Builders who fail to take out domestic insurance for paid-up Victorian buyers will be hit with tough penalties after hundreds of people were caught out by the collapse of Porter Davis.
Legislation introduced to parliament on Tuesday would create offences for builders who fail to immediately take out insurance with the Victorian Managed Insurance Authority after customers pay their deposit.
Under the bill, individuals caught breaking the incoming law would face a fine of up to $96,000 and companies could be hit with a maximum penalty of $480,000.
Builders will be required to register the insurance, with a website set up to allow consumers to make sure it has been filed.
The Victorian Building Authority will also be given increased disciplinary and investigative powers to keep dodgy builders on their toes.
About 1700 homes across Victoria and Queensland were left in limbo when Porter Davis collapsed suddenly in March.
Some 560 clients were not covered by insurance despite paying the construction giant before it went into liquidation, forcing the state government to set up a $15 million bail-out scheme.
In Victoria, businesses already face a six-figure fine for carrying out, managing or arranging domestic building work for contracts worth $16,000 or more without the required insurance.
But it does not cover firms that receive payment but don't subsequently take out insurance before collapsing.
Premier Jacinta Allan said changes were about addressing "loopholes" exposed by the Porter Davis affair.
The new offences are the first in a suite of changes to better protect Victorians building or renovating their home, including a review of the Domestic Building Contracts Act.
"This is all part of a big reform agenda in the building industry," Ms Allan told reporters
Porter Davis victim Shreya Avvari, who was set to lose more than $24,000 before being bailed out under the government scheme, was relieved to know the loophole was being closed.
"It was one thing to get our money back and start again but I'd always have a question ... 'what if another builder does the same thing'," she said.
"Having this in place, giving that sense of surety, keeps us alive."
Opposition Leader John Pesutto said the coalition would wait for more detail on changes but was inclined to support the bill.
"We think home-buyers, particularly first home-buyers, need to have the protection when they engage a builder who has insurance," he said.
"That's sensible and fair."
With opposition support, the legislation would sail through both houses of parliament and come into effect early next year.
