Dodgy builder 'nightmares' spark protections shake-up

Home owners will soon be able to make an immediate insurance claim on shoddy construction without builders collapsing or disappearing.

Victoria's oft-maligned domestic building insurance scheme is set to be overhauled under legislation to establish a more powerful watchdog, the Building and Plumbing Commission.

"We've all heard those nightmare stories," Premier Jacinta Allan told reporters.

"Building or buying a new home will be the biggest investment most of us ever make and Victorians rightly expect to get what they pay for."

In Victoria, builders must take out insurance for any residential work valued at more than $16,000.

But it can only be accessed by home owners as a last resort under very limited circumstances such as a builder dying, disappearing or becoming insolvent.

The reforms introduced to state parliament on Tuesday would allow for claims when a building issue is first identified.

"There has been too much anguish, too much financial hardship and too much uncertainty," Housing Minister Harriet Shing said.

The updated scheme would cover domestic contracts worth more than $20,000 on buildings three storeys and below.

Claims would allowed for lost deposits when a builder has not obtained insurance - as happened during the 2023 collapse of Porter Davis - and incomplete, non-compliant or defective work.

Consumers were too often being "ping ponged" from one entity to the next under the current system, Victorian Building Authority Commissioner Anna Cronin said.

"Consumers have a pretty horrendous journey and even if it works well it's still a pretty complex journey," she said.

"The job of the new building and plumbing commission is to join all of that up and make it a seamless journey for consumers."

Under the bill, the replacement regulator can order the rectification of dodgy building work up to 10 years after an occupancy permit is issued.

Developers will also be forced to pay a bond to cover defective work in buildings four storeys and above from the end of 2025.

The bond rate would be set at two per cent of the cost of construction and held for about two years, in line with arrangements in NSW.

Apartment owners would be covered longer term under a separate 10-year liability scheme.

The Victorian Building Authority has been mired in scandal in recent years.

WorkSafe charged the regulator in September 2022 after one of its inspectors committed suicide and chief executive Sue Eddy resigned in May 2023 after it was revealed some plumbing inspections were carried out virtually.

In October, the Victorian government apologised and announced it would replace the regulator with the commission after a report laid bare weak responses to complaints.

The corruption watchdog has also charged three of its employees after an investigation into alleged financial gains linked to builder registrations.

Ms Shing conceded the mounting issues had created a "trust deficit" in the authority but insisted Ms Cronin had righted the ship.