The Victorian Building Authority (VBA) has advised all kit home suppliers to be a registered builder if they intend to install the homes they sell.

This follows the decision of a Magistrate to penalise a supplier and its director for building a kit home on a Bendigo property without being a registered builder.

The company agreed to install a kit home on the property in 2011, entering into a contract with the property owner for $37,900. The owner obtained a building permit for the work as an owner-builder.

The director argued that the company was not the builder for the project, but that the company supplied the materials and was subcontracted to the homeowner. However, the Magistrate said that once the company agreed to install the house, they became the builder.

The company also claimed that the charge for installation was less than $5000, the threshold at which the work must be carried out by a registered builder. The Magistrate found that the cost of the building material should be included in the total cost of work, making it a major domestic building contract.

The company and director were each fined more than $11,000 for carrying out work when the director was not a registered builder, for not having a proper contract or the required insurance, and for asking a deposit of more than 5 percent.

VBA Chief Executive Officer Prue Digby described it as a defining decision for the Victorian domestic building industry.

According to Ms Digby, the matter of who the builder is in relation to kit homes has caused some confusion in the past. However, the case makes it clear to the industry and homebuyers that anyone who supplies a kit home and installs it, is considered to be carrying out major domestic building work, which requires the work to be executed by a registered builder with a proper contract in place.

If the total cost of the contract is over $12,000, the builder must also have the appropriate insurance.