Section 137B of Victoria's Building Act 1993 makes it an offence for an owner-builder to sell a home within six and a half years of completing domestic building work unless two things are in place. The buyer must receive a defects inspection report no older than six months, prepared by a prescribed building practitioner. If the work was worth more than $16,000, the seller must also hold domestic building insurance for it.
The rule exists because an owner-builder has no registered builder standing behind the work. The report tells the buyer what is wrong with it, and the insurance gives the buyer somewhere to go if a serious defect appears later and the owner-builder has died, disappeared or become insolvent.
What Is Section 137B?
Section 137B is the part of the Building Act 1993 (Vic) that controls how an owner-builder sells a home they built or substantially renovated. Within six and a half years of completing the work, the sale needs a current defects inspection report and, where the work exceeded $16,000, domestic building insurance. Selling without them is an offence.
The section does not stop an owner-builder selling. It sets conditions on the sale so that the buyer is not the last to find out about defects in work that no registered builder signed off.
The obligations sit with the owner-builder who sells, not with the buyer, the agent or the conveyancer. Agents and conveyancers still need to know about it, because a missing report usually surfaces while the contract of sale and the vendor statement are being prepared.
QWhat Counts as Building Work Under Section 137B?
Section 137B covers domestic building work the owner carried out as an owner-builder, which is generally work that needed a building permit. New homes, extensions, second storeys, and structural renovations are the usual examples. Cosmetic work such as painting, new carpet or a kitchen cabinet swap is not domestic building work in this sense.
| Does Section 137B apply? | |
|---|---|
| New house built as an owner-builder | Yes |
| Extension or added second storey | Yes |
| Structural renovation under a building permit | Yes |
| Painting, flooring, cosmetic updates | Usually no |
| Work done entirely by a registered builder | No, the builder's warranties and insurance apply instead |
If you are unsure whether your project counts, the building permit is the best starting point. Work that was permitted with you named as the owner-builder is the clearest sign that Section 137B applies.
Why Section 137B of the Building Act 1993 Matters in Victoria
Section 137B matters because owner-built homes carry none of the protections a buyer gets from a registered builder's work: no builder's statutory warranties to a later owner, and no builder's insurance. Without the section, a buyer could purchase serious defects with no disclosure and no remedy. The report and insurance fill that gap for the first six and a half years.
For sellers, it is a condition of the sale itself. Leaving it until an offer is accepted is the most common way a straightforward sale turns into a delayed or collapsed one.
For buyers, it is information. A 137B report is one of the few documents in a residential sale that lists defects in writing before you sign.
Understanding the 6.5 Year Rule Under Section 137B
The 6.5 year rule means Section 137B applies when the owner-builder enters a contract to sell within six years and six months of completing the domestic building work. After that period, no 137B report or insurance is required under the section. The clock runs from completion of the work, not from when the permit was issued or when the owner moved in.
Six and a half years lines up with the six year period for structural defect claims, plus a margin. In practice the completion date is usually taken from the occupancy permit or certificate of final inspection, so find that document before you list.
Note
If you are close to the six and a half year mark, do not rely on your own estimate of the completion date. Confirm it from the permit documents with your conveyancer before you set a sale date.
Who Does Section 137B Apply To?
Section 137B applies to a person who carried out domestic building work on their own land as an owner-builder and then sells within six and a half years. It does not impose obligations on buyers, real estate agents or registered builders, although each of them is affected by whether the seller has complied.
Owner-builders carry the legal duty. They must obtain the report, arrange insurance where needed and make sure both reach the buyer before the contract is signed.
Buyers are the people the section protects. If you are buying a home with recent owner-builder work, ask for the 137B report and insurance certificate early, and read the report rather than filing it.
Agents and conveyancers are usually the first to notice a gap. Asking "was any of this work done as an owner-builder?" at listing avoids finding out at contract stage.
Owner Builder Obligations Under Section 137B
An owner-builder selling within six and a half years must give the buyer, before the contract is signed, a defects inspection report from a prescribed building practitioner that is no more than six months old. If the work was valued above $16,000, they must also obtain domestic building insurance for it and provide evidence of that cover.
Confirm the completion date
Find the occupancy permit or certificate of final inspection and work out whether the sale falls inside six and a half years.
Work out the value of the owner-builder work
Include materials and labour. If it exceeds $16,000, domestic building insurance will be needed as well as the report.
Book the defects inspection report
Use a prescribed building practitioner, and time it so the report is still under six months old when contracts are signed.
Arrange domestic building insurance if required
Insurers usually want to see the defects report first, so the report comes before the policy.
Give both documents to your conveyancer
They need to be with the buyer before the contract of sale is signed.
Victoria's building regulator, the Building and Plumbing Commission (which replaced the Victorian Building Authority), publishes a report template and guidance for owner-builders on selling.
What Is a 137B Report?
A 137B report, also called a Section 137B owner builder report or defects inspection report, is a written inspection of the owner-builder work that lists every defect and non-compliant item found, with photographs. It is prepared by a prescribed building practitioner, must be less than six months old when the contract is signed, and a copy goes to the buyer.
