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Victorian construction legislation reforms: Supporting statutory and critical construction professionals through upcoming changes

Victorian construction legislation reforms: Supporting statutory and critical construction professionals through upcoming changes

28/05/2026 · 7 minute read

Victoria is preparing for the proposed introduction of the Building Legislation Amendment (Buyer Protections) Act 20251, expected to commence on 1 July 2026, which has the potential to affect a wide range of construction-related professionals who perform statutory or critical functions in the building industry. While the reforms remain subject to final confirmation and may evolve, this article provides a clear, balanced overview of the anticipated changes, their practical effects and considerations around professional indemnity (PI) insurance, particularly for professionals with statutory responsibilities such as building surveyors, certifiers, inspectors, structural and fire engineers, and other building practitioners2 3. The aim is to help these professionals navigate the transition with confidence and clarity.

Overview of key legislative changes

The Building Legislation Amendment (Buyer Protections) Act 2025 proposes several reforms designed to enhance consumer protections and improve defect rectification processes in residential construction. Key measures likely to affect statutory and critical construction professionals include:

  • Domestic building insurance (DBI)4: A proposed first‑resort insurance model for residential buildings up to three storeys, allowing claims to be made by homeowners even if the builder continues operating. This aims to facilitate quicker defect rectification and reduce disputes.
  • Developer bond scheme: For residential buildings over three storeys, developers may be required to lodge a bond equal to 2% of the build cost, held for two years post‑completion to fund defect rectification if required.
  • Expanded rectification powers5: The Building and Plumbing Commission (BPC) will have authority to issue rectification orders for defective work up to 10 years after completion, including post‑occupancy, encouraging long‑term quality assurance.
  • Mandatory insurance verification: Professionals who carry out statutory checks or grant approvals (for example, building surveyors and certifiers) will be required to verify builder insurance before issuing building permits or approvals, reinforcing compliance and risk management.
  • Increased mandatory inspections: Additional inspections, such as pre‑waterproofing and pre‑plastering checks, are proposed to further support construction quality. These additional checkpoints will affect inspectors, certifiers and engineers who perform statutory inspection or certification functions.

Insurance implications for statutory and critical construction professionals

The reforms introduce changes that may affect PI insurance exposure and risk management practices across a broader group of construction professionals. Understanding these implications is key to maintaining professional resilience.

  • Heightened compliance responsibilities: Mandatory insurance verification before permit issuance adds a critical compliance step for professionals with statutory duties. Failure to verify builder insurance, or to follow prescribed verification procedures, could lead to professional negligence claims. Implementing robust verification procedures and documenting compliance diligently will help mitigate this risk.
  • Increased inspection and certification requirements: Additional mandatory inspections and expanded rectification windows increase operational complexity and the potential for disputes over inspection timing, findings or reporting. Statutory certifiers, building surveyors, inspectors and engineers will need clear, auditable processes for inspections and certification to reduce dispute risk.
  • Greater scrutiny over long‑term decisions: With rectification authority extending up to 10 years after completion, professionals’ records, decisions and certifications will be scrutinised over a longer timeframe. Clear documentation of the rationale for decisions, limitations of scope and any reliance on third‑party information will be critical in defending against claims.
  • Interaction with DBI and bonds: The introduction of DBI and developer bonds means insurers and bond administrators may become more actively involved in rectification. For statutory professionals, this can lead to claims being managed through insurers rather than direct homeowner litigation, which may streamline dispute resolution but could also involve early engagement with insurers and their claims processes.
  • Impact on PI coverage terms: Professionals should consider whether existing PI policies adequately reflect extended liability periods, new statutory obligations and the potential for increased regulatory involvement. Key policy aspects to review include retroactive cover, limits, run‑off provisions and contractual liability exclusions.

Practical steps to protect professional liability exposure

To manage professional liability exposures and mitigate PI insurance claims, statutory and critical construction professionals may consider the following pragmatic steps ahead of the reforms:

  • Implement rigorous insurance verification processes: Where verification is mandated, establish and maintain clear procedures to confirm builder insurance before issuing permits, certificates or approvals. Keep detailed records of verification, including copies of insurance certificates, dates checked, expiry dates and correspondence.
  • Adapt inspection and certification protocols: Incorporate the new mandatory inspections into schedules and checklists. Ensure inspections are timely, thorough and supported by standardised reporting templates. For engineers and specialised certifiers, clearly document the scope and limitations of any certification provided.
  • Maintain comprehensive contemporaneous records: Keep thorough records of all inspections, certifications, communications, technical assessments and decisions. Detailed, contemporaneous documentation is invaluable in defending against potential claims, particularly given the extended rectification window.
  • Clarify roles, responsibilities and statutory functions contractually: Many professionals performing statutory functions should avoid commercial contracts that conflict with statutory obligations. Where engagement contracts are necessary, clearly recognise the statutory role, define scope and responsibilities, and record any limitations or exclusions of liability consistent with regulatory requirements.
  • Engage with your PI insurer or broker early: Discuss the reforms and their implications with your PI insurer or broker to ensure coverage aligns with extended liability periods and new compliance obligations. Confirm policy terms, notification requirements, run‑off options and whether policy limits and extensions are sufficient for potential regulatory claims.
  • Prioritise continuing professional development (CPD) and regulatory guidance: Stay informed about legislative changes, updated technical standards and BPC guidance through CPD activities and industry updates. Training on new inspection protocols, documentation standards and insurer interaction will support professional competence and risk mitigation.

Claim examples involving statutory and critical construction professionals

The following hypothetical but realistic scenarios illustrate the types of claims that may arise under the proposed legislative framework and how different statutory professionals could be implicated:

  1. Missed pre‑waterproofing inspection (inspector/certifier) - An inspector or certifier fails to perform or adequately document a mandatory pre‑waterproofing inspection on a single‑storey home. Within two years, the homeowner discovers water ingress and mould. The insurer funds rectification under DBI, and the inspector faces a PI claim alleging inspection shortcomings and inadequate record keeping.
  2. Failure to verify builder insurance (certifier/building surveyor) - A certifier or building surveyor issues a building permit without confirming the builder’s insurance status. The builder becomes insolvent during construction, leaving defects unresolved. The homeowner seeks recovery through the statutory professional’s PI policy for failure to verify insurance as required.
  3. Dispute over scheduling and certification of additional inspections (building surveyor / site inspector) - A builder alleges that delays and additional costs arose from the scheduling and reporting of newly mandated inspections (for example, pre‑plastering). The dispute escalates to a PI claim against the statutory inspector or surveyor, highlighting the need for precise inspection timing, clear communication and robust documentation of any agreed inspection windows.
  4. Structural or fire engineering certification questioned after rectification order (engineer) - Eight years after occupancy, defective cladding or structural failure is identified and the BPC issues a rectification order. Structural or fire engineers who provided earlier certifications or design approvals find their reports and decisions scrutinised as part of the PI claim and regulatory investigation.
  5. Failure to document reliance on third‑party testing (specialist consultant) - A specialist consultant (for example, a geotechnical or materials engineer) provides a report relied upon by a certifier. Years later, defects arise and questions are raised about the consultant’s testing methods or documentation. Clear scope statements and documented limitations of reliance are critical in such cases.

What’s next?

The proposed reforms are anticipated to commence on 1 July 2026; however, they remain subject to legislative finalisation and potential further amendments. Statutory and critical construction professionals are encouraged to follow developments closely and to review internal procedures and insurance arrangements in light of the proposed changes. For the latest updates, please refer to the Building and Plumbing Commission website.

This article provides a general and high-level overview of key changes and potential implications of the new legislation. For specific legal interpretations, contractual matters, or professional circumstances, consulting qualified legal professionals is strongly recommended.

If you would like to discuss how the legislative reform may impact your business and risk exposures, please reach out to a Marsh representative.

 

1 Victorian Legislation Building Legislation Amendment (Buyer Protections) Act 2025 | legislation.vic.gov.au

2 Business Licencing Authority Professional conduct - Consumer Affairs Victoria

3 Building and Plumbing Commission Building surveyors code of conduct

4 Building and Plumbing Commission Domestic Building Insurance | Building and Plumbing Commission

5 Building and Plumbing Commission A new regulator with new powers | Victorian Building Authority

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Mary Kunjan

Mary Kunjan

Principal, Surveyors and Engineers Industry Practice - FINPRO, Marsh Risk

  • Australia

This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modelling, analytics, or projections are subject to inherent uncertainty, and any analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change.

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