With 1700 building projects in turmoil across Victoria due to the downfall of Porter Davis Homes and Lloyd Group,[1] a number of homeowners are likely left with a lot of questions and an unfinished build.
Building a home or renovating a property is a significant investment, both financially and emotionally. Unfortunately, there are instances where the builder may go into liquidation, leaving an unfinished build. This can be a stressful and confusing time for homeowners who are unsure of their legal position and options. In this blog post, we will address the impact of a builder going into liquidation and the legal position of homeowners left with an unfinished build.
My builder has stopped working on site
Generally speaking, when work is incomplete you may be able to seek compensation for the added expense you have suffered as a result of the builder ceasing work. If the builder is no longer able to complete your project, you may be entitled to terminate the contract or otherwise, accept the builder’s repudiation of the contract and seek action against the builder in VCAT or the County Court of Victoria.
In the ordinary cases, and in order to mitigate your loss and have your project finish in a timely fashion, you ought to get a building inspector to inspect the outstanding works and report on what is required to complete your building works. Following which, you may need to engage another builder to provide a quote and ideally, to complete the project so you do not continue to incur costs or further your loss.
While in some cases, it may be practical for homeowners to engage another builder to complete the work, it is essential to ensure that the new builder is licensed and insured and that any contract is properly drafted to protect the homeowner's interests. Homeowners should seek legal advice in relation to proper termination or repudiation of their current building contract, also.
My builder has gone into liquidation
Given that there are building giants collapsing every week, it has become increasingly concerning for homeowners who may struggle to recover damages from companies that are in liquidation.
In Victoria, builders are required to have domestic building insurance for residential buildings and works of more than $16,000. This insurance is designed to protect homeowners from financial loss in the event of incomplete or defective building work caused by the builder's insolvency, death, or disappearance. Homeowners can make a claim against the builder's domestic building insurance to recover their losses.
While making a claim against a builder's domestic building insurance can help homeowners recover their losses, it is not a quick process. Homeowners may need to engage an independent building inspector to assess the defective and/or incomplete work and provide a report to support their claim. This can be time-consuming and expensive.
Steps to Make a Claim Against a Builder's Domestic Building Insurance:
To make a claim against a builder's domestic building insurance, homeowners must follow the process set out in the Domestic Building Contracts Act 1995 and the Building Act 1993. The steps include:\
- Providing written notice of the claim to the insurer within 14 days of becoming aware of the builder's insolvency.
- Providing a copy of the building contract and any other relevant documents, such as
- Providing an itemized list of the defective work and the estimated cost of completing the work – this may require the use of a registered building inspector.
- Cooperating with the insurer's appointed assessor to assess the defective work and estimated cost of completion.
- Accepting or disputing the insurer's decision on the claim – you should seek legal advice if you receive an unfavourable decision from the insurer that you would like to dispute.
Keep in mind that there are often strict time limits in place by which you must make a claim.
Relevant Legislative Considerations
Section 137B of the
Domestic Building Contracts Act 1995 (Vic)
requires builders to take out domestic building insurance before commencing any building work valued at over $16,000. Failure to obtain the insurance is an offense under the Act.
Section 74 of the Building Act 1993 (Vic) sets out the process for making a claim against a builder's domestic building insurance. It also sets out the penalties for builders who fail to obtain the insurance.
Practical Considerations for Owners
If a builder goes into liquidation, leaving an unfinished build, homeowners can make a claim against the builder's domestic building insurance to recover their losses. However, this process can be complex and time-consuming. It is important to seek legal advice from a specialist in construction law, such as our lawyers at Forty Four Degrees, to ensure that you understand your legal position and options. A lawyer can also provide guidance on the most practical and cost-effective approach to completing the building work.
Update as of 22 April 2023:
Daniel Andrews, the premier of Victoria, declared on Thursday, 20 April 2023, that a $15 million state government support package is available to take care of Porter Davis customers, whose homes are not started building yet, and not covered by insurance after the builder went into liquidation last month. Homeowners will get their deposits of up to 5% back from the package, which may be on average $25,000 per customer.
The process of accessing the state government support package is.
1. Register
here through the Victorian Managed Insurance Authority.
2. Once contacted by the VMIA, verify your circumstances by uploading relevant documents.
Please note the package does not include properties that are now being built, with plans to explore if another builder could take over those constructions. This means that homeowners whose homes have commenced construction, and are looking for a substitute builder, would not be able to claim under this state government support package.
[1] Sarah Sharples, ‘Major home builder Porter Davis collapses impacting 1700 projects, with Lloyd Group also failing’, News.com.au (online, 31 March 2023) <https://www.news.com.au/finance/business/other-industries/major-home-builder-porter-davis-collapses-leaving-1700-projects-in-limbo-in-victoria-and-qld/news-story/b197461ec9b6b5f64e0977a5f9723f30>
