Mackay Chapman September 2025 Building & Construction Blog
Welcome to our new monthly building and construction blog.
Each month, we’ll bring updates and key industry insights as the Victorian building industry reform rolls out and the industry continues to navigate the difficult financial environment.
In this issue: a new building and plumbing commission (BPC) in Victoria, insolvencies on the rise, and some recent work Mackay Chapman completed for a boutique building company.
Let’s dive in.
Victoria's new Building and Plumbing Commission
A significant step in Victoria's building industry reform was the launch of the new Building and Plumbing Commission (BPC) in July.
This new, powerful regulator is a consolidated body, bringing together the functions of the Victorian Building Authority (VBA), Domestic Building Dispute Resolution Victoria (DBDRV), and the domestic building insurance arm of the Victorian Managed Insurance Authority (VMIA). The creation of the BPC is a key move toward simplifying the regulatory landscape and improving consumer protection.
While the formation of the BPC is a foundational change, it is only the first step in a series of ongoing legislative and procedural reforms. These reforms grant the BPC new powers and will fundamentally reshape the industry.
Notably, the new legislation expands the regulator’s ability to act against builders even after buyers have moved in. It also introduces a "first resort" model for Domestic Building Insurance (DBI), allowing homeowners to make claims for defective work without the former restrictions of insolvency, death, or disappearance of the builder.
New inspection processes are also being introduced for buildings over three stories, along with a mandatory developer bond scheme for residential apartment buildings over four stories to ensure funds are available for rectifying non-compliance issues.
Construction insolvencies continue to plague the industry in Victoria
The construction industry remains Australia's most affected sector by corporate insolvency, and this trend shows no signs of slowing down.
According to recent data from ASIC, construction accounts for nearly a quarter of all external administration appointments from mid-2024 to mid-2025. Since 2021, more than 2,500 Australian construction companies have gone into liquidation, administration or receivership.
Victoria, in particular, has been one of the hardest-hit states, with thousands of companies entering insolvency amidst rising costs, supply chain disruptions, and labour shortages.
One of the primary drivers of these failures is the widespread use of fixed-price contracts, which leaves builders exposed when the costs of materials and labour unexpectedly increase. This can lead to businesses operating at a loss, eroding profit margins, and eventually collapsing.
The domino effect of these failures can create systemic risks, jeopardising the completion of projects and leave homeowners and subcontractors financially exposed.
Although a small percentage of businesses, the sheer number of collapses underscores the significant financial stress across the sector.
Recent work example
At Mackay Chapman, we have particular expertise in helping builders navigate complex processes with the VMIA.
Recently, we assisted a boutique building company with under 20 employees and multiple residential projects on the go.
The builder is known for working with high-end architects and delivering premium homes across Melbourne. Due to rapid expansion and the securing of a number of new, significant builds, the builder's existing DBI limit was insufficient to cover these new projects.
The builder engaged Mackay Chapman to assist with increasing the eligibility limit. We prepared a comprehensive submission that went beyond standard financial documents, highlighting the company's financial strength, its strategic architectural partnerships, and its robust risk management protocols.
The VMIA responded with a conditional approval, but insisted on an additional, and in our legal team's view, unnecessary condition: an accountant’s certificate specifically verifying the treatment of Work in Progress (WIP) in the financials.
Our team took a firm stance and pushed back on this request, arguing that the financials already submitted were fully compliant and that the extra condition was not required. After a period of direct negotiation, the VMIA backed down from its demand and approved the full limit, allowing the builder to proceed with his projects without delay or additional cost.
This outcome highlights the value of having expert legal representation to challenge unwarranted requests and ensure a smooth path forward for our clients.
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.
