Voidable Contracts & Penalties
The consequences of non-compliance with s137B — the purchaser's right to void the contract and financial penalties for vendors
Critical Legal Consequence
Where an owner-builder vendor fails to comply with any of the applicable requirements of s137B before the purchaser enters into the contract of sale, the purchaser is permitted to void the contract at any point prior to settlement. This right exists even if the vendor subsequently provides the required documents. These requirements cannot be contracted out of. Once the vendor is in breach, there is little they can do to prevent a purchaser from voiding the contract prior to settlement.
The Voidable Contract Mechanism
Section 137B(3) of the Building Act 1993 (Vic) provides that a contract entered into in contravention of subsection (2) is not void by reason only of the contravention, but is voidable at the option of the purchaser at any time before the contract is completed.
This is a critical distinction. The contract is not automatically void — it remains on foot and binding until the purchaser elects to void it. The purchaser can choose to proceed with the purchase despite the non-compliance, or they can exercise their right to void the contract at any time before settlement.
Purchaser's Right
- Void the contract at any time before settlement
- Right exists from the moment of non-compliance
- Right cannot be waived or contracted out of
- Can be exercised even at the eleventh hour
- No obligation to give reasons
Vendor's Position
- Cannot prevent purchaser from voiding
- Cannot cure non-compliance retrospectively
- Cannot rely on purchaser's knowledge of works
- Exposed to financial penalties
- May face professional liability claims
Building Act 1993 (Vic) s137B(3): "A contract entered into in contravention of subsection (2) is not void by reason only of the contravention but is voidable at the option of the purchaser at any time before the contract is completed."
When Can the Purchaser Void the Contract?
The purchaser's right to void the contract arises at the moment the contract is entered into in contravention of s137B. The right continues until the contract is "completed" — which means settlement. Key points:
Before exchange
The vendor should ensure all s137B requirements are satisfied before the contract is signed. If the required documents are not in the Section 32 at exchange, the contract is immediately voidable.
After exchange, before settlement
The purchaser can void the contract at any time after exchange and before settlement — including on the day of settlement. This is the most dangerous scenario for vendors, as the sale can collapse at the last moment.
At settlement
Once settlement has occurred, the contract is 'completed' and the purchaser's right to void the contract under s137B is extinguished. However, the purchaser may still have rights under the implied warranties in s137C.
After settlement
After settlement, the purchaser cannot void the contract under s137B. However, they may still bring proceedings for breach of the implied warranties under s137C, and successors in title also have this right.
Financial Penalties
In addition to the risk of a voidable contract, non-compliance with s137B is a criminal offence. Section 137B(2) provides that contravention is punishable by a fine of 100 penalty units. The value of a penalty unit is set annually by the Victorian Treasurer and indexed to inflation.
100 penalty units = $20,351.00
Source: Special Gazette S245 dated 22 May 2024 — DTF Victoria
Penalty — 100 Penalty Units (FY 2025–26)
Source: Special Gazette S245 dated 22 May 2024. Penalty unit values are adjusted annually by the Victorian Treasurer.
Practitioner Professional Liability
Practitioners acting for either vendors or purchasers face their own professional liability risks if they fail to adequately advise their clients on the potential consequences of owner-builder works and s137B.
Acting for Vendors
A practitioner acting for a vendor who fails to identify owner-builder works, fails to advise the vendor of their obligations, or fails to ensure the required documents are included in the Section 32 may be liable to the vendor for any loss suffered as a result of the contract being voided.
Acting for Purchasers
A practitioner acting for a purchaser who fails to identify owner-builder works in the Section 32 (or their absence), fails to advise the purchaser of their right to void the contract, or fails to conduct adequate due diligence may be liable to the purchaser for any loss suffered.
LPLC Risk Alerts
The LPLC has consistently identified owner-builder matters as a significant source of professional liability claims. Practitioners should develop a specific checklist for owner-builder matters and document their advice in writing in every matter.
Real-World Scenario
Case Study: The Voided Contract
A vendor sold a property that had been remodelled, with landscaping work including the construction of retaining walls. No owner-builder condition report or insurance was included in the Section 32 Vendor Statement.
After exchange, the purchaser became aware of the extent of the owner-builder works. The purchaser's solicitor identified that the s137B requirements had not been satisfied and advised the purchaser to void the contract.
The contract was voided, and the vendor — who had already committed to purchasing another property — suffered significant financial loss.
On This Page
Key Risk
The purchaser can void the contract at any time before settlement — including on the day of settlement. For vendors who have sold and bought simultaneously, this can be catastrophic.
Special Gazette S245 dated 22 May 2024
Verify at DTF VictoriaHistorical Rates
Cannot Be Cured
Once the vendor is in breach of s137B, providing the required documents after the contract is signed does not cure the non-compliance. The contract remains voidable at the purchaser's option.