Mackay Chapman Building & Construction Update September 2026
Victoria’s building reforms are now being tested in practice.
Enforcement is up sharply. New financial requirements are putting limits around how quickly builders can grow. And the shift from Domestic Building Insurance to Home Warranty is creating a new dividing line between old and new contracts.
The practical impact is starting to become much clearer.
Enforcement activity surges
Enforcement activity is surging across Victoria’s building sector, even as complaints fall.
The Building and Plumbing Commission has reported a significant increase in enforcement activity during 2025–26.
Building complaints fell 21% and plumbing complaints fell 10%, reaching their lowest levels in more than five years.
Enforcement moved sharply in the other direction:
- $2.12 million in penalties, up 55% on the previous year;
- 103 suspensions, cancellations and disqualifications, up from 49;
- 68 prosecutions finalised through the courts, more than triple the 21 recorded last year;
- 71 Directions to Fix, compared with 12 the year before;
- 24 immediate suspensions in serious cases, six times the previous year;
- more than 900 Rectification Notices issued to plumbers; and
- more than 5,200 audits and drain inspections carried out.
The message is simple: fewer complaints do not mean less regulatory risk.
The BPC is using a broader range of enforcement tools, more often. That includes audits, inspections, disciplinary action, prosecution and immediate suspension in serious cases.
It has also stepped up action against unregistered and unlicensed practitioners, including those carrying out work without required insurance.
And its powers have expanded again.
From 1 July 2026, the new Rectification Order regime gives the BPC significantly greater power to require defective, incomplete or non-compliant work to be fixed.
That means compliance problems can escalate well before they become a conventional building dispute.
Registration, insurance, record keeping, workmanship and responses to regulatory correspondence all matter.
Once the BPC becomes involved, how an issue is handled early can materially affect what happens next.
Winning more work can create a compliance problem
Growth is usually a good problem to have.
Under the new Minimum Financial Requirements, it can also become a regulatory problem if the balance sheet does not keep pace.
MCC limits the total value of domestic building work a builder can have underway at any one time.
For MCC of up to $20 million, adjusted net tangible assets generally need to equal at least 5% of approved capacity.
So $200,000 in adjusted NTA may support around $4 million in capacity.
If new work pushes that exposure towards $5 million, the builder may need an MCC increase and adjusted NTA of at least $250,000.
The important issue is timing.
An application to increase MCC must be made before entering a contract that would, or is likely to, push the business beyond its approved capacity.
The MFR regime also requires builders to remain able to pay debts as they fall due. If that changes, the BPC must be notified in writing within five business days of the builder becoming aware of the position.
The BPC can reassess financial capacity where a builder seeks an MCC increase, exceeds its approved capacity or otherwise comes under review.
So the question is no longer just whether the business can afford to take on another project.
It is also whether its current financial capacity and registration allow it to do so.
Pipeline, adjusted NTA and MCC need to be considered before the contract is signed.
Winning the job first and sorting out capacity later may be too late.
Which scheme applies to older building contracts?
Victoria’s new Home Warranty scheme commenced on 1 July 2026, but older contracts do not automatically move across to the new regime.
Eligible contracts signed on or after 1 July 2026 may fall under Home Warranty.
Where a contract was signed before 1 July and a Domestic Building Insurance Certificate of Insurance had already been issued, the existing DBI policy continues on its existing terms. It does not convert to Home Warranty.
Transitional arrangements also apply to some pre-1 July contracts where DBI still needs to be arranged.
The distinction matters when a project gets into trouble.
Under the former DBI regime, claims have generally depended on trigger events such as the builder dying, disappearing or becoming insolvent.
Home Warranty is broader. It is now a “first resort” system that may respond where eligible work is incomplete, defective or non-compliant and the builder is unable or unwilling to complete or rectify it.
The maximum cover is also different: up to $400,000 per home under Home Warranty, subject to eligibility, limits and exclusions, compared with generally up to $300,000 under DBI.
So when a project becomes distressed, one of the first questions should be:
When was the contract signed, and which insurance regime actually applies?
That can materially change the options available if the builder fails or the project cannot be completed.
Compliance is now part of the commercial decision
The common thread is that regulation is moving closer to ordinary business decisions.
The BPC is enforcing more aggressively. Financial capacity can now determine whether more work can be taken on. And the insurance position can change materially depending on when a contract was signed.
These are no longer issues to think about only after a dispute starts.
They affect decisions about taking on work, managing financial pressure, responding to regulators and dealing with distressed projects.
Mackay Chapman advises on BPC investigations and enforcement, Home Warranty and legacy DBI issues, Minimum Financial Requirements, registration and disciplinary matters, insolvency and complex building disputes.
Early advice can make a significant difference, particularly where regulatory action, financial pressure or project distress is starting to emerge.
The contents of this update do not constitute legal advice, are not intended to be a substitute for legal advice, and should not be relied upon as such. They are designed and intended as general information in summary form, current at publication, for general informational purposes only. You should seek legal or other professional advice concerning any particular legal matters you or your organisation may have.
