Property Development in Melbourne: Mistakes, Failures, and How to Avoid Them

Commercial property development in Melbourne has long been seen as one of the most lucrative ways to build wealth and shape city landscapes. With hundreds of new developments on the rise, from office buildings to mixed-use precincts, developers, investors, and consultants are pushing forward with ambitious plans. But the reality is that even well-funded, well-designed projects can turn into nightmares when legal, financial, or planning risks are overlooked.

From failed land development projects to builder collapses, Victoria has seen numerous cautionary tales in recent years. This article explores why projects fail, what mistakes cost developers millions, and what every serious player in property development companies in Melbourne needs to know. If you're already working on a project and start noticing red flags, use this legal guide to assess whether you're at risk.
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Victoria’s Development Boom – and the Fallout

Driven by population growth and infrastructure expansion, land developers in Melbourne are accelerating activity across suburbs, corridors, and CBD zones. According to Development Victoria, more than 1,000 development projects are either proposed or underway - from business parks to government-led housing initiatives.

However, between late 2022 and 2024, over 1,400 construction businesses collapsed across Australia, with Victoria hit especially hard. Major builders like Probuild and Porter Davis folded, leaving land development projects and commercial builds stalled mid-way. The ripple effects included unpaid subcontractors, halted sales, and multi-million-dollar losses for developers and financiers.

The Victorian Building Authority and the Department of Planning VIC have acknowledged systemic issues such as permit delays, planning inconsistency, and non-compliant construction practices as key reasons why some developments derail.
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Recent Legal and Regulatory Changes That Impact You

Victoria's legal framework for property development has undergone several major updates you can't afford to ignore:

Windfall Gains Tax (WGT): As of July 2023, landowners whose property is rezoned may now pay up to 50% tax on the land value uplift. This hits hard on land development Victoria projects, especially when rezoning from rural to residential or commercial. If you're not factoring WGT into your feasibility studies, you're gambling with your margins.

Cladding Bans and Liability: After the Lacrosse and Neo200 tower fires, Victoria enforced a total ban on high-risk combustible cladding. Non-compliant builds can trigger massive fines and liability claims. Worse? Developers can now be sued even if the defect wasn’t their direct fault.
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Sunset Clause Laws: Thanks to the Sale of Land Amendment Act 2019, developers can no longer cancel off-the-plan contracts using sunset clauses without buyer consent or a Supreme Court ruling. Try it, and you’ll be facing more than just angry emails.

Property Developer Accountability Law (2024)
A game-changer. Victoria recently passed a law allowing the state to issue rectification orders against directors of property development companies, even after the company collapses. That means personal liability is now very real.

Fast-Track Planning Powers
In 2023, the state government ramped up planning targets for councils and hinted at stripping planning powers from those who under-deliver. The message is clear: adapt fast or get overridden.

Case Study Summaries: When Projects Went from Hero to Headache

Probuild Collapse (2022): One of Victoria’s largest commercial builders, Probuild, collapsed mid-project, impacting property development Melbourne towers like UNO and leaving developers exposed to contractor default risks.

Takeaway: Big names aren't bulletproof. Without strong contracts and fallback plans, you're flying without a parachute.

Corkman Pub Demolition (Carlton, 2016–2021): Developers demolished a heritage pub without planning approval. The result? Court-ordered fines, jail time, and a forced rebuild. It’s now one of the most infamous examples of ignoring property development rules in Victoria.

Takeaway: Disregard for planning laws can lead to criminal charges and reputational damage.

Steller Group (2019): This Melbourne developer collapsed, freezing multiple land development Victoria sites and triggering lawsuits. Financial overreach and poor project management were cited as causes.

Takeaway: Scale doesn't equal safety. Without smart financing and staged delivery, you’re building castles on sand.

Lacrosse Tower Cladding Fire (2014 – VCAT Ruling 2019): A cigarette sparked a fire that raced up 13 storeys of the Lacrosse apartment tower in Docklands, fuelled by highly combustible cladding. The builder and consultants were dragged into a lengthy legal battle. VCAT ruled the builder breached warranties, but held the fire engineer, building surveyor, and architect mostly responsible, ordering $5.7 million in damages.

Takeaway: Compliance isn’t optional. Poor material choice, even if code-approved at the time, can land everyone in court. Consultants and developers alike must now scrutinise materials and approvals more carefully than ever.

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The Usual Suspects: Mistakes That Cost Developers Millions

Here are the most common mistakes and how to avoid them. For anyone involved in property development projects across Victoria:

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Learn From Past Mistakes - Join Our Panel Discussion

This isn’t theory. It’s war stories, legal fixes, and strategies you can actually use. At our upcoming event, "Property Development Nightmares: Case Studies and How to Avoid Costly Mistakes", Director Brad Marland and Senior Associates Bryan Yeo and Joel Garrett will break down:

• the real reasons property development projects collapse
• unique insights from case studies
• how to contract-proof your next deal
• what the regulators (and courts) are cracking down on

Event Date: 12 June 2025 (Thursday)
Location: North Tower, Level 6/80 Collins St, Melbourne VIC 3000

Secure your spot. Or risk becoming the next case study.

Book A Seat | Contact Us

This article in no way constitutes legal advice. It is general in nature and is the opinion of the author only. You should seek legal advice tailored to your individual circumstances before acting on anything related to this article.

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