When will Victoria's new domestic building contract reforms actually start applying to my project?

The reforms were originally set to commence on 1 December 2026, but Parliament deferred this to 31 March 2027 through the Consumer Legislation Amendment Act 2026, though the provisions may be proclaimed earlier. The key point is that the new protections only apply to contracts entered into on or after the commencement date, so any contract you sign beforehand will be governed by the existing rules. Given the date has already been pushed back once, it could shift again, so it's worth seeking advice rather than delaying a project purely in the hope of gaining better statutory rights.

Can my builder still include a cost escalation clause that lets them increase the price after I sign?

Once the reforms commence, builders won't be able to include a cost escalation clause if your contract price is under $1 million, and the previous approved-form alternative will be removed. Even where such clauses are permitted, they'll be void unless the builder gives you a prescribed notice explaining the clause and you sign or initial next to it before entering the contract. There's also a 5% cap on how much the total contract price can be increased, and the builder must provide invoices or receipts evidencing the cost increase before recovering any money under the clause.

What do I need to check in my contract to make sure it meets the new minimum standards?

Once commenced, every domestic building contract must be in writing, in English, and readily legible, and must state each party's name and address, describe the work in detail, state the contract price (or explain how a cost-plus contract will be priced), and include the contract date. These requirements already apply to major domestic building contracts above $10,000, but the reforms extend them to all domestic building contracts, and a builder who doesn't comply commits an offence. Before signing, check that the documents clearly explain what you're getting, what you're paying, and how the price was calculated, as incomplete paperwork is a common source of building disputes.

How will variations to my building work need to be handled under the new rules?

The reforms replace the current dual rules (which differ depending on whether the builder or owner initiated the change) with a single process for variations to plans or specifications in a major domestic building contract. Once commenced, a variation must be in writing, signed by or on behalf of both parties, and include specific details such as the date of the agreement, a detailed description of the change, the reason for it, and whether a permit amendment may be needed. This is designed to prevent the common dispute where a verbal agreement leads to an unexpected invoice for work you thought was already included.

Victoria's 2026 Building Law Reforms for Homeowners

Q: What happens if I sign a building contract that the builder hasn't signed?

Under the reforms, if a major domestic building contract isn't signed by both the builder and the owner (or their authorised agents), the builder has no contractual rights under that contract, though you as the owner can still enforce your rights against them. There's a narrow exception where the builder can recover the cost of work consistent with the unsigned contract plus a reasonable profit, but only if VCAT is satisfied exceptional circumstances exist or the builder would suffer significant hardship, and that recovery wouldn't be unfair to you. This shifts risk onto builders who start work without proper documentation, so always make sure both signatures are in place before any work begins and keep your signed copy safe.

If you are signing a domestic building contract or renovation contract in Victoria, new laws will soon change your rights and protections. The Domestic Building Contracts Amendment Act 2025 received Royal Assent on 16 September 2025. Most of its provisions commence on a day to be proclaimed. The forced commencement date was originally 1 December 2026. In September 2026, Parliament deferred that date to 31 March 2027 through the Consumer Legislation Amendment Act 2026. Understanding these changes will help you identify unfair terms in building contracts before you commit to a project.

The reforms address common problems that have caused disputes for years: vague scope descriptions, unexpected price increases, undocumented variations, and payment claims that run ahead of actual work. If your contract is entered into after the reforms commence, you will have stronger statutory protections. The catch is that you need to know what those protections are to use them.

When Do These Changes Apply to Your Contract?

Timing matters. The main contract reforms apply only to domestic building contracts entered into on or after commencement. If you sign a contract before the relevant provisions are proclaimed (or before 31 March 2027 if they are not proclaimed earlier), the existing rules continue to apply to your project. At the time of writing, the main contract reforms had not commenced.

This creates a practical issue. If you are negotiating a contract now, you should understand what protections you will have once the reforms commence. Be cautious about delaying a contract in the hope of better statutory rights. The commencement date has already been deferred once, the wait may be six months or more, and the date may move again.

Your Contract Must Be Clear and Complete

Once commenced, the Act will require every domestic building contract to meet minimum standards. The contract must be in writing, in English, and readily legible. It must state the name and address of each party, describe the work in detail, state the contract price (or explain how a cost-plus contract will be priced), and include the contract date. These requirements already apply to major domestic building contracts, meaning contracts with a price above $10,000. The reforms extend them to all domestic building contracts, and a builder who does not comply commits an offence.

This sounds obvious, but many building disputes start with incomplete paperwork. A builder who hands you a brief quote and a handshake is not providing what the law will require. Before signing, check that the contract documents clearly explain what you are getting, what you are paying, and how the price was calculated.

Watch for Unsigned Contracts

Under the current law, a major domestic building contract that is not signed by both parties has no effect for either party. The reforms change this. If a major domestic building contract is not signed by both the builder and the owner (or their authorised agents), the builder has no contractual rights under that contract. You, as the owner, can still enforce your rights against the builder.

One exception applies. The builder can recover the cost of work that is consistent with the unsigned contract, plus a reasonable profit, if VCAT is satisfied that exceptional circumstances exist or that the builder would suffer significant hardship, and that recovery would not be unfair to you.

This shifts risk onto builders who start work without proper documentation. For homeowners, it reinforces why you should keep your signed copy safe and ensure both signatures appear before any work begins.

Identify Unfair Terms: Cost Escalation Clauses

One of the most significant changes relates to cost escalation clauses. These are contract terms that allow the builder to increase the price after you have signed, often due to material cost increases or supply chain issues.

Under the current law, a builder cannot include a cost escalation clause unless the contract price exceeds $500,000 or the clause is in an approved form. The reforms lift the threshold and remove the approved-form alternative. Builders will not be able to include a cost escalation clause if the contract price is less than $1 million. Regulations can raise that threshold but cannot lower it. Even where such clauses are permitted, they will be void unless the builder gives you a notice in the prescribed form explaining the clause and you sign or initial next to the clause before entering the contract.

There is also a cap. A builder cannot use cost escalation clauses to increase the total contract price by more than 5%, unless regulations prescribe a different percentage. A builder who relies on a cost escalation clause must give you copies of the invoices or receipts that evidence the cost increase, and cannot recover any money under the clause unless the builder has complied with all of these requirements.

This matters because research into unfair contract terms has shown how open-ended price clauses can leave consumers exposed to costs they did not anticipate. Before signing, look for any clause that lets the builder increase your price. Ask how it works and whether it complies with the new restrictions.

Variations Must Be Properly Documented

Variations are a common source of building disputes. The builder suggests a change, you agree verbally, and weeks later an invoice arrives for work you thought was included.

The current law already requires variations to major domestic building contracts to be in writing, but it applies different rules depending on whether the builder or the owner initiated the change. The reforms replace those rules with a single process. Once commenced, a variation to the plans or specifications in a major domestic building contract must be in writing, signed by or on behalf of both parties, and include specific information: the date of the agreement, a detailed description of the change, the reason for it, whether a permit amendment may be needed and whether supporting documents are required, the builder’s reasonable estimate of any delay, and the cost of the variation and its effect on the contract price.

Two exceptions apply. A builder may proceed without a prior written agreement where a building order requires the change for reasons beyond the builder’s control and you have not disputed the order in writing within five business days of receiving a copy, or where urgent action is needed to avoid danger to people or damage to property. In those cases the builder must give you the same information as soon as practicable after starting the work.

A builder who carries out a variation without a compliant written agreement cannot recover payment for it, unless VCAT is satisfied that exceptional circumstances or significant hardship exist and that recovery would not be unfair to you. If your builder asks you to approve a change via text message or a quick phone call, that informal approach will not meet these requirements. Insist on proper documentation. If you are comparing HIA and MBA contracts, check how each template handles variation procedures.

