The construction industry faces many challenges – largely due to high interest rates, inflation, material scarcity and widespread skills shortages.
Unfortunately, many companies have collapsed under heavy external pressures.
It seems that every other week we’re seeing news reports of businesses going under. Almost 1,400 Australian construction businesses folded in the second half of 2023 alone.
The harsh reality is that construction businesses now make up 26 per cent of all insolvencies across the nation.
Loyal staff, suppliers, contractors and clients suffer the most when a building company goes bust.
This article focuses on the impact on would-be homeowners, who worry about losing their deposit while also contending with an unfinished property.
We talk about steps you can take to protect your deposit and sanity.
Have you sought legal advice?
First, if your builder goes bust it’s important to seek professional legal advice as soon as possible.
Your building contract has been breached, so you need to act accordingly.
A lawyer will advise you on the next steps, which may include ceasing payments, or documenting every interaction with the building company.
We’re not legal professionals, so this article only contains basic general advice.
However, the key point we want to make for ALL people building a home:
Please make sure your builder has home building compensation cover (HBC).
This used to be called home warranty insurance.
HBC gives homeowners financial compensation for incomplete or defective work (at least some of the costs – up until an automatic cap). This insurance lasts for six years after the project has been terminated or completed.
It’s crucial to only work with a licensed company or builder – as they’re legally required to provide HBC for all residential building projects that exceed $20,000.
This covers construction and renovations on residential buildings such as houses, duplexes, triplexes, outbuildings and low-rise residential multi-unit buildings (up to three stories).
Your builder MUST give you proof of their HBC cover, it’s illegal if they fail to do so.
Even if you know they’re licensed, ask to see the certificate anyway. If the company ever goes out of business, HBC will save you a lot of headache later on, so it’s best to err on the side of caution.
Not sure if you’re covered? Find out by using the free online register called HBC Check.
IMPORTANT: Notify your Home Building Compensation Fund Insurer as soon as you find out the company or contractor has collapsed or been declared insolvent. Remember, insurers have strict timeframes for claims! Document all interactions with the builder, and any actions you take.
What if your builder isn’t covered by home building compensation cover?
If you’re not insured for an applicable job over $20,000, report the builder to the Department of Fair Trading for breaching their legal obligations.
Unfortunately this won’t give you the financial compensation you’d be guaranteed under HBC.
You’re left with the option to seek legal advice and try to reclaim some of your funds via the insolvency process. Whether you get any money back (and the amount) depends on the number of assets the company or builder has, which are then allocated to stakeholders based on a priority list.
The HBC offers more security as it puts automatic caps on the amount of financial compensation that clients receive, so it’s always best to make sure you’re insured before signing the contract.
Has your builder folded while you’re in the Design or Approval stage?
We understand you’re going through a stressful time as you worry about lost funds and missed deadlines.
The Amescorp team is happy to review your situation at no cost and no obligation. We’ll then let you know if we can take over your project from the collapsed company.
We’ve been setting industry standards for affordable, quality granny flats for decades, so we have a long history of completing projects that our clients are proud to show off.
Our licensed and insured builders are committed to transparency and take pride in every project.
- Upfront pricing
- Timely completion of projects
- Reliable and respectful tradespeople
- 6-year structural guarantee on workmanship
- Customised designs, layouts and plans
Call us on (02) 8798 9858 and we’ll discuss your options confidentially.
