The Victorian Building Authority (VBA) has suspended the registration of Todd Searle as nominee director of Montego Homes amid concerns the builder did not acquire mandatory domestic building insurance for customers.

Montego Homes entered administration last month and the VBA says it is concerned that almost $900,000 may have been paid to the builder, by way of deposit or otherwise, in relation to 64 sites where there was no domestic building insurance obtained, as required by state laws.

“The VBA issues an immediate suspension to protect consumers while a disciplinary process is completed,” the building regulator said in a statement today. “Mr Searle has been invited to show cause why the proposed disciplinary action should not be taken by making either a written or oral representation in response to the notice received.”

Domestic building insurance is compulsory for all residential projects where the contract price is $16,000 or more. The insurance is to protect homeowners in the event that their project cannot be completed or has defective works that cannot be rectified because their builder has died, disappeared or become insolvent.

The VBA says builders must have the insurance in place for the contracted building project before they request any money from the homeowner.

The collapse of Porter Davis last year exposed cracks in the system as hundreds of its customers, who had paid their deposits, had no domestic building insurance.