescribed percentage of the contract price for that stage of the works.   This offence may deter builders from over-claiming and/or claiming for payment early.

Inspection, enforcement and remedy powers

New Part 5A introduced by the Bill will give the authorised person (the new Plumbing and Building Commission), various powers to inspect, enforce and remedy breaches, or to prosecute non-compliance with the DBC Act. These new sections largely mirror the authorised person’s statutory powers under the Building Act.

Further comments

If the Bill is passed largely unamended, the effects of the Bill will most likely require contract templates, ancillary documents and processes to be revised and updated for both principals / developers, and contractors / builders.

The Regulations, which are unknown at this stage, will play a significant part in shaping the impact of these proposed changes. We will provide any further updates on this Bill and the Regulations.

Please contact the authors, or any member of our Building & Construction team, should you have any questions about this article, or if wish to discuss how we may be able to assist your business and/or projects.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.

_____________________

[1] Review of the Domestic Building Contracts Act 1995 | Engage Victoria