First Resort Home Warranty Scheme - a closer look

Update:

The Building (Statutory Insurance Scheme) Regulations 2026 (Vic) have now been finalised and released, replacing the earlier draft version on which our eAlert dated 25 March 2026 was based. As there are notable differences between the draft and final Regulations, we have updated our eAlert to ensure our analysis accurately reflects the final Regulations which are commencing on 1 July 2026.

New legislation, to come into operation on 1 July 2026, replaces the existing domestic building insurance scheme. 

• The new statutory insurance scheme – known as the ‘First Resort Home Warranty Scheme’ – applies to domestic building work for developments of up to three storeys, in Victoria.
• Builders entering domestic building contracts above $20,000 must pay insurance premiums to the Building and Plumbing Commission (BPC).
• The new insurance scheme provides homeowners with coverage for losses arising from incomplete, defective, or non compliant domestic building work.

This article, the second in a series on the impact of the Building Legislation Amendment (Buyer Protections) Act 2025 (Vic) (Act), examines the Building (Statutory Insurance Scheme) Regulations 2026 (Vic) (Regulations) which were released on 12 May 2026 and will come into operation on 1 July 2026.

In particular, we examine how the Regulations provide clarity regarding the operation of the new insurance scheme.

Claims Trigger

A homeowner may lodge a claim under an insurable contract when they identify domestic building work that is either:

• incomplete; or
• defective or non compliant.

This represents a significant shift from the current trigger for domestic building insurance where homeowners may only receive coverage if their builder dies, disappears or becomes insolvent.

Between January 2002 and June 2019, the Victorian Managed Insurance Authority denied 968 claims due to the builder not being dead, disappeared or insolvent¹. The new insurance scheme is designed to overcome this limitation and introduce more ways for homeowners to claim on insurance.

Claims Procedure

The Regulations set out the timeframe and procedure for making a claim under the Insurance Scheme.

The timeframe for a claim is as follows (Regulations 8 and 28):

• For incomplete works, a claim must be made within 12 months of the date of the insurable domestic building contract end.
• For defective or non-complaint work, a claim must be made within 12 months of the homeowner becoming aware, or reasonably expected to have become aware, of the defective and or non-compliant building work within the statutory timeframes of 6 years for major defects and 2 years from non-major defects (as defined in the Regulations).

The procedure is as follows (Part 6 of the Regulations):

• The homeowner identifies a defect and issues a complaint notice, in the approved form, to the builder (unless there is an ‘insurable domestic building contract event’ or the homeowner is exempt). The homeowner may request that the BPC serves this notice on their behalf.
• The builder has 28 days from receipt of the complaint notice to provide a response (the period 22 December – 10 January is excluded from the 28 day period).
• If the parties are unable to resolve the matter, or if the builder does not respond, the homeowner may lodge a claim for assistance with the BPC.
• If the BPC determines that a legitimate defect exists, it may issue a rectification order requiring the builder to remedy the defect.
• If no decision is made by the BPC within 91 days of the expiry of the 28 days from service of the complaint notice on the builder or the date on which the claim for assistance was made (as applicable), the homeowner may escalate the matter to the Victorian Civil and Administrative Tribunal (VCAT).
• If the builder does not comply with the rectification order, the BPC may provide assistance to the homeowner through the Insurance Scheme.

Homeowners, builders and developers will need to consider existing claims procedures in their contracts to ensure the defects or claims procedures align with the procedure in the Regulations.

Insurance Scheme Assistance

Unless an exemption obtained pursuant to Regulation 34 applies, the parties are required to comply with the claims procedure outlined above. Assistance under the Insurance Scheme becomes available when any of the following circumstances arise:

• an insurable domestic building contract event occurs, including where the builder dies, cannot be located, becomes insolvent, or where the contract is terminated in accordance with section 49W of the Domestic Building Contracts Act 1995 (Vic), or is otherwise validly ended by the homeowner due to the builder’s default;
• a builder refuses to respond to a rectification order issued by the BPC to fix defective or non-compliant domestic building work; or
• a builder fails to comply with a Direction to Rectify Order or a VCAT decision.

The type of assistance available will depend on the stage of construction and generally includes:

• Before work commences – the homeowner may claim a refund of their deposit (capped at 5%) (Regulation 10);
• During construction on land other than common property – the homeowner may claim either:
  • the insurable value of the completion of the incomplete work (less some adjustment items) capped at 30% of the contract price;
  • the reasonable cost of demolition of incomplete work plus the amount due and payable under the insurable domestic building contract that has been paid by the building owner before the relevant domestic building contract event occurs.
  In each case, these entitlements are subject to further threshold checks set out in the Regulations (Regulations 10 and 17).
• After completion – the homeowner may claim:
  • in the case of an insurable value of $400,000 or less – rectification on behalf of BPC of the defective or non-compliant building work less the building owner's liability amount (if any);
  • in the case of an insurable value of $400,000 or more – rectification on behalf of BPC defective or non-compliant building work less the building owner's liability amount (if any) OR payment of compensation less the building owner's liability amount (if any);
    (Regulation 12).

Additional support may also be available for accommodation, removal, and storage costs incurred as a result of delays caused by incomplete or defective or non-compliant work, up to a maximum of $12,000 (Regulation 23).

Other key points

The Regulations also set out:

• Clarification of what constitutes “reasonable costs” when applying insurance funds toward the rectification or completion of domestic building work.
• The manner in which the insurance scheme applies to owners’ corporations, including coverage relating to common property.
• Additional limitations and exclusions on the assistance available under the insurance scheme.
• A schedule of deductibles applicable to claims for assistance.
• The maximum limit of cover, set at $400,000 for all claims.
• Core insurance scheme principles, including the obligation to act in good faith.
• The prescribed timeframe within which a party may seek a review of a BPC decision. The Regulations clarify that entitlement to assistance under the insurance scheme is directly linked to regulatory enforcement outcomes. This framework aligns with the BPC’s new rectification order powers – ie allowing the BPC to require builders or developers to remedy defective, non compliant, or incomplete work for up to 10 years.

Please get in touch with Mark McKinley, Kyle Gillan, Brandon Dewar, Daniel Amicucci, Elizabeth Flanagan or a member of our Property & Development team if you have any queries.

Please also refer our earlier eAlert, which examined the buyer protection reforms introduced by the Act. 

As noted above, this article is the second in a series that examine the three separate draft regulations related to the Act. To read the articles in the series, click here. 

If you would like to keep in touch with Alerts and Insights from our expert Property team, you can subscribe to our mailing list here.

¹ Essential Services Commission (2019), Victoria’s Domestic Building Insurance Scheme- performance report 2018-19. https://www.esc.vic.gov.au/sites/default/files/documents/Victoria%27s%20domestic%20building%20insurnace%20scheme%20-%20performance%20report%202018-19_0.pdf