Building certainty on Victoria’s Developer Bond scheme

The summer holiday season has not slowed down progress of the proposed domestic building reforms in Victoria. Draft regulations related to the Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) (Act) were released for public consultation on 18 December 2025 and recently closed on 1 February 2026.

In particular, the proposed Building (Developer Bonds) Regulations 2025 (Vic) (Draft Regulations) provide welcome guidance on the intended application of the new developer bond scheme introduced by the Act, under which certain developers of residential apartment buildings of four storeys and above will be required to provide security for reportable defective building work to the Building and Plumbing Commission (Authority) prior to applying for an occupancy permit (Developer Bond).

Developers exempt from Developer Bond scheme

Of key interest for developers, the Draft Regulations propose that residential apartment developments will be exempt from the Developer Bond Scheme if the building permit for the relevant building work was issued before 1 July 2027 (Regulation 8). This deadline should be taken into account when considering timing of project commencement and any staged building permit requirements.

Manner for determining total build cost

The amount to be secured by a Developer Bond is to be calculated by reference to 2% of the ‘total build cost’ for the residential apartment building, or such other prescribed percentage.

‘Total build cost’ is proposed to mean the cost of the building work (or of the relevant stage of the building work for a staged permit) estimated by the relevant building surveyor and provided to the building permit applicant for the purposes of determining the applicable building permit levy, less any such amounts which were for building work not carried out for or in connection with the construction of the residential apartment building (Regulation 7). Any such deductions are required to be consistent with guidance to be published by the Authority on its website.

Where the residential apartment building contains mixed-use lots, such as commercial and retail, it is proposed that the total build cost will include those non-residential elements of the building. However, where the mixed-use development contains multiple buildings, it is proposed that the cost of the building work for those buildings which are not residential apartment buildings captured by the Developer Bond scheme may be deducted.

Reportable defective building work

‘Reportable defective building work’, which may be identified by building assessors on their inspections and covered by the scheme, is proposed to include all ‘defective building work’ (as defined in the Act) in both the common property and in a private residential lot of the building (Regulation 6).

Notably, for mixed-use developments such as residential apartments that contain restaurant, office and/or retail lots, it is also proposed to include ‘serious defects’ (a higher threshold for defective building work as defined in the Act) in any building work in any part of a residential apartment building that is not a private residential lot or common property.

Release of Developer Bond

The Act requires the Authority to release the Developer Bond as soon as practicable after receipt of the building assessor’s preliminary report if it does not specify any reportable defective building work, on application by the developer with the consent of the owners corporation, or otherwise in the prescribed circumstances.

The Draft Regulations offer clarity regarding maturity of the bonds by proposing specific deadlines for its release, in particular the expiration of a period of 12 months after the date the building assessor gives the final report to the Authority (which report is to be provided between 21 to 24 months after the issue of the occupancy permit). Separate deadlines are also proposed where an affected person has applied for a review of a relevant decision.

Other matters

The Draft Regulations also prescribe:

• relevant qualifications to be held by those eligible for appointment as a building assessor;
• information to be given by developers to the Authority and building assessors;
• requirements for inspections and reports of building assessors; and
• certain fees payable.

The Draft Regulations are proposed to commence on 1 July 2026 and are available to view on the Engage Victoria website.

Gadens will be following the progress of the proposed Developer Bond requirements closely and continue to support clients to transition to the new scheme.

If you have any questions about the Developer Bond scheme, please contact our team.

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Authored by:

Daniel Middleton, Partner
Emily Loader, Special Counsel