Insolvent builder and project issues

Important no trade is paid ahead of schedule. Once they start to ask its a warning.

 

Happy to hear things are moving forward. Hopefully the new builder can finish things soon.

How does the home warranty work having had 2 builders complete construction?

 

Before work commences, client pays builder 5-10% deposit. This is commencement capital.

In the revised NSW contract, builder gets paid by defined stages. Builder defines what goes into each stage & how many stages, no longer monthly progress claims.

Stage 1 claim may be excavation, sand blinding & edgeboards to house slab
Stage 2 vapour barrier, reinforcement & concrete to house slab
Stage 3 Etc

This minimises the builder's exposure to outstanding payment and financing the project.

 

Upon termination of 1st builder, an independent report was conducted on the state of the properties. This report details all 'works yet to be completed' and any 'defects'. This report represents a ''line in the sand'' that determines what works the 1st builder is responsible for. The report was extensive and expensive ($5k). Cost is claimable on my insurance claim.

2nd builder provides new warranty insurance for the works completed by him/her. Builder only warrants their work.

The report is the important element, it shows who is responsible for what.

cheers

 

Correct.

In hindsight on my project, the builder likely did not get his progress payment schedule correct. Payments were too back ended and he did not have the working capital available to keep funding the project.

I was willing to work with the builder and address progress payment concerns, but ultimately could never get comfortable with his position to continue building with lapsed builders license, lapsed insurance, and the level of defects and liquidated damages that were accruing.

He failed to manage his cashflow, failed to manage his business responsibilities, and failed to maintain trust with his client.

Being a builder is a challenging job.

 

Being a great tradesman is different to managing finance. If you build 50 homes a year you are very busy but if it costs $140K to build a $150K house you only make $500,000 a year. That has to pay all overheads etc. Eventually you are spending the funds from house 45 through to 50 when no work has been done. So when time comes to buy materials for house 50 there is no cash. Or when work slows and sales trickle the wheels stop turning and reality bites. You cant pay trades, materials etc and cant complete.

Turnover and profit are very different. You can go broke making money. Many trades confuse sales with profit and only when there is no cash left do they know they are in trouble

Few small builders correctly account for construction. All costs for a project should be applied directly or indirectly allocated to the job. This is called project accounting. It takes specialised (but simple) software and Xero, MYOB etc are all incapable of use. Project costs should be project managed along with time and sequence of activities.