As we begin 2026, the Victorian residential landscape is shifting. Under the Victorian Housing Statement, the State Government has set an ambitious target of 800,000 new homes over the next decade. To meet this, the Department of Jobs, Skills, Industry and Regions (DJSIR) has explicitly backed Modern Methods of Construction (MMC) including modular and prefabricated builds as the primary solution to our housing shortage.
Currently, Victoria accounts for approximately 24% of Australia’s $17 billion modular construction market. With build times being slashed by up to 50% through off-site prefabrication, MMC is no longer a niche alternative; it is a new standard for social housing, medium-density developments and luxury residential projects.
However many builders and developers are still relying on industry-standard contracts such as the HIA or Master Builders residential contracts.
The problem: template contracts are falling short
The standard contracts are adequate for the traditional brick and mortar builds however they are not designed for the logistical and legal hurdles of factory-built homes. Specifically, the standard HIA or Master Builder contracts often fail to address off-site materials, transportation risks, and the timing of title transfer.
For MMC projects, the legal risks which should explicitly be addressed in the building contract.
1. Insolvency
In a traditional build, you pay for the work completed and fixed to your land. In an MMC project, you often pay a large sum for modules sitting in a factory. The risk under a standard agreement is that if the manufacturer goes into liquidation, the modules may be classified as “chattels” (moveable property) belonging to the liquidator, not you (the owner), even if you have paid for the “chattels” in full. Under common law, goods only become the property of the landowner once they are permanently “affixed” to the land.
The solution is to ensure a Vesting Deed is executed as part of your contract and PPSR (Personal Property Securities Register) registrations are permitted and registered on the building materials before they leave the factory. A Vesting Deed is a legal instrument used to transfer the ownership of materials or components from the builder/manufacturer to the owner before they are delivered to site.
2. Risk and Insurance
Traditional ‘contract works’ insurance may cover the manufacture, however there is a major risk of damage during transit which may not be covered. Your building contract and insurance should clearly allocate risk appropriately if your module/property is damaged during transit. Using the standard contract, which assumes your build occurs on-site, may result in an uninsured loss.
3. The “Building Manual” Mandate (commencing 1 July 2026)
Under the latest Victorian building reforms, developers and builders will be required to maintain a building manual of information (initially focusing on Class 2 apartments, but with a framework to expand). This is a digital record that documents every material, safety check, and design change from the factory to the final assembly.
For example, if a builder cannot provide thorough digital records that the fire-rated insulation inside a pre-sealed modular wall was installed correctly, the BPC can issue a Stop Work Order or refuse an Occupancy Permit.
The liability shifts from proving the building is safe to proving the data record is complete. This means that for MMC projects and contracts, ensuring the building manual requirements are complied with should be a pre-build condition. If your contract does not dictate how the factory data is captured, verified and handed over, there’s a huge risk of legal liability, which falls on both the builder and the developer (given the BPC will have the power to issue orders to the developer and the mandatory 2% developer bond for buildings over three stories). Missing data will be treated with the same legal severity as a structural defect come 1 July 2026.
If your project involves significant off-site manufacturing, special terms and conditions should be included in your building contract. Whether you are a developer looking to scale or a builder moving into a modular space, your risk profile is fundamentally changed.
With the BPC’s new proactive powers already in play (as of January 2026), the transition from ‘bricks and mortar’ to ‘digital and data’ is no longer optional it is a critical prerequisite for project success in the new era of Victorian residential construction.