Construction Changes and Section 137B Reports

When you undertake an owner-builder project in Victoria, the Section 137B Report is not just a formality. It is a legally mandated disclosure document that can determine whether your property sale proceeds smoothly or becomes entangled in legal disputes. Changes made during construction can significantly affect the accuracy and validity of this report, making it essential to understand how modifications impact your compliance obligations.

Under the Building Act (VIC) 1993, owner-builders who sell their property within 6.5 years of completing construction must provide prospective buyers with a Section 137B Report. This report discloses any known building defects, and its accuracy is paramount. When construction changes occur, whether through design modifications, material substitutions, or scope expansions, each alteration has the potential to introduce new defects or compliance issues that must be documented.

This comprehensive guide examines how various construction changes affect your Section 137B Report obligations, the legal and financial implications of undisclosed modifications, and the steps you must take to maintain compliance throughout your owner-builder project.

A Section 137B Report is only as accurate as the information it contains. Construction changes that go undocumented can expose owner-builders to significant legal liability and financial penalties when selling their property.

What is a Section 137B Report?

A Section 137B Report, named after the relevant section of the Building Act (VIC) 1993, is a defect disclosure document required when selling an owner-built property in Victoria. The report must be prepared by a registered building practitioner and provided to prospective buyers before the sale contract is signed.

Purpose of the Section 137B Report

The primary purposes of the Section 137B Report include:

Buyer protection: Ensuring prospective purchasers are fully informed about any building defects before committing to a purchase
Legal compliance: Fulfilling the statutory disclosure requirements under Victorian building legislation
Risk management: Protecting owner-builders from future legal claims by documenting known defects at the time of sale
Transparency: Promoting fair dealing in property transactions involving owner-built homes
Quality assurance: Encouraging higher construction standards by requiring independent professional assessment

Legal Requirements Under the Building Act (VIC) 1993

The Building Act (VIC) 1993 establishes specific requirements for Section 137B Reports that owner-builders must understand:

Mandatory disclosure period: The report is required for any sale occurring within 6.5 years of the date of issue of the occupancy permit or certificate of final inspection
Qualified inspector requirement: Only a registered building practitioner with appropriate qualifications can prepare the report
Pre-contract provision: The report must be given to the buyer before they sign the contract of sale
Comprehensive scope: The inspection must cover all building work undertaken by the owner-builder
Victorian Building Authority (VBA) oversight: The VBA administers and enforces these requirements

What the Report Must Include

A compliant Section 137B Report must document:

All defects identified during the inspection
The severity and nature of each defect
Whether defects relate to structural elements, waterproofing, or other building systems
Recommendations for rectification where applicable
Photographic evidence supporting the findings
Details of any areas that could not be inspected and reasons why
The qualifications and registration details of the inspector

Common Construction Changes That Affect Section 137B Reports

Construction projects rarely proceed exactly as originally planned. Understanding how different types of changes affect your Section 137B Report obligations is essential for maintaining compliance and protecting your legal position.

Design Modifications and Architectural Adjustments

Design modifications are among the most common changes during owner-builder projects. These can range from minor alterations to significant architectural changes that fundamentally affect the building.

Types of Design Modifications

Room layout changes: Altering the position of internal walls, doorways, or the overall floor plan configuration
Window and door modifications: Changing the size, position, or number of openings in external walls
Roof design alterations: Modifying roof pitch, materials, or drainage systems
Structural element changes: Adjusting beam positions, load-bearing walls, or foundation specifications
Facade modifications: Altering external cladding materials, finishes, or architectural features

Impact on Section 137B Compliance

Design modifications can affect your Section 137B Report in several ways:

Changes may introduce compliance issues with the National Construction Code (NCC) that must be disclosed
Structural modifications may require additional engineering certification, the absence of which constitutes a defect
Alterations to fire safety elements such as door widths or escape routes must meet current standards
Energy efficiency requirements may be compromised, requiring disclosure in the report

Material Substitutions Affecting Cost and Quality

Material substitutions occur frequently during construction, often driven by availability issues, budget constraints, or contractor recommendations. While some substitutions may be equivalent or superior, others can introduce defects that must be reported.

