There has been a substantial increase in insolvency in the building and construction industry, and with the significant pressure placed on builders, there is little surprise. Builders – both sole traders and construction companies – are required to manage sub-contractors, suppliers, home-owners (and their financial institutions) all whilst striving to meet often unattainable deadlines.
So what happens when your builder succumbs to those pressures and building your dream home turns into a nightmare?
Fortunately, assistance may be available under the Queensland Home Warranty Scheme (“QHWS”). The QHWS is essentially an insurance policy a builder is required to take out for all construction work over $3,300.00. The insurance policy can be relied on by the owner in certain circumstances, including where their builder becomes insolvent. In essence, the scheme will pay any shortfall owing above the original contract price to a substitute builder.
By way of example, John has entered into a contract with Dream Home Constructions Pty Ltd for the construction of a new home. The parties agree to the contract price of $395,000.00. John makes regular payments throughout the construction process totalling $200,000.00, however prior to completion Dream Home Constructions Pty Ltd is placed into liquidation. In such circumstances, the QHWS may provide relief. If John’s claim is accepted, the Queensland Building and Construction Commission (“QBCC”) will appoint another builder to complete the work (including remedy of any defects). John will be required to pay the new builder for work up to the value of the original contract (i.e. $195,000.00). Any amounts over the original contract price will be paid by the insurer under the QHWS.
Claims under the QHWS are subject to meeting certain criteria, such as lawfully and properly terminating the building contract. It is therefore recommended that legal advice is sought at the onset of any issues in respect of building contracts, thus ensuring legal rights are protected.
If you are experiencing any issues with your building contract, contact our local, expert team for advice today. We are also able to assist with various other building and construction industry matters, including:
- Sub-contractors charges under the Building Industry Fairness (Security of Payment) Act 2017;
- Payment claims under the Building Industry Fairness (Security of Payment) Act 2017;
- Defective work claims; and
- Commercial building disputes
Please do not hesitate to contact our office on (07) 4963 2000 or via our online contact form should you have any queries.