From 1 July 2026 (unless commenced earlier),¹ Victoria will require developers² of residential apartment buildings (a) over three storeys; and (b) where the building permit is issued after 30 June 2027, to lodge a 2% bond before applying for an occupancy permit. This article explains who is captured, notice and bond requirements, the inspection and release process, key exemptions and practical steps to prepare.

Those affected and the regulator

The scheme applies to developers of residential apartment buildings³ over three storeys.⁴ In mixed‑use developments, the bond still applies, but the way the ‘total build cost’ is calculated depends on the configuration of the project—for example, whether non‑residential areas form part of the same building or sit within separate buildings. Administration of the scheme sits with the Building and Plumbing Commission (BPC), the successor to the Victorian Building Authority (VBA).

Commencement

The Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) (Act) commences on a day to be proclaimed or on 1 July 2026 at the latest.⁵ Subject to final form, the draft regulations propose exemptions for:

• eligible build‑to‑rent developments;
• public/community housing (with carve‑outs where private lots are sold); or
• buildings where the building permit is issued before 1 July 2027.⁶

This means that if the building permit for the construction of the residential apartment building was issued prior to 1 July 2027, the developer does not need to issue a developer bond for that building.

Notice requirements

The developer must give the BPC notice within 7 days after the issue or execution of the developer bond.⁷ Such notice must include the total build cost of the building and the amount secured by the developer bond.

Section 40A of the Building Act 1993 (Vic) (Building Act) requires a developer to notify the BPC of its intention to apply for an occupancy permit during the applicable period.⁸ The ‘applicable period’ is defined as:

• where the construction period is more than six months – between 12 months and 6 months before the occupancy permit application date; or
• where the construction period is within six months – between 6 months and 30 days before the occupancy permit application date.⁹

The advance notice enables the BPC to oversee timing and compliance, ensuring an occupancy permit is not sought before the required bond is in place.

Calculating ‘total build cost’

A developer must arrange a bond¹⁰ equal to 2% of the ‘total build cost’ before applying for an occupancy permit¹¹ (c.f. in NSW, the developer bond amount will increase from 2% to 3% from 1 July 2026).

The Act defines ‘total build cost’ broadly as the estimated total cost of the building work for or in connection with the residential apartment building.¹² For this calculation, the draft regulations propose using the relevant building surveyor’s estimate of the cost of the building work (excluding any amounts that are not connected to the residential portion of the building work).¹³

For mixed use buildings, where non‑residential elements (retail or commercial) sit within the same building, they are included in the total build cost. For multi‑building projects, non‑residential buildings may be excluded from the calculation.¹⁴

The role of the building assessor

Once lodged, the developer bond is held by the BPC while the statutory inspection and rectification process runs its course. This inspection and rectification process is carried out by an independent building assessor appointed under the scheme whose role is to inspect and identify reportable defective building work.

Developers are entitled to appoint their own assessors, provided they nominate a qualified assessor at least 14 days before the first owners’ corporation meeting. If the developer fails to appoint its own assessor, the owners corporation refuses to approve the appointment or the appointed assessor is unable to carry out its duties, the BPC may appoint the assessor instead, which reduces developers’ control over the process.¹⁵ The assessor is paid for by the developer irrespective of who appoints the assessor.¹⁶

Defects inspection timeline

The scheme requires the building assessor to carry out both preliminary and final inspections and to issue corresponding reports:

• the preliminary inspection must commence on or after 15 months and be completed by 18 months after the occupancy date; ¹⁷ and
• the final inspection must be conducted between 21 and 24 months after the occupancy date. ¹⁸

Who can claim and on what basis

Following the final report, the owners corporation, the building assessor and any other person who carries out functions under the Act in relation to the residential apartment building (such as the builder appointed by the BPC under Part 9B of the Act to rectify defective building work) may apply to the BPC to access the bond to rectify reportable defective building work identified in the final report or another report commissioned by the BPC.¹⁹

The BPC may:

• request further information or commission an independent report before deciding the outcome of a claim; or
• may approve a claim in full, approve a lesser amount, or refuse the claim, depending on the evidence and scope of the defects.²⁰

Bond release pathways

Release of the bond to the developer may occur:

1. once the preliminary report confirms there is no reportable defective building work. Note that in this case, it will mean the bond is released ‘early’ ie following the preliminary inspection and report (between 15-18 months after the occupancy date); or
2. upon the developer’s application, with the owners corporation consent; or
3. in other prescribed circumstances. ²¹

Under the ‘prescribed circumstances’ in the draft regulations, release can be delayed to the latest of several milestones, including 12 months after the final report is given to the BPC and following a 150‑day period from internal reviews, VCAT reviews and any appeals to VCAT.²² This means the bond can remain in place beyond a period of two years where reviews or appeals are on foot.

