My builder has gone into liquidation. What do I do?
In recent times it seems like a week doesn't go by without another building company going insolvent as rising material and labour costs continue to cause havoc in the building industry.
In recent times it seems like a week doesn’t go by without another building company becoming insolvent as rising material and labour costs continue to cause havoc in the building industry. Porter Davis and Lloyds Group being some of the most recent builders to join the list of failed building businesses going into liquidation.
For owners with existing building contracts, this can mean that they are left in nervous uncertainty as to whether their build will be completed at all and at what cost. This can be a stressful situation for everyone involved. We have recently received numerous enquiries from homeowners wanting some insight as to what they can do.
Whilst not all circumstances are the same, here are a few initial steps that owners may be able to consider if their builder goes insolvent part-way through a building project in order to protect themselves and mitigate their potential loss:
- Ensure that you have copies of all relevant documents from your dealings with the builder (eg. full copies of the fully executed contract, progress claims, payment certificates, invoices, receipts, extension claims and any other documentation or correspondence with the builder);
- Ensure that you have a copy of any domestic building insurance policy and certificate of insurance. It may be important to make contact with the relevant insurer to understand what their procedure and requirements are in the event that the builder goes insolvent and you need to make a claim.
- Consider engaging another building consultant to inspect what works have been completed to identify any existing defects and to determine what works may be required to complete the build and what the likely cost will be. This will be important not only for filing a proof of debt, but also for any domestic building insurance claim and ultimately for establishing whether completion of the project is feasible on your current budget.
- Contact the liquidator as soon as possible. Their details should be made available at ASIC if they have not already been in touch with you or if they are not otherwise made available from the builder. It is important that you get in touch with them to ensure that you are on the list of creditors. You should also file a proof of debt with the liquidator which is a form that provides details of the amount that you will be owed. You may need to seek advice on what is claimable in the circumstances.
- Protect your property and ensure that any materials on site that you have paid for are clearly identified as your property (so as not to be confused with the builder’s property and thereby part of the assets available to the liquidator). Vandalism seems to be a common occurrence on abandoned building sites and it is important to take what measures are appropriate to secure your property and the materials on site.
It is important that the above actions are taken as swiftly as possible and you take advice from an appropriate expert familiar with construction matters and insolvency.
Should you have any queries or if you are dealing with a builder who has or seems at risk of going insolvent, we suggest that you contact our construction law team as soon as possible.
