Home Warranty Changes

First Resort Insurance is Here

Home builders should be aware that the Victorian home building industry is moving to a new type of home warranty scheme for clients of home builders. The new scheme applies to contracts entered into from 1 July 2026. 

Much of the commentary about the new scheme has been about benefits to consumers. Less attention has been given to the impact on home builders and their businesses. This article covers these issues for home builders.

First Resort v Last Resort

For many years the Victorian home warranty scheme has been a so-called last resort system. This meant that while a consumer had some insurance, it was only available if the home builder went broke, disappeared, died or lost a court or tribunal case. If available, the consumer could claim compensation for incomplete or defective work from that home builder. In other words, it could only be used by the client if their builder was pretty much not around to deal with the issue.

Now the home warranty scheme is a so-called first resort scheme. This means that the client can claim for incomplete or defective work even if the home builder has not gone broke, died, disappeared or lost a court or tribunal case. However, the scheme does require the client to first try to resolve the dispute with the home builder before an insurance claim may be made.

When to Buy Cover?

The previous home warranty scheme, called domestic building insurance, required home builders to purchase the insurance policy before they collected a deposit or applied for a building permit. This system allowed home builders to enter into building contracts without necessarily having to purchase insurance. This allowed building contracts to be signed and the parties to then wait till closer to project commencement before insurance was obtained.

The new scheme is very different. Now there is no need to obtain cover before collecting a deposit.  Instead, the scheme requires home builders to obtain cover within ten business days of entering into the contract. The contract is entered into when both parties have signed the contract.

Under the new scheme, there is no allowance for home builders to sign contracts and then wait for insurance. This will be problematic if building work cannot commence for months after contract signing or the contract eventually is cancelled before work commences.

How to Cancel Cover?

It is expected that with the new scheme, there will be an increase in the number of policies being issued and therefore also an increase in the number of policies that need to be cancelled. While the new scheme includes a statutory right for a home builder to cancel cover and receive a refund, it is understood that this process may take months to finalise due to the need for the insurer, the BPC, to confirm the cover is no longer required.

Impacts on Signing Contracts

Any home builder who signs building contracts for untitled land, for jobs needing planning approvals, or to help clients with getting finance is likely to find that the new scheme requires them to take out more policies and for longer periods of time. This means that these home builders may find themselves needing to pay more for home warranty insurance and possibly needing to increase their home warranty limits.

If you are in doubt and a HIA member, don’t hesitate to contact us on 1300 650 620 for more information.