Tell-Tale Signs Of A Builder Going Bust – And What To Do Next

A record number of building companies are collapsing in Australia. In the first nine months of financial year 2023, the number of failing construction companies has reached a seven-year high. New data from the Australian Securities and Investments Commission (ASIC) revealed that 1,601 construction insolvencies were recorded from July 2022 to March 2023. Moreover, ASIC showed that 524 of those insolvencies, nearly one-third of the total, occurred in the first three months of 2023. This puts homeowners at risk of major problems. If a homeowner has paid a deposit or made other repayments to the builder and the builder goes bankrupt, then the homeowner may lose their money. If the construction work hasn’t started or is incomplete, then you might need to find a new builder to complete the project.

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How Do You Know If A Builder Is Going Bust?

Here are some of the tell-tale signs that a builder is in danger of going bust:

• Construction delays: If a builder is delaying construction projects or a project is mismanaged, then the reason might be a lack of resources or financial difficulties. You should immediately check the ASIC register to find out if the company is deregistered or insolvent.
• Communication gap: If your builder isn’t communicating with you or the suppliers, or they have not been on site for a while, it might suggest they are avoiding discussing financial difficulties.
• Struggling to make payments: When a builder consistently struggles to pay suppliers or employees, it may be a sign of financial trouble. You could visit a site where they are building to speak to a subcontractor and find out if they have been chasing the builder for payment.
• Disputes: A builder getting involved in legal disputes with suppliers, clients or employees may be a sign of operational or financial difficulties.
• Defective work: Builders using poor-quality materials are often cutting corners to save money and this may be a sign of financial struggle. The poor-quality materials could also lead to defective work, which could cause additional expenses and delays.

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What Happens When Your Builder Goes Bust?

When a builder goes bust, they will appoint an insolvency practitioner as an administrator or liquidator and halt the construction of your home. You can decline to pay the outstanding or issued progress claims. This will decrease your losses from unfinished work and allow you to have more money to hire another builder.

Watching your dream of owning a home or investment property slip away can be nerve-wracking, but don’t panic. Here are some more steps that can safeguard your resources and get your project back on track.

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Steps To Take If Your Builder Becomes Insolvent

• Contact your lender: The first thing you must do is contact your lender and inform them about your situation. They can give you advice and options for how to proceed.
• Contact the builder’s insolvency practitioner: An insolvency practitioner is the one helping your builder manage his/her business. Talking with the insolvency practitioner will help you find out what is happening with the builder’s assets and if there is any money available to pay for the construction of your home.
• Review your loan agreement: Going over your agreement will help you understand your obligations and the lender’s rights in the event of builder bankruptcy. Also, you should check whether you have any loan protection insurance that would cover you in the event the builder defaults.
• Seek legal advice: It is best to get professional advice before making any decisions. A residential building and construction lawyer can go through your contract and discuss your options.
• Consider alternative builders: You might need to consider finding an alternative builder to take over the project if your builder isn’t able to complete your home. It is best to seek quotes from different builders and compare what they are offering before making any decision.

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We Can Help You!

If you are stuck with an insolvent builder or one you suspect might be going bust, talk to the experienced mortgage brokers at Home Loan Experts. We will help you assess your situation and find out what will be best for you. We can also talk to the lender and find out if a repayment pause is possible.

Generally, lenders are hesitant to give a loan with a half-built home as security. If you need funds to complete your partially constructed home then we can also help you secure a loan after assessing your situation.

Call us today on 1300 889 743 or fill out our free enquiry form online