Victoria’s New First Resort Home Warranty Scheme: What the 2026 Insurance Reforms Mean for Homeowners and Builders
Victoria’s domestic building insurance scheme is changing. For homeowners, the reform may provide earlier access to assistance. For builders, it means stricter risk management, clearer claim processes and greater scrutiny of defective or incomplete work.
Victoria’s domestic building insurance framework is undergoing one of its most significant changes in years.
On 11 May 2026, the Victorian Government published a notice of decision confirming that the Building (Statutory Insurance Scheme) Regulations 2026 would proceed. The Regulations support the operation of the new First Resort Home Warranty Scheme, established under Part 9A of the Building Act 1993. The scheme will be managed by the Victorian Building Authority, trading as the Building and Plumbing Commission.
For homeowners, builders, developers and construction lawyers, these reforms are important because they shift Victoria away from a traditional last resort domestic building insurance model toward a first resort home warranty model.
What is changing?
Under the previous domestic building insurance system, homeowners generally could only access insurance in limited circumstances, such as where the builder had died, disappeared or become insolvent.
The new First Resort Home Warranty Scheme is designed to provide homeowners with earlier access to assistance where there is incomplete, defective or non-compliant domestic building work.
In simple terms, the scheme is intended to allow an owner to seek assistance when a building issue is identified, rather than having to wait until the builder is insolvent, dead or has disappeared.
This is a major policy shift.
When does the new scheme begin?
The Victorian Government has stated that the First Resort Home Warranty Scheme will begin on 1 July 2026.
The Government has also stated that the scheme will apply to building contracts over $20,000 and to homes of three storeys or less.
Homeowners, builders and lawyers dealing with domestic building contracts from this period will need to carefully consider whether the new statutory insurance scheme applies and what obligations arise under it.
Why does this matter?
For many homeowners, defective building work creates immediate financial pressure.
A homeowner may be left with cracking, water ingress, structural issues, incomplete works, defective waterproofing, non-compliant plumbing or an unsafe home. Under the older last resort model, the homeowner often still had to pursue the builder directly before insurance became practically available.
The new model is intended to reduce that gap.
However, this does not mean that every building complaint will automatically result in compensation or rectification.
The Regulations introduce detailed rules about what work is covered, when a building owner is entitled to assistance, when the Building and Plumbing Commission must or must not provide assistance, what exclusions and limitations apply, what process must be followed before a claim is decided, what deductibles are payable, and when cover ends.
The scheme is therefore more accessible, but it is still regulated, procedural and evidence-based.
What types of assistance may be available?
One of the most important changes is how assistance may be provided for defective or non-compliant domestic building work.
The notice of decision states that, for claims valued at less than $400,000, the available assistance is the rectification of the defect or non-compliant domestic building work on behalf of the Authority, less any building owner liability amount.
For claims valued at $400,000 or more, assistance may be provided by rectification on behalf of the Authority or by payment of compensation, again less any applicable owner liability amount.
This is significant. It suggests the scheme is primarily focused on practical rectification, particularly for claims below $400,000. Compensation may be available for larger claims, but the Authority appears to retain control over whether rectification or compensation is the appropriate pathway.
For homeowners, this means the claim may not simply be a cheque-writing exercise. The Authority may become directly involved in arranging or managing rectification.
For builders, this means defective or non-compliant work may be scrutinised by the Authority in a more direct way than under the old insurance framework.
Owners must be careful before doing urgent rectification works
A very important practical issue is that homeowners may lose entitlement to assistance if they rectify, complete, demolish, or attempt to rectify, complete or demolish the domestic building work without written approval from the Authority.
The notice states that building owners will not be entitled to assistance if they carry out or attempt those works without written approval, noting that the Authority will operate a 24-hour hotline to respond to emergency situations.
This is one of the most important warnings for homeowners.
If a home is unsafe, leaking, exposed to weather, or suffering ongoing damage, owners naturally want to act quickly. However, under the new scheme, owners should be very careful before undertaking works themselves.
The safer course will usually be to document the issue urgently, notify the relevant parties, seek approval from the Authority where required, and obtain legal advice before authorising significant rectification, completion or demolition works.
Emergency circumstances may still require immediate action, but the owner should not assume that all urgent works will automatically be covered after the fact.
Complaint notices and the builder’s opportunity to respond
The scheme also introduces a structured claims process involving a complaint notice.