Failing to comply with the scheme

The relevant building surveyor must refuse to issue an occupancy permit if the developer has failed to issue a bond.²³

If an occupancy permit is issued for an off‑the‑plan lot and the developer has not arranged the bond (or has arranged an insufficient bond), the purchaser may rescind and recover all amounts paid (including the deposit).²⁴

The BPC may issue a rectification order to the builder or the developer in relation to building work that is either (a) defective; (b) incomplete; or (c) non-compliant.²⁵ The Registrar of Titles must not register a plan of subdivision for residential apartment land while a Building Act notice (which includes rectification orders) remains in force. This mechanism prevents a developer registering land for subdivision where there are unresolved safety or compliance issues.²⁶

Key contraventions including failure to give notice within the applicable period, applying for an occupancy permit without a bond, or attempting to register a plan while a Building Act notice remains unrevoked may carry penalties of up to 500 penalty units for individuals (approximately $100,000) and 2,500 penalty units for corporations (approximately $500,000) per contravention.

Practical tips

• Set reminders to comply with all the timing requirements under the scheme: Remember the 7-day post-bond notice to the BPC and work backwards from the targeted occupancy permit date to ensure statutory notice of intention is issued within the correct window.
• Treat the bond as a ‘locked-up’ cost: The bond can remain tied up for over two years. Allow for this in cash-flow models and financing discussions.
• Appoint your building assessor asap: Appoint the building assessor early and coordinate quality assurance before the preliminary inspection window.
• Aim for a defect-free preliminary inspection: Consider engaging an independent third-party assessor in advance of the preliminary inspection to identify any existing defects for early rectification.
• Clarify costs early: Bond calculations differ for mixed‑use and staged projects, so confirm how the building’s components will be treated from the outset to avoid unexpected costs.

This article was written by Alan Chiang, Partner, and Eleanor Ng, Associate.

¹ The power to proclaim an earlier commencement date rests with the Victorian Government via a publication in the Victorian Government Gazette.

² ‘Developer’ means the owner of the land on which the residential apartment building is affixed on the date of registration of the plan of subdivision for the land (the Act, s96, inserting a new s 137ZM to the Building Act).

³ Under s 81 of the Act, residential apartment building is defined as being a Class 2 Building. This includes serviced apartments (provided they are long-term residential apartment buildings) but excludes purpose built student accommodations, hotels, motels etc. (see Building Classifications, National Construction Code).

⁴ A space within a building that only contains accommodation for vehicles (and stairways and lifts to enter and exit the space) is not considered a storey for the purposes of calculating the rise in storeys. If the carpark contains other facilities (such as storage areas and entrance foyers), it does contribute to the rise in storeys. (See VBA Practice Note, Multi-Storey Residential Buildings – Warranty Insurance Exception).

⁵ the Act  s 2.

⁶ the Building (Developer Bonds) Regulations 2025 (exposure draft), reg 8.

⁷ the Act s 96, inserting a new s 137ZQ to the Building Act.

⁸ the Act s 94(1).

⁹ the Act s 94(5).

¹⁰ This is required to be in the form of a bank guarantee, bond or other prescribed form of security (the Act s 96, inserting a new s 137ZN to the Building Act).

¹¹ the Act s 96, inserting a new s 137ZP(1) and s 137ZP(3)(a) to the Building Act.

¹² the Act s 96, inserting a new s 137ZO to the Building Act.

¹³ the Building (Developer Bonds) Regulations 2025 (exposure draft), reg 7(1).

¹⁴ the Building (Developer Bonds) Regulations 2025 (exposure draft), reg 7(3).

¹⁵ the Act Part 9B.

¹⁶ the Act, s96, inserting a new s 137ZZ to the Building Act.

¹⁷ the Act s 96, inserting a new s 137ZZD(5) to the Building Act.

¹⁸ the Act s 96, inserting a new s 137ZZH(6) to the Building Act.

¹⁹ the Act s 96, inserting a new s 137ZZN(1) to the Building Act.

²⁰ the Act s 96, inserting a new s 137ZZO(1) to the Building Act.

²¹ the Act s 96, inserting a new s 137ZZR to the Building Act.

²² the Building (Developer Bonds) Regulations 2025 (exposure draft), reg 15.

²³ the Act s 83.

²⁴ the Act s 102.

²⁵ the Act s 84, inserting a new Part 5A to the Building Act.

²⁶ the Act s 90, inserting a new s 37A to the Subdivision Act 1988 (Vic).