Have you ever imagined what your next move will be when your builder goes bankrupt while working on your home construction or renovation project? It will be a disaster for you, right? When a builder faces an insolvency event, specifically bankruptcy, it leads homeowners to incomplete projects, unfinished homes, and significant financial losses. It not only leaves homeowners in a state of distress but also causes financial woes. So, most homeowners seek advice on what must be done in such scenarios.
Here are a few issues to consider if your builder becomes insolvent:
Step 1: Termination of the Building Contract
When a builder goes bankrupt, they will often cease trading immediately. For incomplete works, it is crucial for homeowners to correctly terminate the original contract before appointing another builder. However, this must be done carefully, as wrongful termination could expose the homeowner to legal action. You can consider taking legal advice to address your termination rights to lessen the risk of a builder accusing you that the contract has been wrongfully terminated.
Step 2- Documents to Gather
It is really crucial to have all relevant documents concerning your contract with your builder in hand. Examples of documents you should gather include:
- Copies of the fully executed contract
- Specifications and building plans
- DA or CDC consent
- Signed variations
- Progress claims
- Invoices
- Payment receipts
- Claims for extension of time
You might need to have other relevant documents or correspondence you have with your builder to take any action.
Step 3- Home Building Insurance
Builders have a legal obligation to obtain domestic building insurance (DBI) for domestic building work for residential buildings of three or fewer storeys. These policies are activated when a builder becomes insolvent. You have to make sure that you have a copy of this policy and your certificate of insurance, as these are important documents when making a claim through your DBI insurer.
Step 4- Making a Claim
If your builder has caused incomplete or defective work and has either disappeared, become insolvent, died, or had their license suspended due to non-compliance with a tribunal or court order to pay you money, you may be eligible to claim under a policy issued by the Home Building Compensation Fund (HBCF). In cases where the builder has disappeared and cannot be located, you should contact NSW Fair Trading. They will issue a letter confirming the builder cannot be found, which you can submit with your HBCF claim.
Dwelcom- