If you are engaging in domestic building work valued at over $10,000, then the Domestic Building Contracts Act 1995 (Vic) (DBCA) requires that you have a written major domestic building contract prior to the commencement of those works. If you are entering into a major domestic building contract, we would like to remind you of the importance of following the correct procedures, especially when it comes to Domestic Building Insurance (DBI), also commonly referred to as “Home Warranty Insurance”. 

DBI is a mandatory insurance policy that must be taken out by builders in Victoria for building works valued at over $16,000. The primary purpose of DBI is to provide protections to consumers against defective building work or the non-completion of works by a builder. DBI will only be triggered if the builder dies, disappears, or is declared insolvent. 

As a builder, it is imperative that you provide your client with a copy of the DBI policy before you request and receive any money from your client, including the deposit. Once you have provided your client with a copy of the DBI policy, you can then request and receive your deposit. As a reminder, the deposit amount is capped at 5% of the contract price for works valued at over $20,000. For further information about DBI, see Domestic Building Insurance.  

We understand the challenges the industry has been facing with price increases as well as supply, skill and trade shortages making cash flow difficult.  However, taking shortcuts with your legal compliance, in this case DBI, can have severe consequences, not only for you, but also for your clients. For further information about the legal requirements that need to be met before entering into a major domestic building contract, see Entering into a Domestic Building Contract. 

As MBV members, we encourage you to reach out to our legal department for advice on complying with DBI requirements and other legal obligations. Our legal team is here to support you and help you navigate the complex legal landscape of the construction industry.  

Further, in order to comply with the necessity of having a major domestic building contract, we highly recommend that you consider using one of the MBV contracts, which are available on our website and through our eContracts platform. These contracts are specifically designed to ensure legal compliance, including containing clauses in relation to DBI. The MBV contracts have been developed by legal experts and are periodically updated to reflect changes in legislation, ensuring that you can have peace of mind that you are using a contract that is legally compliant. 

By using a MBV Contract, you can save time and resources that would otherwise be spent on drafting and negotiating custom contracts. These contracts can also be customised to suit your specific needs, ensuring that you have a contract that is tailored to your project. 

If MBV members have any questions or concerns, please do not hesitate to contact the legal department on (03) 9411 4555. 

Disclaimer: This correspondence contains general information only. You should not rely upon it as legal advice or a substitute for legal advice.