The Consumer Legislation Amendment Act 2026 adds a further written-variation rule that applies to any domestic building contract where a variation takes the total cost of the work to $20,000 or more, or increases the cost by $5,000 or more (alone or together with earlier variations). In those cases the variation agreement must be in writing and must state the work to be done, the cost of the variation and the contract price. That rule commences on proclamation, with a default date of 1 June 2027.

Your Right to Exit If the Project Blows Out

The current law already allows an owner to end a major domestic building contract in two situations:

The contract price increases by 15% or more after you entered into the contract
The project has not been completed within 1.5 times the original completion period

At present, that right applies only if the reason for the increase was something the builder could not reasonably have foreseen when the contract was made. The reforms remove that test. Once commenced, either trigger alone will be enough.

Some increases do not count toward the thresholds, including increases from prime cost items, provisional sums, and variations you initiated. Apart from those exclusions, the new test does not ask why the price or time increased. To end the contract, you must give the builder a signed notice stating that you are ending the contract under this provision and why. The builder is then entitled to a reasonable price for the work carried out to that date, capped at what the builder could have recovered under the contract.

This protection exists because projects that spiral out of control leave homeowners stuck in impossible situations. Knowing you have this right may also encourage builders to be more realistic in their original pricing and timelines.

Progress Payments Must Match Actual Work

Another reform addresses progress payments. Builders will not be permitted to demand, recover or retain under a major domestic building contract more than an amount that directly relates to the progress of the work actually carried out. Deposit limits and progress payment stages will move from the Act into regulations. Draft Domestic Building Contracts Amendment Regulations 2026 were released for consultation in August 2026, but the regulations had not been made at the time of writing.

In practice, this means comparing payment claims against what you can see on site. If your builder invoices for 50% completion but the frame is only half finished, that claim may exceed what the reforms allow.

Take photos of your site regularly. Keep a record of what work exists when each payment claim arrives. This evidence can be valuable if a dispute arises later.

Stronger Dispute Resolution for Damage Claims

Building work can damage existing parts of your property. Cracking, water intrusion, and damage to neighbouring areas are common complaints that fall outside traditional defect claims.

The reforms expand the dispute resolution framework to cover damage caused by domestic building work, not just defective or incomplete work. Assessors can consider whether damage was caused by the building work and whether the builder is responsible.

This matters because protection works requirements often involve concerns about damage to neighbouring properties. The same principles apply to damage within your own home during construction.

Contract Splitting Will Be Treated as One Contract

Some builders have attempted to avoid statutory obligations by splitting projects into multiple smaller contracts. Under the incoming reforms, if a builder and an owner enter into multiple domestic building contracts that could have been a single contract, and together they would amount to a major domestic building contract, the Act treats them as a single contract.

Look at your overall project, not just each document separately. If you are asked to sign several separate contracts for what is clearly one project, consider whether this structure serves your interests or the builder’s.

What to Check Before Signing

The ACCC has urged businesses to remove unfair contract terms, and building contracts are no exception. Before you sign your domestic building contract or renovation contract, check for:

Clear description of the work, with plans and specifications detailed enough to obtain a building permit
Fixed contract price or properly explained cost-plus method
Any cost escalation clause, and whether it meets the new restrictions
Variation procedures that require written, signed documentation
Progress payment stages that relate to actual work completed
Builder’s registration number and insurance details

The reforms provide stronger protections, but those protections work best when you have clear records and act promptly if problems arise.

Get Independent Advice Before Signing

Building contracts, whether HIA, MBA or custom documents, contain terms that can significantly affect your rights. Having a lawyer review your contract before you sign costs far less than disputing unfair terms after construction begins.

A contract review can identify terms that do not comply with the incoming reforms, unusual risk allocations, missing protections, and clauses that limit your rights in ways you may not expect. Understanding your position before signing gives you the opportunity to negotiate changes while the builder still wants your business.

This information is general in nature. Contact us for advice specific to your situation.

Updated 18 September 2026 to reflect the deferral of the commencement date by the Consumer Legislation Amendment Act 2026.