Common Material Substitutions

Structural timber: Substituting specified timber grades with alternatives that may or may not meet structural requirements
Roofing materials: Changing from specified roof tiles or sheeting to different products
Waterproofing membranes: Using alternative waterproofing products that may have different performance characteristics
Insulation: Substituting specified insulation types or thicknesses, potentially affecting energy ratings
Cladding systems: Changing external cladding materials, which can affect weatherproofing and fire ratings
Plumbing and electrical components: Using alternative fixtures, fittings, or wiring that may not meet specifications

Quality and Compliance Implications

Material substitutions can create several issues for Section 137B Reports:

Non-compliant materials that do not meet Australian Standards must be disclosed as defects
Substitutions that reduce the building's performance below NCC requirements constitute reportable defects
Warranty implications arise when materials differ from those specified in building permits
Future maintenance issues may be anticipated where inferior materials have been used

Scope Expansion Beyond Initial Parameters

Scope creep is common in owner-builder projects, with additional work often undertaken as the project progresses. Each expansion of scope can introduce new areas requiring inspection and potential disclosure.

Examples of Scope Expansion

Additional rooms or levels: Constructing extra bedrooms, bathrooms, or second storeys not included in original plans
Outdoor structures: Adding pergolas, carports, or outdoor entertaining areas
Swimming pools and spas: Installing pools that require separate compliance certification
Retaining walls and landscaping: Constructing retaining walls or significant earthworks
Basement or cellar construction: Excavating below the original building footprint
Shed or garage additions: Building structures beyond the original scope

Permit and Compliance Considerations

Scope expansion raises important compliance issues:

Additional work may require separate building permits that must be obtained before construction
The Section 137B inspection must cover all owner-builder work, including scope expansions
Unpermitted work constitutes a significant defect that must be disclosed to buyers
Council approvals and zoning compliance must be verified for all additions

Timeline Delays from Weather or Site Conditions

Construction delays, while not directly creating defects, can lead to issues that affect Section 137B compliance. Understanding these connections is important for owner-builders.

How Delays Affect Construction Quality

Weather damage to exposed elements: Timber framing left exposed during extended delays may suffer moisture damage
Material degradation: Building materials stored on site for extended periods may deteriorate
Rushed completion: Pressure to finish after delays can lead to substandard workmanship
Contractor availability: Original tradespeople may become unavailable, leading to less experienced replacements
Coordination issues: Disrupted schedules can result in work being done out of sequence

Documentation Requirements

When delays occur, owner-builders should:

Document the cause and duration of delays
Record any protective measures taken during the delay period
Note any remedial work required as a result of delays
Keep records of contractor changes and their qualifications

Types of Changes and Their Impact on Section 137B Compliance

Type of Change	Potential Impact on 137B Report	Required Actions	Risk Level
Structural Design Changes	May require new engineering certification; non-compliance becomes reportable defect	Obtain amended building permit; engage structural engineer; update inspection scope	High
Material Substitutions	Non-compliant materials must be disclosed; may affect warranties and performance	Document substitutions; verify compliance; retain product certifications	Medium to High
Room Layout Changes	May affect fire egress, accessibility, and NCC compliance requirements	Amend building permit; verify code compliance; ensure proper approvals	Medium
Scope Expansion (Additional Rooms)	Additional work must be included in inspection; unpermitted work is a major defect	Obtain separate building permit; include in inspection scope; document approvals	High
Waterproofing System Changes	Non-compliant waterproofing is a significant structural defect requiring disclosure	Ensure compliance with AS 3740; retain certificates; document application methods	High
Electrical Installation Changes	Must be completed by licensed electrician; certificates required for compliance	Engage licensed electrician; obtain certificate of compliance; update permit if needed	Medium
Plumbing Modifications	Licensed plumber required; compliance certificates essential for inspection	Use licensed plumber; obtain plumbing compliance certificate; document all changes	Medium
External Structures (Carport, Pergola)	Separate permits may be required; must be included in inspection if owner-built	Check permit requirements; ensure structural compliance; include in inspection	Medium
Finish and Fixture Changes	Generally lower impact unless affecting safety systems or accessibility	Document changes; verify fixture compliance where applicable	Low
Timeline Delays (Weather Related)	May result in material damage or rushed completion affecting quality	Document delays; implement protective measures; inspect for damage before continuing	Variable

Legal and Financial Implications of Construction Changes

Understanding the legal and financial consequences of construction changes is essential for owner-builders. Failure to properly document and disclose changes can result in significant liability.

Formal Contract Updates and Documentation

When changes occur during construction, proper documentation is crucial for Section 137B compliance:

Variation documentation: All changes should be recorded in writing, with details of the original specification and the change made
Permit amendments: Where changes require building permit amendments, these must be obtained before the work is undertaken
Contractor agreements: Any changes involving contractors should be documented with updated scope of works
Certification records: All compliance certificates and engineering documentation must be retained and updated as changes occur

Compliance Risks and Penalties

Non-compliance with Section 137B requirements carries serious consequences under Victorian law:

Failure to provide report: Selling without providing a compliant Section 137B Report is an offence under the Building Act
Penalties: Fines of up to 50 penalty units can apply for failing to provide the required report
Contract implications: Buyers may have grounds to void the contract or claim compensation if the report was not provided
VBA enforcement: The Victorian Building Authority actively investigates complaints and can take enforcement action

Legal Action for Misrepresentation

Providing an inaccurate or incomplete Section 137B Report can expose owner-builders to legal claims:

Misrepresentation claims: Buyers who discover undisclosed defects may sue for damages based on misleading conduct
Contract rescission: In serious cases, buyers may seek to rescind the contract and recover their purchase price
Rectification costs: Owner-builders may be held liable for the full cost of rectifying undisclosed defects
Consumer law claims: Australian Consumer Law provides additional protections for buyers that may apply
VCAT proceedings: The Victorian Civil and Administrative Tribunal handles many building disputes, providing an accessible forum for buyer claims

Financial Impact of Non-Disclosure

The financial consequences of failing to properly disclose construction changes include:

Legal costs defending claims from buyers
Rectification costs for undisclosed defects
Potential reduction in sale price if issues are discovered during negotiations
Fines and penalties from regulatory authorities
Insurance implications, including potential denial of claims
Reputational damage affecting future property dealings

Compliance Requirements for Construction Changes

Maintaining compliance throughout your owner-builder project requires understanding and following specific requirements when changes occur.

New Permits and Approvals

Many construction changes require updated or new permits:

Building permit amendments: Required when changes affect the approved plans, including structural modifications, layout changes, or material substitutions that affect compliance
Planning permit variations: Necessary when changes affect aspects controlled by planning permits, such as setbacks, height, or external appearance
Additional building permits: Separate permits may be required for new structures not included in the original approval
Occupancy permit updates: Final occupancy permits must reflect the as-built condition, including all approved changes

Updated Environmental Assessments

Construction changes may trigger additional environmental requirements:

Stormwater management: Changes to roof area, paving, or drainage may require updated stormwater calculations
Soil erosion controls: Extended construction periods or earthworks changes may require additional erosion controls
Energy efficiency ratings: Changes to windows, insulation, or building envelope may affect energy ratings and require reassessment
Native vegetation: Site modifications may trigger additional native vegetation requirements

Modified Safety Protocols

Construction changes can affect safety requirements that impact Section 137B compliance:

Fire safety systems: Changes to layouts or materials may require updated fire safety measures
Smoke alarm positioning: Room modifications may require repositioning of smoke alarms to maintain compliance
Balustrades and barriers: Changes to decks, stairs, or balconies must maintain compliant fall protection
Window safety: Changes to window positions may trigger additional safety glazing or fall protection requirements
Emergency egress: Layout changes must not compromise emergency escape routes

When and How to Update Your Section 137B Report

Understanding when report updates are necessary and how to manage them is essential for maintaining compliance.

Revise Immediately After Significant Changes

The Section 137B Report must accurately reflect the building at the time of sale. When significant changes occur, owner-builders should:

Document all changes as they occur: Maintain detailed records of modifications, including dates, reasons, and any associated approvals
Engage the inspector early: Consult with your building inspector about changes before they are made, where possible
Update the inspection scope: Ensure the inspector is aware of all changes so they can be included in the assessment
Obtain a new report before sale: If significant changes have occurred since the last inspection, arrange a fresh report before listing the property

Timing Considerations

Several timing factors affect Section 137B Report updates:

Report validity: While reports do not have a specified expiry period, an outdated report may not accurately reflect current conditions
Sale preparation: Arrange for the report to be prepared close to when you intend to list the property
Changes after report: If changes occur after the report is prepared but before sale, a new or updated report may be required
Buyer requests: Buyers may request a more recent report if the existing one is considered outdated

Stakeholder Consultation for Construction Changes

Effective management of construction changes requires consultation with relevant stakeholders to ensure Section 137B compliance is maintained.

Documenting Changes

Proper documentation should include:

Change requests: Written records of why changes were requested or required
Approvals obtained: Copies of all amended permits and approvals
Technical specifications: Updated specifications for materials and construction methods
Compliance certificates: Current certificates for all regulated work
Photographic records: Photos documenting construction stages, especially for elements that will be concealed
Contractor records: Details of all contractors involved in changes, including licences and insurance

Legal Review

Engaging legal professionals can help protect your position when significant changes occur:

Contract review: Ensuring construction contracts accommodate variations appropriately
Compliance assessment: Verifying that changes meet all legal requirements
Sale preparation: Reviewing disclosure documents before sale to ensure accuracy
Risk assessment: Identifying potential liability issues arising from changes

Professional Consultations to Consider

Depending on the nature of changes, owner-builders may need to consult:

Registered building practitioners: For Section 137B Report preparation and updates
Structural engineers: For changes affecting structural elements
Building surveyors: For permit amendments and compliance assessments
Energy assessors: For changes affecting energy efficiency ratings
Conveyancing solicitors: For advice on disclosure obligations during sale

Who Needs a Section 137B Report?

