What Victoria’s New Building Defect Powers Mean for Strata Communities

The reforms give the regulator greater ability to require builders, subcontractors and developers to return and fix defective work for up to 10 years after occupation where safety risks are identified and other enforcement options are not enough. This may be particularly relevant for apartment buildings, where unresolved waterproofing, fire safety, structural or façade issues can quickly become an owners corporation problem, affecting levies, special contributions, property values and future insurance discussions.

The planned developer bond scheme is also important. From 1 July 2027, developers of qualifying apartment buildings will be required to lodge a bond with the Building and Plumbing Commission to help fund rectification of defective work. This is intended as an interim pathway while Victoria continues work on a decennial insurance model for apartment buildings. Once operational, that longer-term model is expected to provide a first-resort, no-fault pathway for certain serious defects, reducing the need for owners corporations to prove who was responsible before a claim can move forward.

For committees and strata managers, the practical message is clear: these reforms may improve protection for new apartment buyers, but they do not remove the need for disciplined insurance governance. Standard strata insurance remains focused on insured events and property-related risks under the policy wording. Building defects, poor workmanship and gradual deterioration are often treated differently, so committees should avoid assuming a new government scheme will automatically fill every gap.

There are several actions worth considering now:

• Review building records, defect reports and maintenance histories before renewal discussions.
• Ask how known defects may affect underwriting, exclusions, excesses or premium loadings.
• Separate construction defect recovery pathways from day-to-day insurance claims management.
• For newer buildings, confirm whether future bond or decennial arrangements may apply and what evidence must be retained.
• Seek professional assistance when defect issues, disclosure obligations and renewal negotiations overlap.

The broader trend is positive for apartment owners: governments are recognising that complex building defects can leave individual owners and owners corporations carrying costs they are poorly equipped to manage. However, the transition period will matter. Until the developer bond and decennial insurance frameworks are fully tested, committees should keep focusing on clear records, timely maintenance, transparent disclosure and careful policy comparison at each renewal.