Buying an Apartment With Outstanding Rectification Orders

The worry is simple: ‘If the building already has defect issues, am I buying someone else’s problem?’

The short answer: A Victorian rectification order can require a builder, subcontractor or, for many residential apartment buildings, a developer to fix incomplete, defective or non-compliant building work. Under the Building Legislation Amendment (Buyer Protections) Act 2025, the regulator can have up to 10 years to act after the occupancy permit or other relevant completion point. A later apartment buyer is usually not personally liable under the order, but may still face delay, stress, loss of value or owners corporation levies if the work is not fixed.

What is a rectification order in Victoria?

A rectification order is a formal direction requiring defective, incomplete or non-compliant building work to be fixed. In Victoria, the Building and Plumbing Commission is the integrated building regulator now sitting at the centre of these reforms.

For apartment buyers, the key point is timing. The Buyer Protections Act gives the regulator broader power to issue rectification orders after occupation, not just while a project is still being built. For newer apartment blocks, that means the building may still be inside the defect enforcement window even if the first owners have already moved in, leased out their units and put lots back on the market.

Think of a two-year-old apartment in Richmond with ongoing balcony drainage issues. The unit may look clean at inspection, the café strip may be around the corner and the tram ride into the CBD may be perfect. The building can still have a live defect issue sitting behind the scenes.

Who is responsible for an outstanding rectification order?

The order is aimed at the responsible building party, not automatically at the later apartment buyer. Depending on the work, that may be the builder, a subcontractor who carried out the work or, for residential apartment buildings, the developer.

That distinction matters. If you buy an apartment after a rectification order has been issued, the order does not usually become your personal debt simply because your name is now on the title. You did not pour the slab, waterproof the balcony or install the façade.

The practical risk is different. You own a lot in a building where defective work may still need fixing. If the responsible party delays, fights the order, has poor insurance, or has stopped trading, the owners corporation may have to manage the problem. That can mean lawyers, engineers, special levies and long meetings in a cold foyer after work.

Does the 2 per cent developer bond protect apartment buyers?

The 2 per cent developer bond is designed to give extra protection for residential apartment buildings with a rise in storeys of more than three. The bond is not for every unit, townhouse or small block in Victoria.

For larger residential apartment buildings, the developer bond scheme is meant to keep money available for defect rectification after occupation. The Act also sets up assessor inspections and reports, with a preliminary inspection window at 15 to 18 months after the occupancy date and a final inspection window at 21 to 24 months after the occupancy date.

That is useful, but it is not a magic shield. A bond may not cover every defect, timing can matter, and each project needs to be checked against the current legislation, regulations and transition rules. If you are buying second-hand into a recent apartment tower, ask whether the building is inside the bond scheme, whether reports exist and whether any bond money has already been claimed.

What could go wrong if I buy before the work is fixed?

The legal liability may sit elsewhere, but the inconvenience can land on you. That is why outstanding rectification orders should be treated as a serious contract-stage issue, not just a technical building note.

Common risks include:

a special levy if the owners corporation needs funds for experts, legal fees or urgent works
a delay in defect repairs that affects your use of the apartment or common property
water leaks, cladding, fire safety or structural concerns that affect insurance or resale
trouble getting clear answers from the vendor, agent, developer or owners corporation manager
future buyers asking hard questions when you sell

We’ve seen this come up most often when buyers focus on the private lot, the floorplan and the view, while the owners corporation records tell the real story: repeated defect correspondence, engineering reports, levy discussions and years of slow follow-up with the builder.

What should your conveyancer check before you sign?

Your conveyancer should check the contract pack against the building’s defect history before you sign, not after auction day. This is especially true for newly built apartments and recent projects, where the same checks used when buying a newly constructed house in Melbourne need to be adapted for strata living.

Ask your conveyancer to look closely at:

The occupancy permit date. This helps work out whether the building may still sit inside the 10-year rectification order window.
The Section 32 vendor statement. Check for building permits, notices, orders and other disclosures affecting the land or lot.
The owners corporation records. The owners corporation certificate and minutes can reveal special levies, defect disputes, notices, orders, repairs, insurance issues and legal action.
The developer and builder history. Confirm who built the project, who developed it and whether those parties are still trading.
The bond and inspection status. For larger recent apartment buildings, ask whether a developer bond was lodged, whether assessor reports exist and whether defect rectification has already used any bond money.

A clean-looking Section 32 is not the end of the check. Owners corporation minutes, registers and correspondence often carry the practical warning signs.

What if you discover an outstanding order after settlement?

Your options are usually stronger before settlement than after it. If an order, notice or defect dispute should have been disclosed and was not, the timing of discovery can be decisive.

