As Australia’s housing supply shortage continues, many renters are looking to become homeowners, in a bid to escape rising rental prices. However, a complex regulatory framework, the prevalence of building defects, as well as issues relating to domestic building insurance and dispute resolution can provide additional challenges to new homeowners.
These are issues that property lawyer Megan Thorburn knows all too well. Megan is an Accredited Specialist in Property Law, the Chair of the Building and Construction Committee at the Law Institute of Victoria, Principal of CCP Law and an adjunct lecturer at the College of Law in Victoria. We spoke to Megan about some of the legal challenges facing homeowners in Victoria, and recent reforms to the sector.
The reforms taking place in Victoria reflect significant strides when it comes to strengthening building confidence in the state. These regulatory changes could prove a model worth considering by other jurisdictions.
Challenges faced by new Victorian homeowners
“There have been large numbers of building defects detected in apartment buildings constructed in Victoria in the past 30 years,” Megan explains. “Instances of defects, such as water leakage, structural issues, or poor workmanship, can result in additional costs incurred by homeowners for repairs and maintenance.”
The building defects can also lead to unforeseen litigation costs to resolve these issues, as new homeowners strive to get the defects rectified.
“Around half of Victoria’s apartment buildings inspected in Victoria’s cladding rectification program have been identified to have non-cladding defects,” Megan says.
These non-cladding defects are not funded by Cladding Safety Victoria, which means even more costs need to be borne by homeowners.
“For homeowners compelled to litigate disputes relating to rectification of defects, the process can take years. The number and complexity of cases in VCAT concerning high-rise apartment buildings has increased significantly in recent years.”
Failure by builders to promptly take out domestic building insurance has been another issue for new homebuyers as seen with the collapse of Porter Davis.
“There has been a widespread incidence of builders taking deposits from owners but not promptly taking out warranty insurance,” Megan explains.
Cutting costs and corners by builders under pressure to build high density housing quickly, can have adverse flow-on effects for homeowners.
“For apartment buildings suspected of having combustible cladding there is the cost of testing and rectification, the stress of complying with notices and orders and the difficulty selling properties with orders in place,” Megan says.
Finally, homeowners, and the lawyers who represent them, face a regulatory system that is quite complex.
Regulatory reforms aimed at boosting building confidence
A road map for regulatory reform was outlined in the 22 recommendations of the Building Confidence Report 2018.
The Building System Review Expert Panel was established in Victoria in 2019 and has commenced a three-stage comprehensive review of Victoria’s building system. The Panel’s Stage 2 Report was handed down in November 2023 and Dan O’Brien has recently been appointed Chair of the Expert Panel to implement Stage 3, to advise the Government on a framework for a new Building Act for Victoria.
“The Building Legislation Amendment Bill 2023 established the role of the State Building Surveyor to serve as the primary source of technical expertise and guidance for the building and plumbing industries and to ensure compliance,” Megan explains.
“The Bill also introduced the role of Building Monitor, whose role is to represent and advocate for consumers at a systemic level.”
In addition to these reforms, “a Building Manual was created to be a repository of information relating to design, construction and ongoing maintenance of a building,” Megan says.
The Building Legislation Amendment (Domestic Building Insurance New Offences) Bill 2023, received royal assent February 2024 and creates two new offences for builders who take deposits from owners but do not promptly take out warranty insurance.
“This widespread practice came to public attention in the wake of the collapse of Porter Davis in March 2023 which saw the state government have to step in to compensate owners left without insurance,” Megan says.
Indeed, 2023 proved to be a busy period for building reform.
“On 28 November 2023, the Expert Panel’s Stage Two Report was released,” said Megan. “That same day, the Victorian Government published a broad-ranging review of the Domestic Building Contracts Act 1995 (DBCA). These measures are related, with six of the 14 recommendations from the Panel’s Report calling for amendments to the DBCA and for improvements to Domestic Building Dispute Resolution Victoria (DBDRV).”
