Victoria’s Domestic Building Contract Reforms: What builders, owners and developers need to know as at 13 May 2026

Important timing point: The Domestic Building Contracts Amendment Act 2025 (Vic) received Royal Assent on 16 September 2025. As at 13 May 2026, the main operative reforms should be described as incoming reforms unless the relevant provisions have been proclaimed. The Act provides that Part 1 and Division 3 of Part 8 commenced on the day after Royal Assent, while the remaining provisions commence on proclamation and, if not proclaimed earlier, on 1 December 2026. Many contract-related reforms apply only to domestic building contracts entered into on or after commencement.

Source: Domestic Building Contracts Amendment Act 2025 (Vic), No. 36 of 2025, including sections 1, 2 and 139.

Executive summary

The Act tightens Victoria’s domestic building contract regime. It strengthens contract documentation requirements, restricts cost escalation clauses, clarifies variation procedures, reforms deposits and progress payments, expands dispute resolution powers, and creates stronger inspection and enforcement powers. The safest way to write about the reforms on 13 May 2026 is to say “once commenced” or “these reforms are due to commence by 1 December 2026 unless proclaimed earlier”, rather than suggesting that all reforms already apply.

The big picture

The reforms are aimed at making domestic building contracts clearer, reducing disputes about scope and price, and giving owners stronger protections against unclear contracts, excessive deposits, premature progress claims, undocumented variations and major cost or time blowouts. For builders, the reforms mean stricter contract administration. For owners, they mean stronger statutory protection. For developers, they mean a more tailored regime because the Act now expressly recognises developers.

1. Developers are now specifically recognised

The Act introduces a definition of “developer”. In broad terms, a developer includes a person who contracts for, arranges, or owns land for domestic building work involving the construction of two or more homes intended for sale or already subject to contracts of sale. This matters because the Act also inserts a new section dealing with the application of the Domestic Building Contracts Act to contracts between builders and developers. Only certain provisions apply to those contracts.

Practical effect: Developers are not treated exactly the same as ordinary residential owners. However, builder-developer contracts are not completely outside the domestic building regime. Minimum requirements still apply.

2. Builder-developer contracts still need proper documents

For a major domestic building contract with a developer, the contract must include key information, including plans and specifications with enough detail to obtain a building permit, the registration number of the relevant registered building practitioner, partnership details if applicable, and the contract price or cost-plus payment method. Non-compliance carries a penalty of 50 penalty units.

Practical effect: Builders and developers should avoid vague short-form arrangements. The contract should clearly identify scope, plans, specifications, practitioner details and the pricing mechanism.

3. Contract splitting will be harder

If a builder and building owner enter into multiple domestic building contracts that could have been one contract, and if combined they would amount to a major domestic building contract, the contracts are taken to be a single contract.

Practical effect: Builders should not assume that splitting a project into smaller contracts avoids statutory obligations. Owners should look at the overall project, not just each document separately.

4. Contracts must be clear, written and legible

The Act introduces basic content requirements for domestic building contracts. A contract must be in writing, in English, readily legible, identify the parties, include a detailed description of the work, state the contract price or cost-plus payment method, and state the date of the contract.

Practical effect: This discourages informal, vague or incomplete building arrangements. Builders should ensure the contract is complete before work starts. Owners should ensure the scope and price are understandable before signing.

5. Unsigned major domestic building contracts create serious risk for builders

If a major domestic building contract is not signed by both the builder and the owner, the builder has no contractual rights or entitlements under the contract. The owner may still enforce their contractual rights. A builder may recover money only in limited circumstances, including where VCAT is satisfied there are exceptional circumstances or significant hardship and recovery would not be unfair to the owner.

Practical effect: Builders should not start work without a properly signed contract. This is one of the clearest risk-shifting provisions in the reforms.

6. Cost escalation clauses are heavily restricted

A builder must not include a cost escalation clause in a domestic building contract if the contract price is less than $1 million, unless regulations prescribe a higher amount. A cost escalation clause is void unless the builder gives the owner the required notice and the owner signs, seals or initials next to the clause before entering the contract. A builder also must not use cost escalation clauses to increase the total contract price by more than 5%, unless regulations prescribe another percentage.

Practical effect: Builders will need to justify and document cost increases carefully. Owners will have stronger protection against hidden or open-ended price escalation clauses.

7. Variations must be documented properly

For major domestic building contracts, a variation to plans or specifications must be in writing, in English and readily legible, signed by both parties, dated, describe the variation, explain the reason, state whether a permit amendment is required, identify delay, estimate the delay, and state the cost and effect on the contract price.

Practical effect: Builders should not rely on verbal approvals or informal texts for significant changes. Owners should insist that any variation clearly explains what changed, why it changed, and what it does to price and time.

8. Owners get clearer rights to end a contract

An owner may end a major domestic building contract if the contract price increases by 15% or more after the contract was entered into, or if the contract has not been completed within 1.5 times the original completion period. Certain increases are ignored, including increases arising from prime cost items, provisional sums and owner-initiated variations.

Practical effect: This gives owners a clearer exit right where a project materially blows out in price or time. Builders should treat delay and cost control as legal risk issues, not just project management issues.

9. Progress payments must relate to actual progress

The Act reforms progress payment rules. For certain major domestic building contracts, including contracts involving prescribed modern methods of construction, progress payments are limited by prescribed stage percentages and by the amount that directly relates to the progress of the building work. For other major domestic building contracts, the builder must not demand, recover or retain more than an amount directly related to the progress of work actually carried out.

Practical effect: Builders should ensure payment claims are supported by actual progress. Owners should compare payment claims against work actually completed.

10. Dispute resolution will cover damage more clearly

The Act expands the dispute resolution framework so assessors and dispute resolution officers can deal not only with defective or incomplete work, but also with damage caused in the carrying out of domestic building work or by defective domestic building work. Assessors may consider whether damage was caused by the work and whether it is attributable to the builder.

Practical effect: This is important because many disputes involve consequential damage, such as cracking, water damage or damage to existing parts of the property.

11. Dispute resolution orders become stronger

A dispute resolution order may require a builder to pay money to an owner for rectifying defective work, rectifying damage caused by the work or defective work, or completing incomplete work. Orders may also require refunds where the builder accepted money without required insurance, where there have been significant delays, or where the builder had no entitlement to the money.

Practical effect: Owners may have stronger practical remedies. Builders should treat dispute resolution orders seriously because non-compliance may create further consequences.

12. The regulator’s role is changing

The Act includes provisions transferring certain functions from Consumer Affairs Victoria to the Victorian Building Authority and creating stronger inspection, enforcement and remedy powers. Those powers include requiring information and documents, entry and search powers, examination of building or plumbing work, seizure of things connected with contraventions, taking samples, making recordings, requiring production of documents, and requiring relevant practitioners to attend inspections.

Practical effect: To avoid confusion in public-facing drafting, it is safer to refer to the building regulator or Authority unless discussing a specific provision that names a regulator.

Quick practical checklist

Conclusion

The Domestic Building Contracts Amendment Act 2025 is a major reform package. However, as at 13 May 2026, the main operative provisions should be described as incoming reforms unless the relevant provisions have been proclaimed. The most careful wording is:

“Once commenced, these reforms will require builders to be more transparent, more careful and more disciplined with contracts, variations, payment claims and records. Owners will receive stronger protections against unclear contracts, excessive price increases, premature payment claims and undocumented variations. Developers should review their contract structures because the Act now treats builder-developer contracts differently from ordinary owner-builder contracts.”

This article is general information only and is not legal advice. Specific advice should be obtained before relying on these reforms in relation to any particular contract, dispute or project.