The notice of decision states that the required information in a complaint notice has been expanded. The notice must identify the domestic building work to which the claim relates, identify the relevant person to be served, and describe any rectification or completion work undertaken or attempted by the building owner.
The relevant person then has a period to respond. Importantly, the 28-day response period excludes the period from 22 December to 10 January, recognising the construction industry shutdown period.
The response may agree in full or in part that the domestic building work is incomplete, defective or non-compliant and that the relevant person carried out that work. If the relevant person does not agree, they must give reasons. If they do agree, they must state what action they will take and when.
This process matters because it creates a formal record.
For homeowners, the complaint notice should be prepared carefully and supported by evidence.
For builders, a vague denial may not be enough. The response should deal properly with the allegations, reasons, proposed rectification and timing.
Imminent risk and danger to property
The Regulations also recognise that some matters cannot wait.
The notice states that the grounds for not serving a complaint notice have been amended so that the relevant test is whether the claim presents an imminent risk to the health or safety of occupants or members of the public, or a danger to property.
This is important in cases involving serious water ingress, structural instability, unsafe balconies, stairs or retaining walls, defective waterproofing causing progressive damage, dangerous electrical or plumbing defects, incomplete works exposing the building to damage, or defects affecting public safety.
However, the use of the word imminent means the exception is unlikely to apply to every defect. Owners will need to show why the risk is immediate or sufficiently serious.
Structural, waterproofing and weatherproofing defects
The notice of decision confirms that the definition of structural defect has been amended to include defects that adversely affect, or are likely to adversely affect, the life, safety or health of occupants, users of the building, or members of the public.
The definition of waterproofing or weatherproofing defects has also been amended to capture work that adversely affects, or is likely to adversely affect, members of the public.
This is important because many domestic building disputes involve waterproofing, leaking balconies, failed membranes, roof leaks, drainage issues and water ingress.
The expanded wording may assist in cases where defective building work creates broader safety or health consequences, not merely cosmetic inconvenience.
Cost-plus contracts
Another important amendment is the introduction of cover for domestic building work carried out under a cost-plus contract, but only in limited circumstances.
The notice states that cover is introduced for defective or non-compliant work under a cost-plus contract only if the domestic building work is incomplete and the date of practical completion has not passed.
Owners and builders entering into cost-plus arrangements should obtain advice about whether the scheme applies and what risks remain outside cover.
Design defects and responsibility between multiple parties
The notice also states that an exclusion was removed where defective or non-compliant work arose from designs, plans or specifications that did not comply with the Building Act or Building Code and were not prepared by certain registered practitioners.
The Government stated this amendment responded to feedback that distinguishing between registered and non-registered designers could create additional complexity where multiple parties are responsible for defective or non-compliant domestic building work.
This is a sensible change.
Domestic building disputes often involve multiple actors, including builders, architects, engineers, building designers, draftspersons, plumbers, waterproofers, building surveyors and subcontractors.
It is not always easy for an owner to identify which party caused which defect at the start of a claim. Removing that exclusion may reduce technical arguments that would otherwise make access to assistance more difficult.
Swimming pools
The Government has also removed the proposed $100,000 limitation on assistance for domestic building work related to swimming pools.
The notice states this was done to address confusion about cover for standalone pool contracts, pools integrated into broader domestic building work, and consequential damage from pool-related work.
This is relevant for owners undertaking high-value residential projects where pools are integrated with landscaping, retaining walls, outdoor structures, drainage and the home itself.
Pool defects can cause serious consequential damage, including water ingress, structural issues, retaining wall failures and drainage problems.
Accommodation, removal and storage costs
The Regulations also increase the limit for accommodation, removal and storage costs from $10,000 to $12,000.
While this increase is welcome, owners should still be aware that temporary accommodation and storage costs can exceed this amount quickly, particularly where rectification works are prolonged.
In serious defect disputes, owners should keep careful records of rental accommodation, storage, moving expenses, hotel stays, temporary relocation costs and additional costs caused by delay or defective work.
Deductibles for homeowners
The scheme will include deductibles payable by building owners when making a claim.
The notice states that deductibles are higher for claims made later in the warranty period. The deductible amounts include $500 for claims made at least three months but no more than 12 months after completion, $750 for claims made at least three years but less than five years after completion, and $1,000 for claims made at least five years after completion.
