Does Victorian Building Warranty Insurance Really Protect Subsequent Owners
Is domestic building warranty insurance in Victoria really protecting subsequent owners?
There is a significant concern emerging in Victoria about the practical protection provided by domestic building warranty insurance, particularly for people who purchase a home after the original building works have been completed.
The recent decision in Victorian Building Authority v Fall-Armytage [2026] VSCA 32 brings that concern into focus.
The case concerned a subsequent owner who acquired a property more than 2 years after construction had been completed. This was an issue because they discovered non structural defects and sought to claim.
The time limits that apply to claims under domestic building warranty insurance are 2 years for non-structural defects and 6 years for structural defects.
At first instance, the County Court formed a policy construction of clause 34 of the VMIA policy which allowed the claim because the relevant defects had occurred during the applicable 2 year non structural defect period.
The Court of Appeal took a different view.
The critical issue was the wording of clause 34 of the VMIA policy, which provides cover for “loss or damage” arising from a non-structural defect “occurring” during the period.
The Court of Appeal held that the words “occurring during the period” refer to the loss or damage as separate from the defects which existed at construction and because a subsequent owner could not suffer loss and damage before they owned the property the homeowner was out of luck.
Therefore the distinction of a sale and the focus on loss and damage not being possible prior to ownership transfer makes a huge difference.
So, a defect may have existed in a building at construction but if the sale occurs after the period of cover expires the VMIA certificate is worthless!
Fall-Armytage makes it clear that the timing of loss and damage is critical despite it being a somewhat nebulous concept.
An application for leave to the High Court of Australia has been made. Let’s hope some sensible clarity arises…
And, in my view, this deserves much closer attention from the industry and policymakers.
At BU Lawyers, we will be watching this area closely.
This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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