New changes to speculative buildings in Victoria

What is a speculative building project?

A speculative building project is when a builder builds on land that they own, and they intend on selling that property to a prospective client.

Accordingly, these legislative changes will provide confidence to builders as to whether their project will be considered as a speculative build.

Amendment 1: Identifying and defining a ‘speculative builder’

The Building Act will define a ‘speculative builder’ to be a building practitioner who carries out ‘speculative domestic building work’. 

The Act will further define speculative domestic building work to mean: 

• There is no domestic building contract; and 
• The builder owns the land; and 
• The construction work consists of the building or erection of one home, or two or more homes in a building with a rise of three stories or less; and 
• The builder intends to sell the home (or each home) or the homes are subject to an executed contract of sale. 

Amendment 2: New insurance requirements 

In addition to providing a definition, the amendments will also introduce new insurance requirements necessitating the speculative builder to purchase a domestic building insurance (DBI) policy. 

Not unlike how DBI operates in typical building scenarios, the policy is for the benefit of the prospective purchaser, as opposed to the builder. 

The policy will take effect either on the date of paying for the insurance, or on the date the building works commence – whichever occurs first.

How can I prepare for the impending changes?

Builders who engage in speculative building or are thinking of expanding their business are encouraged to evaluate their current business structure and practices before the changes take place.

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.