Understanding whether you require a Section 137B Report depends on several factors related to your ownership and construction history.

Owner-Builders Selling Within 6.5 Years

The primary group requiring a Section 137B Report includes:

Owner-builders who held a Certificate of Consent: Anyone who obtained an owner-builder permit (Certificate of Consent) to undertake building work
Sellers within the statutory period: Those selling within 6.5 years of the occupancy permit or certificate of final inspection issue date
Subsequent owners: Even if you purchased the property from the original owner-builder, you may need to provide the report if selling within the 6.5 year period

Types of Building Work Covered

The Section 137B requirement applies to:

New home construction undertaken as an owner-builder
Major renovations requiring a building permit where the owner held owner-builder status
Extensions and additions constructed under owner-builder arrangements
Any building work exceeding the monetary threshold requiring a Certificate of Consent

Exemptions and Special Cases

Some situations may be exempt or require special consideration:

Minor works: Building work below the monetary threshold that did not require owner-builder registration
Work by registered builders: Where all work was completed by registered domestic builders with appropriate contracts and warranties
Sales after 6.5 years: Properties sold more than 6.5 years after completion are not subject to the Section 137B requirement

How to Get Your Section 137B Report Updated

When construction changes have occurred, following the correct process for obtaining an updated report is essential.

Step 1: Gather Documentation

Before engaging an inspector, collect:

Original building permits and any amendments
Approved plans, including as-built drawings if available
All compliance certificates (electrical, plumbing, waterproofing)
Records of construction changes and variations
Engineering certificates and structural specifications
Previous Section 137B Reports if any exist
Photographic records of construction stages

Step 2: Engage a Qualified Inspector

Selecting the right inspector is crucial:

VBA registration: Ensure the inspector is registered with the Victorian Building Authority
Appropriate qualifications: Verify they hold qualifications appropriate for Section 137B inspections
Experience: Look for inspectors experienced in assessing owner-builder work
Insurance: Confirm they carry professional indemnity insurance
Communication: Choose an inspector who can explain findings clearly

Step 3: Brief the Inspector on Changes

Provide the inspector with comprehensive information:

Details of all construction changes since original plans
Reasons for changes and who performed the work
Any areas of concern you have identified
Access arrangements for all areas requiring inspection
Copies of all relevant documentation

Step 4: Facilitate Thorough Inspection

During the inspection:

Ensure clear access to all areas including roof spaces and subfloor
Provide access to any locked areas or outbuildings
Be available to answer questions about construction history
Point out areas where changes were made
Do not attempt to conceal defects or problem areas

Step 5: Review and Understand the Report

Once you receive the report:

Read the entire report carefully
Ask the inspector to clarify anything you do not understand
Consider the implications of any defects identified
Discuss options for rectification where applicable
Understand your disclosure obligations when selling

Frequently Asked Questions

What is a Section 137B Report and why is it required?

Short answer: A Section 137B Report is a mandatory defect disclosure document required under the Building Act (VIC) 1993 for owner-built properties sold within 6.5 years of completion.

The report must be prepared by a registered building practitioner and provided to prospective buyers before they sign a contract of sale. It discloses any building defects identified during a professional inspection of the owner-built work. The purpose is to protect buyers from purchasing properties with hidden defects and to ensure transparency in property transactions involving owner-built homes. The 6.5 year period aligns with the statutory warranty period for domestic building work in Victoria, during which defect claims can be made.

Do construction changes always require a new Section 137B Report?

Short answer: Not all changes require a completely new report, but significant modifications should be included in an updated inspection before selling the property.

Minor changes such as paint colours or fixture selections typically do not require report updates. However, changes affecting structural elements, waterproofing, electrical systems, plumbing, or fire safety should be included in the inspection. If substantial changes occur after a report is prepared, it is advisable to obtain a new report that accurately reflects the current condition of the building. The report provided to buyers must accurately represent the property at the time of sale to avoid potential misrepresentation claims.

What happens if I sell without disclosing construction changes?

Short answer: Failing to disclose construction changes that result in defects can lead to legal claims for misrepresentation, contract rescission, and liability for rectification costs.