Strengthening Victoria’s Building Regulations in line with worldwide standards
“The reforms in Victoria reflect a broader trend of strengthening building regulations and building safety worldwide,” Megan says.
“Incidents like the Grenfell Tower tragedy have prompted nations to reevaluate their building regulations. International standards emphasise fire safety, structural integrity, and consumer rights. Victoria needs to create safer buildings and prioritise the well-being of occupants.”
In line with these trends, Victoria has introduced a raft of reforms. These include legislative reforms, calls for better industry stakeholder collaboration and information sharing with regulatory authorities, and initiatives like Cladding Safety Victoria.
“Amendments to the Building Act need to be enacted to ensure buildings are constructed and maintained to a high standard of safety,” Megan explains.
“Victoria's establishment of Cladding Safety Victoria demonstrates a $600 million proactive approach to identifying and rectifying buildings with non-compliant cladding to address this safety hazard,” Megan says.
“Cladding Safety Victoria (CSV) was established by the Victorian Government as an initiative to reduce the risk posed by non-compliant or non-conforming external wall cladding products on residential apartment buildings and publicly owned structures,” Megan explains. “CSV has identified buildings with potentially combustible cladding.”
CSV then assesses the level of risk posed by cladding materials through building inspections and risk assessments.
“Once buildings with non-compliant cladding are identified, CSV works with building owners, authorities, and industry stakeholders to develop and implement rectification plans,” Megan says. “This may involve removing and replacing the cladding materials with fire-safe alternatives. CSV also provides funding to support eligible building owners to help cover the costs of rectification works.
“The program continues to rectify high risk cladding throughout the state, and the government has started to enforce its rights of subrogation to recover the costs of the work from responsible parties.”
Indeed, CSV does more than merely discover cladding defects. In fact, it oversees funding for rectification works of combustible cladding on some buildings. In addition to helping to discover defects and funding oversight, CSV plays a crucial third role - it provides support and guidance to homeowners throughout the rectification process.
“This includes information on available funding options, assistance with navigating regulatory requirements, and access to resources for selecting qualified contractors and consultants to carry out rectification works. Unfortunately, the financial burden of rectification falls on apartment owners where cladding is not assessed to be high risk as well as for the rectification of non-cladding defects.”
What further reforms could strengthen building confidence?
The above reforms reflect significant strides when it comes to strengthening building confidence in Victoria. Their emphasis on information sharing and transparency, collaboration between industry stakeholders and regulators, and guidance for apartment owners who need to rectify defects, could prove a model worth considering by other jurisdictions.
As Chair of LIV’s Building and Construction Committee, a large part of Megan’s role is looking ahead to future reforms. To this end, she listed four major potential reforms.
1. Independent third-party certification
“The first is independent third-party certification of building designs, construction, and safety features,” Megan says. “This can help ensure impartial assessment through independent oversight.”
2. Regular inspections
Megan also recommends regular inspections during construction and post-occupancy to verify compliance.
“This helps extend regulatory oversight beyond the completion of construction,” Megan explains. “It helps monitor building performance, maintenance, and safety over time.”
3. Strengthen material oversight
Her third proposal is mandatory adherence to approved construction materials and standards.
“We should also consider strengthening oversight of building products and materials, as this is crucial to ensuring that only safe and compliant materials are used in construction,” Megan says.
“This may involve implementing stricter testing and certification requirements, enhancing product labelling and documentation standards, and increasing penalties for the use of non-compliant materials.”
4. Consequences for non-compliance
Finally, Megan recommends consequences for non-compliance, so that those in violation are held to account.
“Non-compliance with regulations by building practitioners should have consequences to improve compliance and restore confidence in the construction industry,” Megan says. “There ought be clear guidelines holding builders, developers, and contractors accountable for their work. This may involve increasing penalties for non-compliance, implementing more rigorous inspection regimes, and improving coordination between regulatory bodies.”
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