Section 137B of Victoria's Building Act 1993 requires owner-builders to obtain a defects inspection report from a registered building practitioner before selling a property within 6.5 years of construction completion. This regulation protects property buyers by ensuring that owner-builders disclose details about the construction work undertaken on a property, including any defects or compliance issues. If you are an owner-builder planning to sell, or a buyer purchasing an owner-built property, understanding Section 137B is important.
This guide explains who must comply, what the report involves, insurance requirements, and what happens if you fail to meet the obligations.
What Is Section 137B?
Section 137B serves as a protection mechanism for property buyers, ensuring that owner-builders disclose details about the construction work undertaken on a property. The regulation applies to owner-builders who have completed renovations, extensions, or major home improvements and intend to sell within 6.5 years of the work being completed.
The key requirements are:
- Obtaining a defects inspection report from a registered building practitioner
- Providing the report to prospective buyers before the contract of sale is signed
- Purchasing domestic building insurance if the work exceeds $16,000
- Complying within the 6.5-year timeframe from completion of the building work
Who Must Comply with Section 137B?
Section 137B applies specifically to owner-builders in Victoria who are selling a property where they carried out building work themselves. The obligation sits with the seller.
- Owner-builders selling within 6.5 years of the building work being completed must obtain the defects report and provide it to buyers
- Property buyers and real estate agents should be aware of the requirement as part of their due diligence
- Licensed builders who carried out the work are generally exempt, as different warranty and insurance frameworks apply
QWhat Is Exempt?
Minor renovations are generally exempt from Section 137B requirements. This includes cosmetic work such as painting, replacing flooring, and installing cabinetry. The regulation targets major structural modifications, renovations, and extensions that affect the structural integrity or safety of the property.
What the Defects Inspection Report Covers
The defects inspection report must be prepared by a qualified registered building practitioner. The report assesses the building work carried out by the owner-builder and covers:
- Structural soundness: Assessment of the structural integrity of the work, including foundations, framing, and load-bearing elements
- Identification of defects: Any defects in workmanship, materials, or construction methods
- Code compliance: Whether the work complies with the Building Code of Australia (now the National Construction Code) and relevant Australian Standards
- Repair recommendations: Advice on what repairs or rectifications are needed to address identified defects
The defects inspection report is valid for six months from the date of issue. If the property is not sold within that period, a new report must be obtained.
Domestic Building Insurance Requirements
When building work carried out by an owner-builder exceeds $16,000, domestic building insurance must be obtained. This insurance protects buyers from financial losses related to structural issues and incomplete projects.
- The insurance covers structural defects for six years and non-structural defects for two years from the date of the certificate of occupancy or final inspection
- It provides buyers with a financial safety net if problems emerge after the sale
- The policy must be in place before the contract of sale is signed
Consequences of Non-Compliance
Failure to comply with Section 137B can result in serious consequences for the seller:
- Significant fines imposed by the Victorian Building Authority (VBA)
- Buyers may have the right to terminate the contract of sale
- Legal claims for damages if defects are discovered after purchase
- Enforcement action by the VBA, including further legal proceedings
How Section 137B Protects Buyers
For buyers, Section 137B provides transparency and peace of mind when purchasing an owner-built property. The defects report gives buyers a clear picture of the quality of the building work and any issues that need to be addressed. This allows buyers to:
- Make an informed decision about whether to proceed with the purchase
- Negotiate the purchase price based on any defects identified
- Budget for any repairs or rectification work that may be needed
- Verify that domestic building insurance is in place for their protection
Frequently Asked Questions
QWhat is the purpose of Section 137B of the Building Act 1993?
Section 137B protects property buyers by requiring owner-builders to obtain and provide a defects inspection report before selling a property within 6.5 years of completing building work. It ensures transparency about the quality of owner-builder construction.
QWho is responsible for obtaining the Section 137B report?
The owner-builder who carried out the building work is responsible for obtaining the defects inspection report from a registered building practitioner and providing it to prospective buyers before the contract of sale is signed.
QWhat are the consequences of not complying with Section 137B?
Non-compliance can result in significant fines from the Victorian Building Authority, the buyer's right to terminate the contract, legal claims for damages, and enforcement action. The financial and legal consequences can be substantial.
QHow long is the Section 137B defects report valid?
The defects inspection report is valid for six months from the date of issue. If the property is not sold within that period, a new report must be obtained from a registered building practitioner.
QWhen is domestic building insurance required under Section 137B?
Domestic building insurance is required when the value of the building work carried out by the owner-builder exceeds $16,000. The insurance must be in place before the contract of sale is signed.
QWhat penalties apply for non-compliance with Section 137B?
Penalties include fines imposed by the Victorian Building Authority, potential contract termination by the buyer, and legal claims for damages. The VBA can also take enforcement action against non-compliant owner-builders.
QHow can I verify if a builder is registered in Victoria?
You can verify a builder's registration through the Victorian Building Authority (VBA) website, which maintains a public register of licensed and registered building practitioners. This allows you to confirm their qualifications and registration status.
QDoes Section 137B apply to minor renovations?
No. Minor cosmetic work such as painting, replacing flooring, and installing cabinetry is generally exempt. Section 137B targets major structural modifications, renovations, and extensions that affect the structural integrity or safety of the property.
QDoes Section 137B apply if a licensed builder did the work?
No. Section 137B applies specifically to owner-builders. When a licensed builder carries out the work, different warranty and insurance frameworks apply under the Domestic Building Contracts Act 1995 (VIC).
QCan a buyer request a Section 137B report from the seller?
Yes. If the property was built or renovated by an owner-builder within the past 6.5 years, buyers should request the Section 137B defects inspection report and evidence of domestic building insurance as part of their due diligence before signing the contract.
Key Takeaways
- Section 137B of Victoria's Building Act 1993 requires owner-builders to provide a defects inspection report when selling within 6.5 years of completing building work
- The report must be prepared by a registered building practitioner and is valid for six months
- Domestic building insurance is required when owner-builder work exceeds $16,000
- Non-compliance can result in fines, contract termination, and legal claims
- Minor cosmetic renovations are generally exempt from the requirement - Licensed builder work is covered by separate warranty and insurance frameworks
- Buyers should always request the Section 137B report as part of their due diligence on owner-built properties
References and Resources
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