Building & Construction Update: November 2026

This month's update examines the implications of the Bathla Group collapse for the construction industry, the impact of director drawings on builders' Minimum Financial Requirements, increased enforcement activity by Victoria's Building and Plumbing Commission and upcoming domestic building contract reforms.

‍

Bathla collapse highlights funding and insolvency risks for the building industry

The collapse of property developer Bathla Group continues to expose the financial and legal risks associated with heavily indebted property developments and private credit funding.

In October, 360 Capital announced the acquisition of a senior loan facility over a Bathla development at Marsden Park for approximately $31.2 million.

The transaction brought the first and second mortgages over the development under the control of entities associated with 360 Capital. The project comprises 72 apartments, with 36 already pre-sold.

The intention is to complete the development, settle those sales and recover outstanding debt.

The transaction also highlights the importance of security arrangements when a development encounters financial distress. Secured creditors with priority over project assets can be in a substantially different position from unsecured creditors and other parties owed money.

For builders, subcontractors and suppliers, the broader Bathla collapse raises important questions about exposure to financially distressed developers.

Key considerations include:

• Developer funding: Understanding how a project is financed and whether funding remains available to complete the work.
• Contractual exposure: Identifying outstanding progress payments, variations, retentions and other amounts owed.
• Security and recovery: Understanding where the business stands if a developer becomes insolvent or secured lenders enforce their rights.
• Project risk: Recognising warning signs of financial distress before unpaid work and contractual commitments increase.

As private credit comes under greater scrutiny, the ability of developers to maintain funding or refinance existing debt may become an increasingly important issue for the construction industry.

The Bathla collapse is a reminder that a profitable project on paper does not necessarily protect builders and contractors from the consequences of financial distress further up the contractual chain.

Read more about the latest Bathla developments in ABC News' report on the 360 Capital transaction.

‍

Director drawings could undermine a builder's financial capacity under MFRs

Builders who regularly withdraw money from their businesses need to consider how those transactions affect their financial position under Victoria's new Minimum Financial Requirements (MFRs).

Since 1 July 2026, Victorian domestic builders have been subject to ongoing financial requirements, including maintaining sufficient Adjusted Net Tangible Assets (ANTA) to support their approved Maximum Construction Capacity (MCC).

For most builders with an MCC of up to $20 million, the required ANTA is at least 5% of their approved capacity, subject to the applicable guidelines and any determination by the Building and Plumbing Commission (BPC).

Director drawings, dividends and related-party transactions can have a direct impact on those calculations.

For example, a builder might operate a profitable business but regularly withdraw substantial funds for personal purposes. Depending on how those withdrawals are structured and recorded, they may reduce the company's cash, retained earnings or adjusted net tangible asset position.

Recording a withdrawal as a director loan does not necessarily resolve the issue. The treatment of loans and related-party assets depends on the circumstances and the MFR guidelines.

A reduction in ANTA can affect whether a builder continues to satisfy the requirements supporting their approved construction capacity, particularly when applying to increase that capacity.

Builders should consider:

• How director drawings, distributions and loan accounts are recorded.
• Whether the business has sufficient adjusted net tangible assets after those transactions.
• The impact of withdrawals on cash flow and the ability to meet debts as they fall due.
• Whether planned distributions could affect an application to increase construction capacity.
• Whether related-party balances and guarantees satisfy the applicable requirements.

The key point is that money withdrawn from a building business may have consequences beyond its immediate cash flow impact.

Builders seeking to grow their operations should understand how their financial decisions affect the capacity they are authorised to carry.

The BPC's Minimum Financial Requirements guidance explains the financial requirements and how adjusted net tangible assets are assessed.

‍

BPC increases enforcement activity across Victorian building sites

Victoria's Building and Plumbing Commission is taking a more active approach to identifying unregistered practitioners and non-compliant building work.

In a recent statewide enforcement operation, BPC inspectors visited nearly 350 residential and commercial construction sites and checked the credentials of almost 700 practitioners.

The operation identified 24 unregistered or unlicensed practitioners, all of whom were undertaking plumbing work. The matters were referred for further investigation and potential enforcement action.

Inspectors also issued four directions to fix non-compliant building work and eight infringement notices relating to drainage work.

The BPC reports that it finalised 68 prosecutions through the courts during its first year, compared with 21 in the preceding year under the former Victorian Building Authority.

The regulator has also established a publicly accessible Compliance and Enforcement Register, which provides information about disciplinary action against building practitioners, building companies and plumbers.

For builders and construction businesses, the increased enforcement activity is a reminder that registration, licensing and regulatory compliance are subject to active scrutiny.

Businesses should ensure that practitioners working on their projects hold the required registration or licence and that any regulatory notices, directions or disciplinary concerns are addressed appropriately.

Read more in the BPC's announcement of its statewide enforcement operation.

‍

Victorian domestic building contract reforms: what builders need to prepare for

Victoria's domestic building contract framework is undergoing significant reform, with changes scheduled to commence by 31 March 2027.

The reforms, introduced through the Domestic Building Contracts Amendment Act 2025 and supporting Domestic Building Contracts Amendment Regulations 2026, will change several important aspects of contracting for residential building work.

Key changes include:

• Major domestic building contract threshold: Increasing the threshold from $10,000 to $20,000.
• Deposit limits: New arrangements that account for the use of modern methods of construction, including prefabrication and off-site manufacturing.
• Progress payments: Changes to payment stages and arrangements, including requirements linking payments to the value of completed work.
• Cost escalation clauses: New restrictions and consumer protections governing when contract prices can increase.
• Modern methods of construction: Recognition of construction practices that may require different deposit and payment arrangements.

The changes are intended to strengthen consumer protections while better accommodating contemporary building practices.

However, questions remain for builders about the practical application of the new payment framework, particularly to renovation, extension and custom-building projects.

Master Builders Victoria has indicated that it will develop updated contracts and guidance material to assist members.

Builders should review their standard contracts, payment schedules and variation procedures before the relevant changes commence.

The commencement arrangements also matter. The existing contractual framework continues to apply until the relevant reforms commence, and the application of the new rules will depend on when a contract is entered into.

Builders entering into contracts during the transition period should ensure they are using documents appropriate to the law applying at that time.

Further information is available through the Victorian Government's building reform updates and the Domestic Building Contracts Amendment Regulations 2026.

‍

The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have. 

‍