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Help my builder has gone bust – what next?

With the demise of builder Firm last month, there are three apartment projects now hanging in limbo while the developers scramble to either complete the project themselves or appoint an alternative builder.

This uncertainty for apartment buyers is less than desirable and erodes confidence levels as they await further advice about completion dates and the like.

But AAA CEO Samantha Reece says that you can be one step ahead of this announcement if you demonstrate due diligence.

“Make sure that you are driving past your project every week so that you can do a progress check,” Ms Reece said.

“If there is inactivity on the site for 1-2 weeks then make sure you contact the developer and ask for a project status update and ideally you would like any verbal reports then provided in writing. If the developer is reluctant to commit to an email this could be the early signs that trouble is afoot.”

Ms Reece says that at this point buyers have the following options:

  • Check your contract with your lawyer and see if you have a clause to exit the contract if the build is not completed by a set date. Ideally this should be included at time of signing a sales contract as very rarely will a developer include a clause that could be to their disadvantage.

  • Ask the developer if a retention fund is in place. This is often actioned if the builder and developer sign an MBA or HIA construction contract. A retention fund is often 2% of the total build value and is placed in a trust account as surety. Half is refunded upon practical completion and the remainder at the end of the 12 month defect liability period (and once defects have been repaired). If you have this retention fund this will provide a degree of financial support during the period where the developer considers their options with completing the build.

  • If you have real concerns raise the matter with your local MP, the Planning Minister and DMIRS (WA Building Commission). These people are in a position of authority to then make enquiries on your behalf and determine the status of the situation.

  • Finally, don’t settle the apartment until you have completed an independent inspection of your apartment and the building to ensure that there are no major concerns eg structural cracking etc.

Ms Reece said that the biggest concern about a liquidated builder was the warranty period post construction.

“Typically owners have 12 months for a defect liability period whereby the builder undertakes repairs and then a further six years under the Statutory warranty period,” Ms Reece said.

“But if your builder goes under at 85% of the build, for example, unless you are three storeys or below, then you have no protection.

“It is essential that if you do proceed to settle your apartment that you therefore gain in writing from the developer the elements that were completed by the liquidated company and those by the subsequent builder so you are clear as to what extent you are protected moving forward.”

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