If you think your home construction might be in doubt, here’s what your next steps should be

When Matt Stahl heard rumors about the financial stability of Australia’s largest construction company Metricon this week, his heart sank.

The landscaper had been saving since he was a teenager to pay a $17,500 down payment to build his first home on a 981 square meter block in scenic Campbells Creek Township.

His block is about a 10-minute drive through the historic billabong-strewn goldfields from Castlemaine in central Victoria.

Permit approval and preliminary work were ahead of schedule and construction was expected to begin in early June, but talk about the fact that Metricon is under pressure made Mr. Stahl feel like the roof was collapsing on his dream.

Some of the rumors were sparked by the death of Metricon chief executive and founder Mario Biasin on Monday, and prompted the company to meet with Victorian government officials.

Amid industry-wide challenges in construction and speculation amplified by media coverage, the company’s interim chief executive, Peter Langfelder, called a press conference to put the rumors to bed.

“We’re in a really strong and viable position, we have the support of our banks, we have some headroom available,” he said.

Metricon shut down rumors about its financial situation this week.(Provided)

But away from the spotlight on Australia’s biggest homebuilder, the pressures on the industry exacerbated by the COVID pandemic have been well documented.

Amid issues such as rising costs, supply constraints and soaring outsourcing fees, some big companies have already gone bankrupt, such as Probuild, Privium and Hotondo Homes.

Michaela Lihou, from Master Builders Victoria, said yesterday some companies were being forced to ‘steer clear of the industry’.

“We have ongoing insolvencies. We are doing our best to protect the industry,” she said.

So what if you’re not so lucky and your dream of building a house becomes a nightmare?

First, sift through the rumors and establish the facts

Since speculation about Metricon made headlines, national nonprofit legal program Justice Connect has seen a 140% increase in traffic to its online guide on what to do in the event of builder insolvency.

If you suspect your builder is in financial difficulty, you should check your building contract or permits to confirm the correct name of your builder or the registered name of the company.

the australian bankruptcy register can be used to check whether a sole proprietorship or building society has gone bankrupt, while ASIC register will tell you if a company has been deregistered or insolvent.

End of structural steel at Brisbane site
Building materials have been significantly impacted by global supply chain issues.(ABC News: Liz Pickering)

Insurance covering insolvency is integrated into the contracts

If your fears are confirmed, your next immediate step is to access the details of the home building insurance which is included in your building contract.

All states and territories except Tasmania require construction companies to have insurance for faulty or incomplete work due to insolvency.

The construction contract lists all the insurance information you need, including the policy number, to make a claim.

In some states this will be done through a legal authority while others will require you to contact the insurance companies directly.

Here are the best contacts for each part of Australia:

Your national authority will also need copies of your builder’s invoices, receipts or bank statements as proof of payment, as well as a list of any incomplete works you are claiming.

An overhead view of two wooden house frames.  Piles of red bricks are scattered around.
Insurance is a mandatory part of construction contracts in Australia.(ABC News: Luke Bowden)

If you cannot find the insurer’s contact information or it appears that your builder does not have insurance, you should always contact your state authorities for assistance.

The authority will assess your claim and send a construction consultant to visit your property and inspect the necessary work.

You may be asked to obtain quotes from a new builder of your choice, or the authority may do this on your behalf and then decide what they will pay to complete the work.

If the insurance route doesn’t work, a court may be the next step

Justice Connect chief executive Chris Povey said if you disagree with the authority or insurer’s assessments, the next step is to go to court.

“It’s just more stress and anxiety,” he said.

“I mean, you’re dealing with people’s biggest investment.”

Chris wears a navy suit jacket and white shirt and smiles as he sits in a leafy green office.
Chris Povey of Justice Connect says it’s important to act quickly when a construction company is collapsing.(Provided)

Getting to court can be time consuming and very expensive.

Groups like Justice Connect offer help for what they call “the missing middle” – those who cannot afford a lawyer but earn too much to qualify for pro bono representation or juridical help.

“Legal aid is out of reach for most Australians, so it’s really not ideal for people to end up in court,” Mr Povey said.

“We are in the midst of a housing crisis.

“The law needs to be as accessible as possible. It’s good that there is insurance coverage, but you still need people to be supported through the process.”

Brown bricks sitting on scaffolding.  Temporary fences are visible in the background.
Some Australian construction companies have closed in recent years.(ABC News: Luke Bowden)

So after all this, who will finish my house?

Mr Povey says he is worried about how people will find a new builder during the shortage of labor and building materials.

“In reality, what is the probability that they have someone to pick up a half-done job?” he asked.

“And what will it cost?

“I don’t like the chances of people changing horses mid-term and we’re going to have to think deeply about that in the weeks and months to come as more and more builders come under pressure.”

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