By Pinar Acay
Section 137B of the Building Act 1993 (Vic) is a key provision mandating the disclosure of important information when transferring ownership of a property in Victoria. It is designed to protect prospective purchasers by ensuring they are aware of potential defects or non-compliance with building regulations. Understanding the requirements of this provision and the associated timeframes is crucial for vendors to avoid legal pitfalls and ensure a smooth property sale process.
Scope of Application
Section 137B applies to property transactions involving:
- Residential buildings: This includes houses, units, townhouses, and other types of residential dwellings but does not include a home constructed under a major domestic building contract.
- Non-residential buildings: It also extends to certain non-residential properties where an occupancy permit or a certificate of final inspection has been issued or required to be issued.
Building work includes constructing a building, making alterations to a building (including non-structural cosmetic work), enlarging or extending a building, causing any other person to do such work in relation to a building, and managing or arranging the doing of such work.
Compliance Requirements
To comply with Section 137B, the vendor must fulfill the following obligations:
- Provide a Condition Report:
The vendor must obtain a condition report from a prescribed building practitioner containing details of any building work completed within the prescribed period and any defects in the work undertaken. A copy of all building permits, occupancy permits and certificates of final inspection issued for the building work should be attached to the report.
- Obtain Domestic Building Insurance (if applicable):
For domestic building work exceeding $16,000, the vendor must obtain domestic building insurance (DBI), which covers defects or incomplete work if the builder is unavailable due to death, disappearance or insolvency.
- Disclosure to Prospective Purchasers:
A copy of the condition report and certificate of any applicable DBI must be provided to the purchaser before signing a contract of sale. The condition report must be less than six months old.
Applicable Timeframes
- Prescribed Period:
Section 137B applies to building work completed under a building permit within the prescribed periods set out below:
| Type of building work carried out | Qualifier | Prescribed period |
| Sale of a building on which domestic building work has been carried out | Where an occupancy permit or a certificate of final inspection was issued or required to be issued | 6 years and 6 months after the date of issue of the occupancy permit or certificate of final inspection |
| Where a building permit was issued but an occupancy permit or a certificate of final inspection was not issued or required to be issued | 7 years after the date of the issue of the building permit | |
| Where a building permit, an occupancy permit or a certificate of final inspection was not issued or required to be issued | 6 years and 6 months after the date certified by the owner of the building by statutory declaration as the date of commencement of the building work | |
| Sale of any other building | Where an occupancy permit or a certificate of final inspection was issued or required to be issued | 10 years after the date of issue of the occupancy permit or certificate of final inspection |
- Timing of Disclosure:
The vendor must disclose required information under section 137B before the purchaser signs the contract of sale.
Consequences of Non-Compliance
Non-compliance with section 137B can result in significant legal and financial repercussions for the vendor:
- Contractual Issues:
If a vendor fails to disclose required information under section 137B, the purchaser may have grounds to rescind the contract of sale before settlement. This can lead to delayed transactions, financial losses and reputational damage for the vendor.
- Financial Penalties:
Breaching disclosure requirements under section 137B can result in fines or penalties imposed by the Victorian Building Authority (VBA) or other regulatory bodies.
- Legal Claims:
A purchaser who suffers financial loss or discovers undisclosed defects may initiate legal action against the vendor for misleading or deceptive conduct and breach of warranty. Vendors can be held liable for damages, including the cost of rectifying undisclosed defects.
- Impact on Insurance Claims:
Failure to disclose the required details may affect claims under DBI or other relevant policies, leaving vendors or subsequent owners exposed to repair costs.
Contact Us Today for a Consultation
Our experienced team at Eales & Mackenzie can assist vendors by ensuring all disclosure obligations under section 137B are met and documented correctly. We can also advise purchasers about their rights in relation to any section 137B compliance issues.
This information is general in nature and not a substitute for legal advice. Speak to one of our senior property lawyers, namely Pinar Acay on (03) 8621 1000 or (03) 9331 1144 at our Melbourne and/or Essendon offices for tailored advice about your situation.
