Section 137B owner-builder resale rules in Victoria

What it is

Section 137B of the Building Act 1993 (Vic) restricts an owner-builder from selling a home on which they carried out domestic building work within 6½ years of completion of that work. The restriction exists to protect a downstream purchaser from inheriting defective work without the statutory protections that apply to work delivered by a registered builder. The section operates alongside section 137F, which transfers the implied warranties in section 8 of the Domestic Building Contracts Act 1995 onto the owner-builder for the same six and a half year window.

The two sections work together. Section 137B sets the procedural gate the owner-builder must pass to legally complete the sale. Section 137F sets the substantive warranty the purchaser receives once that gate is passed. Failure on the first section voids the contract of sale at the purchaser's election. Failure on the second exposes the owner-builder to direct claims for the cost of rectification.

The section 137B requirements

Before signing a contract of sale for a property on which domestic building work has been carried out by the owner-builder in the past 6½ years, the owner-builder must take three steps in a defined order.

First, obtain a Domestic Building Report from a registered building practitioner. The inspector must hold a current registration in a class authorised to inspect the type of work performed. The report must identify all defects in the work as well as the items that are incomplete. The report has a six month shelf life and must be current at the time of sale.

Second, attach a copy of the Domestic Building Report to the section 32 vendor statement. The Sale of Land Act 1962 vendor statement must include the report as an annexure. Failure to attach allows the purchaser to rescind the contract at any time before settlement under section 32K of the Sale of Land Act 1962.

Third, take out Domestic Building Insurance under the Ministerial Order administered by the Building and Plumbing Commission, formerly held by the Victorian Managed Insurance Authority. The policy must cover the implied warranties for the unexpired portion of the six and a half year period and name the purchaser and their successors in title as beneficiaries.

Definition of completion

Completion is the date the relevant building permit was finalised by the relevant building surveyor through the issue of a certificate of final inspection or occupancy permit. Where no permit was required the date defaults to the practical completion of the work. The 6½ year window runs from this date, not from settlement of the original land purchase or from the start of construction.

The section 137F warranty

Section 137F transfers the section 8 warranties under the Domestic Building Contracts Act 1995 onto the owner-builder once the property is sold within the six and a half year window. The warranties cover that the work was carried out in a proper and workmanlike manner in accordance with the plans and specifications, that materials supplied for the work were good and suitable for the purpose and that the work complied with the Building Act 1993 and the Regulations in force at the time.

The warranty runs in favour of the immediate purchaser and any subsequent purchaser whose interest arises within the unexpired portion of the six and a half year period. The owner-builder cannot exclude or limit the warranty by contract terms in the section 32 vendor statement, by special conditions in the contract of sale or by a side deed. A purported exclusion is void under section 132 of the Domestic Building Contracts Act 1995.

Enforcement and TradeLens risk

Consumer Affairs Victoria investigates section 137B breaches and the Building and Plumbing Commission cross-references owner-builder permits issued by relevant building surveyors against property transactions recorded by Land Use Victoria. A sale within the six and a half year window that lacks a Domestic Building Report on the section 32 triggers a regulatory referral and a potential rescission claim from the purchaser.

For TradeLens clients the section 137B framework applies whenever a director or related party has held an owner-builder permit. The risk pattern repeats. The owner-builder applies for a Certificate of Consent and a building permit, completes the work, lists the property within five or six years and is told at settlement that the Domestic Building Insurance is not in place. Settlement collapses, the buyer claims damages and the vendor faces a Consumer Affairs Victoria complaint. TradeLens flags any property held in a related entity where the owner-builder window is still open against the sale workflow.