What is Section 137b?

Melbourne's vibrant housing market sees a steady flow of owner builder homes coming up for sale. If you built or substantially renovated your property yourself, you might have heard whispers about a "Section 137B report". What exactly is it, why does it matter, and how do you stay on the right side of Victorian law? This post breaks down Section 137B in plain language, explains when it applies, and shows you how to navigate the process smoothly whether you are selling or buying in metropolitan Melbourne or the surrounding suburbs.

What is Section 137B?

Section 137B sits within the Building Act 1993 (Victoria). In simple terms, it makes it an offence for an owner builder to sell a dwelling within six years and six months of completing building works unless two key conditions are met: a recent defects report is supplied, and appropriate domestic building insurance is in place.

When Does Section 137B Apply?

The rule only bites if:

You (or a previous owner) carried out building work as an owner builder, and
You decide to sell the property within six years and six months of the date on the occupancy permit or certificate of final inspection.

Once that time has passed, Section 137B no longer applies, and you can transfer title in the usual way.

What is a Section 137B Report?

A Section 137B report sometimes called an owner buildier defects report is an expert inspection prepared by a registered building practitioner who is independent of the owner. It must be no more than six months old at the time contracts are signed. The report should:

Describe all building works completed in the relevant period
Identify any defects, incomplete items, or second-hand materials used
Comment on whether visible works comply with applicable building standards
Be prepared on the inspector's letterhead, signed, dated, and accompanied by the practitioner's registration number

The report is designed to give buyers a transparent view of the quality of work before they commit to the purchase.

Insurance Obligations That Travel With the Report

If the value of owner builder works exceeds $16,000 (including labour and materials), the seller must also provide domestic building insurance that lasts for six years for structural work and two years for non-structural work. The insurance covers the purchaser if the owner builder dies, disappears, or becomes insolvent and a major defect later appears.

Where Does the Report Go? The Section 32 Connection

Victorian vendors must give every prospective buyer a Section 32 Vendor Statement before contracts are signed. For owner builder properties within the six year and six month window, the Section 137B report and insurance certificate must be attached to that statement. If they are missing, the buyer may have grounds to walk away or seek compensation.

Penalties for Non-Compliance

Selling without the required paperwork can trigger substantial fines and, in serious cases, prosecution. Even if no prosecution follows, failing to disclose defects or provide insurance can lead to civil claims from disgruntled purchasers and costly settlement delays. The safest course is to comply early and fully.

Why Buyers Should Pay Attention

For buyers, the Section 137B report is a free head start on due diligence. It highlights any unfinished items or workmanship concerns so you can:

Request repairs or a price adjustment before signing
Budget realistically for post-settlement rectification
Decide whether further specialist inspections (such as pest or engineering reports) are wise

In a competitive Melbourne market, knowing the real condition of an owner-built property can prevent expensive surprises down the track.

How to Organise a Section 137B Report

Owners should engage a registered building inspector or building surveyor with experience in defects reporting. Ask for:

Evidence of current registration
Professional indemnity insurance details
A clear, fixed fee quote
Delivery of the final report in both PDF and hard copy so it can be attached to the Section 32 statement straight away

Inspection slots can fill quickly in Melbourne's peak selling seasons (spring and early autumn). Booking four to six weeks before listing avoids last-minute stress.

Typical Costs and Practical Tips

Most metropolitan inspections fall between $550 and $950, depending on property size and location. Complex two storey renovations or rural acreage can cost more. Sellers can keep the figure down by:

Providing clear access to sub floor and roof void spaces
Collating permits, plans, and receipts for the inspector in advance
Finishing minor cosmetic touch ups before the inspection date

Common Misconceptions

"I am only selling a renovated bathroom surely I can skip the report." Not necessarily. If your combined works since the original build exceed $16,000 and fall within the six year and six month period, Section 137B still applies.

"A private building inspector is too fussy. I can draft the report myself." The law is clear that the report must come from a registered building practitioner who was not involved in the original works. Drafting your own report will not satisfy Section 137B and could expose you to fines.

A Timeline for Melbourne Owner-Builders Planning to Sell

Eight months before listing: Consult a conveyancer to confirm whether Section 137B applies
Six months before listing: Book a registered inspector, gather permits and receipts
Four months before listing: Receive the draft report, discuss any highlighted defects, and, if feasible, rectify issues
Two months before listing: Obtain domestic building insurance (if required) and finalise the report
Listing week: Provide the report and insurance certificate to your conveyancer so they can prepare the Section 32 statement
Contract signing: Ensure both documents are attached to the vendor statement that buyers will review

How Pearson Chambers Conveyancing Can Help

Section 137B can feel technical, but you do not have to tackle it alone. At Pearson Chambers Conveyancing we:

Confirm whether Section 137B applies to your property
Recommend reputable, independent building inspectors
Review the draft report for accuracy and clarity
Arrange domestic building insurance where necessary
Prepare a watertight Section 32 statement that keeps your sale on track
Advise buyers on interpreting reports and negotiating outcomes

Our team lives and works in Melbourne, so we understand local council requirements, typical inspection wait times, and current market conditions.

Conclusion and Next Steps

Navigating Section 137B is a straightforward process once you know the rules: obtain a compliant defects report that is less than six months old, secure insurance if the works exceed $16,000, and attach both documents to your Section 32 statement. Doing so protects you from penalties, keeps your sale moving smoothly, and gives buyers peace of mind.

Ready to take the next step? Reach out to Pearson Chambers Conveyancing for tailored advice and a free Section 32 contract review today.

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au