The developer bond has a clear start date. Decennial insurance does not, and that gap may matter.
Victoria is introducing two new protections for defects in residential apartment buildings of over three storeys: A developer bond scheme and a decennial insurance (DI) scheme. On paper, they are designed as alternatives to each other. In practice, they are on very different clocks, and that is worth understanding if you are developing, financing, insuring, buying into, or advising on an apartment project right now.
We set out below what is important to know about the current gap between these two reforms, and what it could mean for projects moving through the system right now.
Two schemes, two different jobs
The developer bond scheme, which has been introduced into the Building Act 1993 (Vic) (Building Act) via Part 6, Division 1 of the Building Legislation Amendment (Buyer Protections) Act 2025 (Vic), requires developers of residential apartment buildings over three storeys to lodge a bond before getting an occupancy permit. The bond is held for a period after completion and can be claimed against to fund defect rectification. This is similar to the Strata Builder Bond scheme in New South Wales.
DI, which will be introduced into the Building Act via Part 2, Division 3 of the Building Legislation and Treasury Legislation (Tax Relief) Amendment Act 2026 (Vic) (DI Amending Act), is a 10-year, first-resort insurance product a developer can take out to take the place of the bond. It covers “relevant defects” in “relevant building elements” and, unlike the bond, is not capped at a fixed percentage of build cost, offering potentially broader protection.
The bond has a transition period. DI, for now, does not
In regulation 8(d), the Building (Developer Bonds) Regulations 2026 (Vic) set out a clear carve-out: Developers are exempt from the bond where the building permit is issued before 1 July 2027. That pushes the real-world start of the scheme out a full year from its nominal 1 July 2026 commencement.
DI is different. The DI Amending Act has passed, but the amendments related to DI will only be effective on and from 1 December 2027, unless proclaimed earlier. At the time of writing, regulations relating to DI have not been published and so there is currently no published transitional arrangement for DI at all.
Why that gap matters
Put the two timelines side by side and a programming problem emerges. A developer with a permit before 1 July 2027 can expect to fall outside the bond requirement, but DI could commence any time up to 1 December 2027, on a timeline set by its own regulations, not the date of the bond scheme. This leads to numerous questions such as:
- whether, upon the amendments relating to DI becoming effective, any corresponding regulation will include its own transitional exemption, and whether it will align with the date of the bond scheme, 1 July 2027; and
- what happens to a project mid-construction that has secured its bond exemption on an early permit, but then finds DI obligations commencing before completion and prior to applying for an occupancy permit. It is worth noting that, under section 65 of the DI Amending Act, which sets out new section 137ZZZP of the Building Act, it will be an offence for a person to apply for an occupancy permit if there is no bond or DI in place.
Provided any upcoming regulations relating to DI include a transitional mechanism that dovetails neatly with the bond scheme, then there will be no gap. But that is not yet confirmed, and decisions being made today about permit timing, contracts, and insurance are being made without that confirmation.
What this means in practice, today
- Keep up to date on developments relating to the regulations concerning DI as they are released, even when they are released in draft form.
- Build flexibility into contracts. Off-the-plan sale contracts, funding documents, and consultant engagements may need room to accommodate a DI requirement landing partway through a project.
- Engage early with insurers and brokers, given the DI market, pricing, and product availability are still developing.
The Victorian reforms are closing a real gap in apartment owner protection, but the two schemes are moving at different speeds, and only one currently has a confirmed transition period. Anyone with a project that could straddle these commencement dates should be watching the regulations closely, not assuming the position of today will hold.