It is not a pre-purchase inspection and it is not a certificate that the work is compliant. It records the condition of the work at the date of inspection. A report that lists defects does not stop the sale; it means the buyer is told about them.
What Does a Section 137B Report Usually Include?
A Section 137B report usually includes a description of the owner-builder work, the date of inspection, the practitioner's details, and a list of every defect or non-compliance observed, each supported by a photograph. It covers the building work done under the owner-builder permit, not the whole property's general condition.
Typical findings include:
- Cracking in walls, slabs or brickwork linked to the new work
- Water entry, failed flashings or wet area waterproofing problems
- Framing, bracing or tie-down issues visible at the time of inspection
- Incomplete work or items that do not match the permit documents
- Safety items such as balustrade heights or stair geometry
Because the report is visual, concealed defects may need further investigation. Where a finding points to a deeper problem, a defect investigation report goes further than a standard inspection can.
When Is a 137B Report Required?
A 137B report is required when all three conditions are met: the seller carried out domestic building work as an owner-builder, that work was completed less than six and a half years before the contract of sale, and the home is being sold. If any one of the three is missing, Section 137B does not require a report.
Timing matters as much as eligibility. A report older than six months at the contract date does not satisfy the section, so a property that sits on the market for a long time may need a fresh inspection.
Who Can Prepare a Section 137B Owner Builder Report?
A Section 137B report must be prepared by a prescribed building practitioner. That generally means a registered building inspector, registered building surveyor, or a registered engineer or architect with the right class of registration. The practitioner must be independent of the work, so someone who carried out or supervised the building cannot report on it.
Before booking, check the practitioner's registration on the Building and Plumbing Commission's public register and ask directly whether they prepare Section 137B reports. Not every inspector who does pre-purchase inspections is set up for them.
Domestic Building Insurance Requirements Under Section 137B
Under Section 137B, an owner-builder who sells within six and a half years must hold domestic building insurance if the value of the owner-builder work exceeded $16,000, including labour and materials. The cover protects the buyer if a defect claim arises and the owner-builder has died, disappeared or become insolvent. Evidence of the policy must be provided before the sale.
The insurance is not optional just because the report found no defects, and the report is not optional just because insurance is in place. Above the threshold, both are needed.
Insurers commonly ask for the defects report when assessing an owner-builder policy, so arrange the inspection first. The Building and Plumbing Commission has more on domestic building insurance and home warranty.
Section 137B vs Registered Builder Responsibilities
Section 137B applies only to owner-builder work. When a registered builder carries out domestic building work under a contract, the builder must take out domestic building insurance for jobs above the threshold and the statutory warranties pass to later owners, so no 137B report is needed. A home can involve both: a builder's original house and a later owner-builder extension.
In a mixed case, Section 137B covers the owner-builder part only. The report should say clearly which work it covers, so a buyer is not left guessing where the builder's responsibility ends.
Legal Implications for Non Compliance With Section 137B
Selling without the required report or insurance is an offence under the Building Act 1993 and can lead to a fine. More practically, a buyer who did not receive the required documents may be able to end the contract before settlement, and the seller may face claims if defects appear later. Owner Inspections is not a law firm, so get legal advice on your own situation.
For buyers, the missing documents are a signal to slow down. For sellers, fixing it before listing is almost always cheaper than fixing it after an offer, when the buyer holds the leverage.
If a sale has already gone ahead and defects have since appeared, keep a careful record. Our guide on how to document building defects for a legal claim explains what evidence helps. If you are buying a home with owner-builder work, an independent pre-purchase inspection gives you a second view alongside the seller's 137B report, and you can read more about how inspections work on the Owner Inspections site.
Section 137B Checklist for Buyers and Sellers
The quickest way to handle Section 137B is a short checklist run before the property is listed. Sellers confirm the dates, value, report and insurance. Buyers confirm they have received both documents and read the defects list before signing anything.
Sellers
Buyers
Frequently Asked Questions
What is section 137B of the Victorian Building Act 1993?
What is a 137B report?
How long is a 137B report valid?
Do I need a 137B report if I sell after 6.5 years?
Does an owner-builder always need domestic building insurance to sell?
Who can prepare a Section 137B owner builder report?
What happens if an owner-builder sells without a 137B report?
Does a 137B report stop the sale if it finds defects?
Key Takeaways
- Section 137B applies when an owner-builder sells within six and a half years of completing domestic building work
- The buyer must receive a defects inspection report from a prescribed building practitioner, no more than six months old at the contract date
- Domestic building insurance is also required when the owner-builder work exceeded $16,000
- Selling without them is an offence, and the buyer may be able to end the contract before settlement
- Work done by a registered builder under contract is covered by the builder's warranties and insurance instead
Related Articles
How Changes During Construction Affect the Section 137B Report
Why variations to plans and permits during an owner-builder project show up in the 137B report.
Owner Builder Inspection Requirements by State in Australia
How owner-builder inspection and sale rules differ between Victoria and the other states.
What Does a Building Inspector Do in Victoria?
What a registered building inspector can and cannot assess, and when you need one.