Mackay Chapman April Building & Construction Update

Welcome to Mackay Chapman’s April building and construction update.

Pressure across Victoria’s construction sector is increasingly being shaped by access, not just activity. Access to insurance, access to capital and, more recently, access to reliable transaction processes are all emerging as critical constraints on builders and developers.

At the same time, the regulatory framework continues to tighten around risk, with DBI assessments, governance scrutiny and cost shifting all playing a more direct role in determining who can operate and how projects move forward.

This month we look at DBI eligibility in practice, the immediate impact of regulatory intervention on trading continuity and emerging changes in how risk and cost are allocated. 

DBI eligibility: the details matter

DBI eligibility is not just a simple checklist exercise but a detailed examination assessing whether a builder presents an acceptable risk across both operational and financial dimensions. 

Getting your application right and ensuring you are clear on all these areas is therefore critical. 

Some of the areas the BPC will consider include past building performance, including defect history and claims experience, alongside the type and scale of projects undertaken. Technical capability, management experience and overall business track record also form part of the picture.

Financial assessment remains central and is typically detailed. Key indicators include net tangible assets, working capital, profitability, cash flow strength and the relationship between shareholders’ funds and turnover. Broader metrics such as debtor and creditor cycles, return on equity and business structure are also considered. Where relevant, personal asset and liability positions and trust structures are reviewed.

The practical reality is that builders are being assessed in a more detailed way than ever before. Financial presentation, record quality and forward planning are not administrative matters. They are central to whether eligibility is granted, maintained or increased.

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Case Study - Criminal proceedings and DBI eligibility: immediate impact, not deferred risk

We recently acted for a mid-tier Victorian builder with an active domestic pipeline valued between $10 million and $20 million whose DBI eligibility was downgraded following criminal proceedings being brought against a director.

The BPC determined that no DBI policies would be issued while the matter was ongoing. In practical terms, this removed the builder’s ability to operate in the domestic market for the duration of the proceedings, despite no finding of guilt.

We intervened to preserve eligibility on an interim basis, allowing the builder to continue trading and service its existing pipeline while the matter progressed.

When the charges were ultimately withdrawn, we negotiated full reinstatement of DBI eligibility.

The commercial impact in cases of this kind is immediate. Regulatory or criminal proceedings do not operate in isolation. They can directly affect a builder’s ability to contract, generate revenue and maintain workforce continuity. Early intervention is often critical to preserving both eligibility and trading position.

Mandatory inspection scheme proposed for Victorian property sales

The Victorian Government has said that, if re-elected late this year, it will legislate a mandatory building and pest inspection scheme in early 2027 under which vendors would pay for building and pest inspections and make those reports available before sale.

The proposal is aimed at reducing duplication of costs and improving efficiency in property transactions. Building and pest inspections typically cost between $500 and $600, with many buyers commissioning multiple reports across unsuccessful purchases. Some buyers incur significantly higher costs, while others proceed without inspections due to cost and timing constraints.

The Government has indicated it will consider elements of the ACT model, including requirements that inspections be completed within a defined timeframe prior to sale and be undertaken by qualified professionals. 

A number of issues have already been raised in response to the proposal. These include the level of detail available on how the scheme will operate, the timing of implementation and the potential for variability in report quality. Industry stakeholders have also raised concerns about the independence of inspections and whether cost pressures could affect the standard of reporting if not carefully regulated.

The Government has indicated that consultation will occur and that the scheme will be designed to address these concerns.

Risk, access and continuity in 2026

Victoria’s construction sector continues to operate in an environment where access is as important as activity.

Access to DBI determines whether a builder can take on work. Access to stable governance and regulatory standing determines whether that eligibility can be maintained. Access to efficient and reliable transaction processes influences how projects convert into completed sales.

At the same time, risk is being assessed more closely and allocated more directly across participants in the system.

For Victorian builders and developers, the focus remains consistent. Financial discipline, governance strength and early strategic engagement are critical to maintaining continuity and positioning for growth in a constrained and evolving market.

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.

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