How new Buyer Protection and insurance laws affect builders

First Resort Home Warranty Scheme (FRHWS) replaces Domestic Building Insurance (DBI)

The Domestic Building Insurance (DBI) scheme has been replaced with First Resort Home Warranty Insurance (FRHWS). From July 1st, the FRHWS applies to all new domestic building contracts worth $20,000 or more. You must now pay the insurance premium to the Building and Plumbing Commission (BPC) within 10 business days after the contract is signed or when building works commence, whatever is earlier. You cannot delay obtaining FRHWS cover by delaying collection of the deposit. This new insurance product is available from the Building and Plumbing Commission (BPC) website.

Victorian building contracts available via HIA’s Contracts Online platform incorporate the new provisions on FRHWS premiums, deposits, variations, optional additional insurance and a Consumer Affairs Checklist.  These updated contracts must be used from July 1st 2026. HIA recommends members do not use any hard copy contracts purchased prior to this date. Please contact us to obtain Contracts Online credits for any hard copy contracts you have already purchased.

The Department of Transport and Planning has advised that DBI policies for contracts signed prior to July 1st will still be available for purchase from BPC after this date. We advise members to seek advice from a legal professional to determine if the contract would be considered “entered into” in these circumstances and whether DBI or FRHWS is required.

New Minimum Financial Requirements (MFR) for builders

Under Victoria’s new Minimum Financial Requirements, domestic builders will need to demonstrate they are financially viable, solvent and appropriately capitalised to maintain registration and access the First Resort Home Warranty Scheme (FRHWS).

Requirements vary based on builder size and revenue, with phased implementation for existing builders continuing until June 30th 2028. MFRs and Guidelines outlines the legislation in detail. HIA fought for several changes to the initial offering, which were implemented. What is included in the revised version:

• Existing builders will maintain their registration in line with their current Letter of Eligibility.
• Registered builders will maintain their current Total Construction Limit renamed as Maximum Construction Capacity (MCC).
• The BPC will keep track of the builders’ Total Value of Domestic Building Work at any point in time (Guideline 15) to ensure they are working within their MCC.
• MCC for most builders will be set as 20 times their Adjusted Net Tangible Assets (ANTA).
• How to calculate ANTA is set out in Guideline 10 and MCC in Guideline 8.
• Builders will be able to use Guarantees (Guideline 12) and can use Trust Assets.
• Builders requiring higher MCC will be able to work with BPC to increase their cap through a written MFR Agreement (see Guideline 7.2).

Retrospective Rectification Orders

Retrospective Rectification Orders (RO) give the Building and Plumbing Commission the power to direct builders and others to rectify defective or incomplete work. This can apply to jobs completed up to a decade ago. HIA has pressured the BPC to limit these RO actions to the most serious instances of defective, non-compliant or incomplete building work. The Victorian Government’s Ministerial Direction sets out what the BPC has been instructed to prioritise.

BPC inspections of multi-unit home building projects

The new reforms include the BPC’s increased authority to inspect multi-unit home building projects for serious defects where it considers appropriate, and if necessary, prevent final payments from consumers to developers until such defects are resolved. A developer bond of 2% of the cost of the project will provide protection to consumers of multi-unit home building projects where FRHWS cover is not available. The developer bond of 2% will apply to projects where the building permit is issued from 1 July 2027.

Keeping your client informed

HIA understands that it can be difficult explaining some of these details to clients. To make things easier, we have prepared a short infosheet for consumers which builders can print and provide to clients.

Client handout

To find out more, contact HIA's Contracts and Compliance team

Email us

The above is intended to provide general information in summary form. The content does not constitute specific advice and should not be relied upon as such. Formal advice should be sought by members and customers with respect to particular matters before taking action.