Before signing, you may be able to ask for more documents, negotiate special conditions, delay your offer or walk away. Before settlement, you may be able to raise disclosure issues with the vendor’s representative if the Section 32 appears defective. After settlement, the path is harder. You may be left with a claim for loss, an owners corporation process or a regulator process, none of which gives the quick comfort buyers want.

This is why pre-signing review matters so much in Melbourne’s apartment market. Once the auction hammer falls, or the private sale contract is signed and cooling-off rights have passed, the buyer’s room to move gets smaller.

How does this affect off-the-plan apartment buyers?

Off-the-plan buyers may have extra rights because they are buying directly into the development before completion. If the project is a residential apartment building of more than three storeys, the developer bond scheme may affect whether the developer can obtain key approvals and whether the buyer has rights if the bond requirements are not met.

For buyers comparing display suites, sunset dates and contract plans, off-the-plan conveyancing now needs one more layer: what happens if serious defects are identified after occupation? The answer depends on the building type, the timing of the contract, the occupancy permit, the bond scheme and the terms of the sale contract.

Second purchasers, meaning buyers who purchase from the first owner after the apartment is finished, should not assume they get the same rights as the original off-the-plan buyer. Their protection usually comes from disclosure, owners corporation searches and careful contract review.

Should you still buy the apartment?

An outstanding rectification order is not always a reason to walk away. It is a reason to slow down and understand the risk before you commit.

A manageable order against a solvent builder, backed by a clear owners corporation plan and available bond money, may be a very different proposition from a vague defect dispute in a building with no funds, no current reports and no clear path forward. The key is not panic. The key is information.

Before making an offer, ask:

What exactly needs to be fixed?
Who is required to fix it?
Has the work started?
Who is paying?
Is the owners corporation budgeting for a special levy?
Are there engineering, fire safety or waterproofing reports?
Will the issue affect your lender, insurer or future resale?

If those answers feel woolly, get advice before you sign.

Frequently asked questions

What is a rectification order in Victoria?

A rectification order is a formal direction requiring defective, incomplete or non-compliant building work to be fixed. Under the Buyer Protections Act 2025, the Victorian building regulator can issue orders to parties such as builders, subcontractors and, for residential apartment buildings, developers.

Are rectification orders recorded on the title to the property?

Rectification orders are made against the responsible building party rather than being ordinary title debts of a later lot owner. Buyers should still check the Section 32, owners corporation certificate, owners corporation minutes and any available regulator records because a title search alone may not tell the full story.

If I buy an apartment with an outstanding rectification order against the builder, am I responsible for the rectification cost?

You are usually not personally liable to the regulator just because you bought the apartment later. Your risk is practical: if the responsible party does not fix the work, the owners corporation may need to fund investigations, legal steps or repairs through levies paid by lot owners.

When does the Buyer Protections Act 2025 commence?

The Building Legislation Amendment (Buyer Protections) Act 2025 received Royal Assent on 3 June 2025. Its provisions commence on proclamation, or on 1 July 2026 if not commenced earlier, with the Building and Plumbing Commission already forming part of Victoria’s building reform programme.

Do rectification orders apply to building work completed before the Act commenced?

The new rectification order powers can reach work completed before the relevant provisions commence, provided the work sits within the statutory time window and the regulator is satisfied the legal tests are met. For apartment buyers, the occupancy permit date is one of the first documents to check.

Does the 2 per cent developer bond apply to every apartment building?

No. The developer bond scheme is aimed at residential apartment buildings with a rise in storeys of more than three. Smaller apartment blocks, townhouses and low-rise projects may fall outside the bond scheme, even though other building laws and insurance rules may still apply.

What protections are there for second purchasers?

Second purchasers rely mainly on the Section 32 vendor statement, contract review, owners corporation records, building history checks and any live rectification process involving the original builder or developer. The safest step is to identify defect and disclosure issues before signing, while you still have room to negotiate or walk away.

About the Pearson Chambers Conveyancing team

Pearson Chambers Conveyancing is a Melbourne-focused team helping buyers, sellers and first-home purchasers work through Victorian residential property contracts. We review contracts of sale, Section 32 vendor statements and owners corporation material for apartment buyers across metropolitan Melbourne every day. Outstanding rectification orders sit right in the work we do because they link legal disclosure, building defects, settlement risk and future owners corporation costs.

Sources we consulted

Talk to us before you sign

If you are shortlisting an apartment in Melbourne and you are unsure about rectification orders, developer bonds, building defects or owners corporation records, speak with Pearson Chambers Conveyancing before you commit. We can review the contract and Section 32, raise the right questions and help you understand whether the risk is manageable.

For a complimentary Section 32 contract review, contact our team:

Email: contact@pearsonchambers.com.au

General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.