Builder ceases trading - insurance and remedies

A builder ceases trading owing money to staff and sub-contractors, with buildings incomplete. Assets are exceeded by liabilities. There seems to be limited recourse for those affected. Is there insurance available for such situations, or should there be? A similar question can be asked about buildings that have been approved by private inspectors but are sub-standard. I have a vague recollection about a relatively new high-rise that has major structural problems. Another had flammable cladding.

Mandatory insurance for builds over a certain amount may be viable.

 

They wont have just ceased trading. They may have had receivers appointed OR commenced liquidation. These affect licenses and involve Fair Trading and licensing agencies. Your state will operate a licensing and building insurance scheme where in due course another builder will be appointed to complete. If its complete that a different issue and defects "may" or may not be covered by statutory building warranty insurance that applies to all new construction for XX years. Its part of the development approval process. It limits what it pays for of course. Not usually for strata property. Owners will become liable in most instances for cost to remedy cladding issues or structural defects etc.

There has been much in the media in many states about the issue. However the band aid appears to address future builds and past builds are less protected. In NSW dodgy certifiers have been struck off and greater supervision is now given. One major site in Sydney had several towers stop work while structural and concrete defects were given advice. No occupancy is permitted for completed towers until major works to remedy what had been signed off is corrected. Gaps in floor slabs failing fire regs and misaligned and thin concrete were published in news. Other sites have major cracking and structural failure evident with occupants evicted. The occ certs that were issued were cancelled. The PI insurance is insufficient of course and developers have alimited resources and its not a matter for the state scheme to fund such fixes. Other towers by the same developer completed in past years have known defects and owners may yet foot the costs. The developer says they will fix it but thats not certain until it happens ad fixinga defect is nothing like building it well in the first place. The cladding is suspected to be defective and the state govt is not saying which properties need new cladding at owners expense. I would be very concerned as a strata or owner insurer may refuse a claim if a fire occurs.

 

Hotondo Tassie ceased trading recently, leaving multiple unfinished builds and unpaid trades, and TAS doesnt have home owner warranty insurance. This will be the first of many many many many many many many builders going under in coming months- several have already failed in QLD late last year as well. They have fixed price contracts signed x number of months ago, and between land registration delays, lender delays , tradie shortages and material delivery delays, prices are rising violently and unpredictably while they wait....
FYI Timber prices are going up again - I have attached a screen shot of pending increases below FYI - and the price is charged when timber is delivered to site not when it is ordered, so you cant even hedge against it by ordering early in order to avoid problems, as delivery is at least 10 weeks. Australia is being absolutely mauled by shipping costs. Its a deliberate strategy by the Chinese, who have quietly removed over 30% of the worlds cargo capacity from the water by hoarding shipping containers. There is going to be an inflation tsunami coming our way this year Everyone needs to get used to the fact that builders will need to price no more than 1 month in advance. If you cant exchange by then you should expect quite violent ( I used the work deliberately ) price increases to become the norm. ie 70,80K on a standard build.
I flagged this months ago and some well known members here suggested they were able to secure building tenders at what I said was now below the cost of materials. I said at the time they were delusional and nothing has changed. It has become even worse. No suppliers/importers are immune from these volatile shipping price increases /issues so no builder can build at the price they have been claiming and stay in business.

 

Paul and euro73, thanks. This is messy and bad for those involved. A single national scheme covering these issues is indicated. The container shortage and timber price increase is bad.

 

Each state has it's own system for residential construction contracts. Some are more fiddly than others. In WA every contract over $20k should have it and it covers up to $100k in difference to get another builder to complete the build. The process is fairly simple in WA but for high end builds the $100k sometimes doesn't go far enough.
Other states, like Vic, have a higher amount but the process to get to the money is harder and lengthy delays