Homeowners on Edge as Builders Go Bankrupt
Last updated on December 6th, 2022
With developers and builders having to face so many external factors, it is only natural that Aussie Homeowners on Edge as Builders Go Bankrupt?
Finding out that your builder has gone bankrupt while your house is not yet finished is one of the most stressful news that a first home buyer can receive.
With the coronavirus pandemic disrupting the economy, many builders have had to deal with the rising costs of materials, worksite shutdowns, and high labour costs. As a result, many construction projects have been postponed or cancelled.
If you find yourself in this situation, knowing your rights and what to do to mitigate your losses would be crucial.
Did your builder go bust?
If your builder starts to miss deadlines or is suddenly unreachable, look up their status in the Australian Securities and Investments Commission (ASIC) register. If they have ceased operations, they may have been deregistered or insolvent.
What should you do if your builder goes bankrupt?
All builders are required to take out mandatory insurance before starting construction. This protects you in case the work is defective or incomplete, or the builder becomes insolvent.
If you find out that your builder has gone bust, you must stop all payments for the construction.
It would also help if you speak to a lawyer to help validly terminate the builder contract and file a claim on the building insurance policy.
Your attorney can also assist you in obtaining a defects report that details what is needed to be fixed and how much it would cost.
The rules for handling builder insolvency vary by state, so it is best to check your local laws on how much compensation you are entitled to.
Below is a summary of builder insolvency polity in each state.
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New South Wales
Builders must take out home building compensation (HBC) cover for construction projects valued over $20,000.
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Victoria
Builders are required to take out builders’ warranty insurance for construction work valued over $16,000.
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Queensland
Residential builders must have insurance for construction work valued over $3,300.
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South Australia
Residential builders must obtain building indemnity insurance for construction work valued over $12,000.
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Western Australia
Residential builders are required to take out home indemnity insurance for construction projects valued over $20,000.
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ACT
Residential builders must apply for insurance for construction work valued over $12,000.
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Northern Territory
A fidelity fund certificate is issued as residential building cover for homeowners in case their builder goes insolvent.
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Tasmania
Currently, Tasmania has no mandatory builders’ warranty insurance.
Ask for a copy of the builders’ insurance before starting any build.
When signing a builder contract, always ask for a copy of the builder’s warranty insurance certificate.
If your builder suddenly disappears and they never took out any insurance, you won’t be able to make a claim and get your money back.
Although builder’s insurance is required by law, it is not uncommon for shady builders to try to save money by not paying for it.
If you are still unsure whether your builder has mandatory insurance, seek legal advice.
Conclusion
The construction industry has yet to recover fully from the economic downfall caused by COVID-19. And unfortunately, more builders are about to bust due to financial hardship.
As a homeowner, the only thing you can do to protect yourself is to ensure your builder has appropriate insurance before starting any construction work.
Should your builder does go bankrupt, call a lawyer and have your builder contract terminated immediately. Each state has a different law for dealing with insolvency and making insurance claims, so be sure to seek legal assistance.
Need help with builder insurance or home loans? Compare your options today here at Makes Cents.
