What Are Your Rights if Your Builder Goes into Liquidation? A Guide from Patterson Construction

Building or renovating a home is an exciting yet challenging process that involves significant time and financial investment. Unfortunately, sometimes things don’t go as planned, and you may find yourself in a situation where your builder goes into liquidation. This can be a stressful and uncertain time, but it’s important to know that you have rights and protections under Australian law. In this blog, Patterson Construction will walk you through what to do if your builder goes into liquidation and how you can protect your investment.

1. Understanding Builder Liquidation

When a builder goes into liquidation, it means the company is insolvent and cannot pay its debts. A liquidator is appointed to wind up the company’s affairs, which typically involves selling off assets to pay creditors. For customers, this often results in projects being left unfinished and payments potentially being lost.

However, Australian law offers several protections to help consumers navigate this situation.

2. Home Warranty Insurance: Your First Line of defence

Home Warranty Insurance (HWI), also known as Domestic Building Insurance in some states, is designed to protect homeowners when a builder becomes insolvent. This insurance is mandatory for most residential building projects above a certain value, typically $12,000.

What Does Home Warranty Insurance Cover?

Completion of Work: If your builder goes into liquidation, HWI covers the cost to complete the building work according to the original contract terms.

Rectification of Defects: The insurance also covers the rectification of any defective work that was done by the builder before they went into liquidation.

How to Make a Claim:

Contact the Insurer: Notify the insurer as soon as you become aware that your builder is in liquidation.

Provide Evidence: You’ll need to provide evidence of the liquidation, such as a letter from the liquidator, and any documentation related to the contract and the work that has been completed.

Assessment and Payout: The insurer will assess your claim and, if approved, will either pay you directly or appoint another builder to complete the work.

It’s important to note that time limits apply to making a claim, usually within six years for structural defects and two years for non-structural issues from the completion of work.

3. Your Contractual Rights

Your building contract is the key document that outlines the responsibilities of both parties. If your builder goes into liquidation, the contract will guide you on the next steps, including your rights to terminate the agreement and seek compensation.

Key Considerations:

Termination of Contract: Typically, if the builder cannot fulfill their obligations due to liquidation, you have the right to terminate the contract.

Engage a New Builder: After terminating the contract, you can engage a new builder to complete the work. Ensure that the new builder understands the existing contract terms and the stage at which the previous builder left off.

Recourse for Damages: Depending on the contract, you may be entitled to seek compensation for any losses incurred due to the builder’s liquidation. This could include additional costs to complete the work or rectify defects.

4. Consumer Protection Under Australian Law

Australian Consumer Law (ACL) provides further protection against unfair practices. If your builder engaged in misleading or deceptive conduct before going into liquidation, or if the contract contains unfair terms, you might have grounds to seek additional compensation or remedies under ACL.

5. Proactive Measures to Protect Yourself

While no one can predict a builder going into liquidation, there are steps you can take to protect yourself before and during your building project:

Verify Builder’s Credentials: Always check that your builder is licensed and in good standing. You can verify this through your state or territory’s building authority.

Ensure Insurance Coverage: Confirm that Home Warranty Insurance is in place before making significant payments. Ask to see the certificate of insurance for your project.

Document Everything: Keep thorough records of all communications, payments, and work progress. This documentation will be invaluable if you need to make an insurance claim or resolve a dispute.

While a builder going into liquidation can be a challenging situation, understanding your rights and the protections available under Australian law can help you navigate the process more smoothly. Home Warranty Insurance, your contractual rights, and consumer protection laws all offer avenues to protect your investment and ensure your project reaches completion.

At Patterson Construction, we are committed to transparency, quality, and customer satisfaction. We encourage all our clients to stay informed and take the necessary steps to protect their investments. If you find yourself in a situation where your builder has gone into liquidation, don’t hesitate to seek legal advice and make use of the protections available to you.

By being proactive and understanding your rights, you can minimize the impact of such unfortunate events and continue your journey toward building your dream home.