This means homeowners should not delay investigating suspected defects.
Delay can make evidence harder to obtain, defects worse, and claims more expensive.
What homeowners should do now
Homeowners should treat the new scheme as helpful, but not automatic.
If defective or incomplete domestic building work is suspected, homeowners should take photographs and videos, keep a timeline of events, collect the contract, plans, specifications and variations, obtain occupancy permit and certificate documents, obtain inspection reports and expert evidence, avoid carrying out rectification works without approval where the scheme may apply, prepare any complaint notice carefully, and obtain legal advice before making admissions, signing releases or accepting partial rectification.
The strongest claims will usually be those supported by clear documents, expert evidence and a properly framed complaint.
What builders should do now
Builders should prepare for a more active insurance and regulatory environment.
The new scheme is likely to increase scrutiny of defective work, incomplete work, non-compliance with the Building Act and Building Code, delay, poor documentation, unclear variations, inadequate responses to owner complaints and failure to rectify.
Builders should ensure they understand when the scheme applies, keep proper records of all works, variations and communications, respond properly to complaint notices, give reasons if they dispute a claim, propose realistic rectification steps where defects are admitted, obtain their own expert evidence early, and notify insurers and relevant professionals where required.
A poorly managed response to a complaint notice may create avoidable legal and commercial risk.
What this means for VCAT building disputes
The new First Resort Home Warranty Scheme does not remove the need for careful legal strategy in VCAT building disputes.
There will still be disputes about whether work is defective or non-compliant, who caused the defect, whether the owner is entitled to assistance, whether exclusions apply, whether rectification is reasonable, whether compensation should be paid, whether urgent works were approved, whether the builder should be given an opportunity to rectify, and how expert evidence should be assessed.
The scheme may change the pathway, but it will not remove the importance of evidence.
For construction lawyers, the new scheme will require careful consideration of how insurance claims, rectification orders, VCAT proceedings, expert reports and settlement strategy interact.
Why this reform is important
The move from last resort insurance to first resort home warranty protection is a significant consumer protection reform.
The Government has stated that the new scheme is intended to provide better access to insurance when things go wrong, including cover for lost deposits, incomplete building work and non-compliant or defective building work.
That said, the scheme is not a blank cheque.
It contains conditions, exclusions, claim processes, deductibles and approval requirements. Owners who act too quickly without approval may prejudice their position. Builders who fail to respond properly may expose themselves to further scrutiny.
Conclusion
Victoria’s new First Resort Home Warranty Scheme represents a major shift in domestic building insurance.
For homeowners, it may provide earlier and more practical access to assistance where domestic building work is incomplete, defective or non-compliant.
For builders, it raises the stakes. Poor workmanship, inadequate documentation and slow responses to complaints may now have more immediate insurance and regulatory consequences.
For lawyers, the reforms create a new layer of strategy in building defect disputes. The key will be understanding when the scheme applies, how the claim process works, what evidence is required, and how the scheme interacts with existing rights under domestic building contracts, statutory warranties and VCAT proceedings.
The message is clear: domestic building insurance in Victoria is no longer just a last resort. From 1 July 2026, homeowners and builders will need to understand the new first resort framework and act carefully from the moment a defect or incomplete work issue arises.
Need advice about the new First Resort Home Warranty Scheme?
Boutique Lawyers are building and construction lawyers in Melbourne. We advise homeowners, builders, developers and industry professionals on domestic building disputes, defective building work, VCAT proceedings, statutory warranties, insurance claims and construction litigation.
If you are dealing with incomplete building work, defective work, non-compliant domestic building work or a dispute about insurance cover, contact Boutique Lawyers for advice about your rights and options.
Call 1300 556 140 or contact Boutique Lawyers to speak with a building and construction lawyer in Melbourne.
Source notes
- Victoria Government Gazette No. S 241, Monday 11 May 2026, Notice of Decision: Building (Statutory Insurance Scheme) Regulations 2026.
- Building (Statutory Insurance Scheme) Regulations 2026 and related Victorian Government materials concerning the First Resort Home Warranty Scheme.
Disclaimer: This article is general information only and is not legal advice. The operation of the First Resort Home Warranty Scheme will depend on the final Regulations, the Building Act 1993, the contract documents, the facts of the claim and any applicable exclusions or limitations. You should obtain legal advice about your particular circumstances.