New Home Building Contract Laws

Announcement on Contract Law Changes

The Victorian government has announced important changes to home building contract laws and introduced a Bill into Parliament. If passed, it is expected to take effect around late 2026, likely on 1 December.

While late 2026 may seem distant, the time will pass quickly, and the changes are significant enough that many in the home building industry will need time to adjust.

The changes include the following:

• There will be different rules for home builders when they enter into building contracts with developers as opposed to consumers. The rules for contracts with developers will be less restrictive
• Existing standard payment stages in the Act will be replaced with new stages to be set by regulations. These regulations will become available later
• There will be more flexibility with deposits. Once again this will be covered in regulations to come later
• Cost escalation clauses will finally be allowed for home building contracts, but only for contracts with developers or contracts priced over $1 million. There will also be limits on the use of these clauses which will probably make the use of cost-plus contracts a better option
• Some simplification of the process for agreeing to variations. Noting that they will continue to need to be documented properly and clearly if the builder realistically wants to be paid for the variation
• Preliminary agreements or contracts to prepare plans and specifications not being covered by domestic building contract laws
• New compliance and enforcement powers will be available to the Building and Plumbing Commission which is replacing Consumer Affairs Victoria.

It is expected that all standard contracts used for home building will need to be updated. These new versions will be required for contracts signed on or after the day the new laws commence. For the time being, existing standard contracts, including the HIA contracts, can continue to be used.

Since there is still a lot of detail, and especially with respect to progress payments, to be clarified in regulations, these are likely to be available for public consultation either late this year or early next year.

HIA members can contact us on 1300 650 620 for more guidance about these matters.