Buyers who discover undisclosed defects after purchase may pursue legal action for damages under common law misrepresentation or statutory provisions including the Australian Consumer Law. They may seek to rescind the contract and recover their purchase price, or claim the cost of rectifying defects that should have been disclosed. The Victorian Building Authority can also take enforcement action for failure to provide an accurate Section 137B Report, with penalties of up to 50 penalty units. The financial and legal consequences of non-disclosure typically far exceed the cost of proper documentation and disclosure.

How do material substitutions affect my Section 137B compliance?

Short answer: Material substitutions that result in non-compliant materials being used must be disclosed in the Section 137B Report as defects.

When materials are substituted during construction, the replacement materials must meet the requirements of the National Construction Code and relevant Australian Standards. If substitute materials do not meet these requirements, the non-compliance constitutes a defect that must be disclosed. Common issues include timber of incorrect grade, waterproofing membranes that do not meet AS 3740, insulation that does not achieve required energy ratings, and cladding that does not meet fire rating requirements. The inspector will assess whether materials used comply with applicable standards and note any non-compliance in the report.

Can I rectify defects before getting my Section 137B Report?

Short answer: Yes, rectifying defects before the inspection will result in a cleaner report, though the report will note any areas that have been remediated.

If you are aware of construction issues, addressing them before the Section 137B inspection is advisable. The inspector will assess the current condition of the building, so completed rectification work will be noted as compliant. However, the inspector may note that areas have been remediated if this is apparent. For significant defects, engage appropriate licensed tradespeople to complete rectification work and obtain compliance certificates before the inspection. This approach typically results in a more favourable report and reduces concerns for prospective buyers.

What qualifications must a Section 137B inspector have?

Short answer: A Section 137B Report must be prepared by a registered building practitioner with appropriate qualifications under Victorian building legislation.

In Victoria, the inspector must be registered with the Victorian Building Authority as a building practitioner in a category that permits the preparation of Section 137B Reports. This typically includes registration as a building inspector (unlimited) or a building surveyor. The inspector should also carry professional indemnity insurance to protect both themselves and property owners. When selecting an inspector, verify their VBA registration status, which can be checked on the VBA website. Choose an inspector with experience in assessing residential construction and owner-builder work for the most thorough assessment.

How long does a Section 137B Report remain valid?

Short answer: There is no specified expiry period for Section 137B Reports, but the report must accurately reflect the condition of the building at the time of sale.

While the legislation does not specify a validity period, a report becomes outdated if the building condition has changed since the inspection. If significant changes have occurred, including construction modifications, deterioration, or rectification work, a new report should be obtained. Buyers or their legal representatives may question the validity of an older report and request a more recent inspection. For best practice, arrange for the Section 137B inspection to be conducted relatively close to when you intend to sell, particularly if several months or years have passed since previous inspections.

What if my building permit was never amended for construction changes?

Short answer: Unpermitted work constitutes a significant defect that must be disclosed in the Section 137B Report and may require retrospective approval before sale.

Construction work that deviates from approved plans without permit amendments is technically unpermitted work. This is a compliance issue that must be disclosed to buyers and can significantly affect property value and saleability. Options for addressing unpermitted work include seeking retrospective approval through a building surveyor, which may require the work to be certified as compliant or modified to achieve compliance. In some cases, unpermitted work may need to be removed. Consult with a building surveyor early to understand your options and the implications for selling your property.

Key Takeaways

Section 137B Reports are mandatory for owner-built properties sold within 6.5 years of completion under the Building Act (VIC) 1993.
Construction changes including design modifications, material substitutions, and scope expansions can all affect Section 137B compliance obligations.
Failure to disclose construction changes that result in defects can lead to legal claims for misrepresentation and significant financial liability.
Many construction changes require building permit amendments, and unpermitted work constitutes a major defect requiring disclosure.
Proper documentation of all construction changes is essential for maintaining compliance and protecting your legal position.
The Section 137B Report must be prepared by a VBA-registered building practitioner and provided to buyers before contract signing.
Reports should be updated when significant changes occur to ensure accuracy at the time of sale.
Engaging professional advice from building practitioners, solicitors, and other consultants can help navigate complex compliance requirements.

References and Resources

Get Your VBA-Certified Section 137B Report

Ensure your owner-built property meets all Victorian compliance requirements before sale. Our VBA-registered building practitioners provide thorough Section 137B inspections that document any defects and protect your legal position. Whether you have made construction changes or need a fresh assessment, we deliver comprehensive reports that satisfy your statutory obligations.

Request a Section 137B Inspection Quote

How Changes During Construction Affect the Section 137B Report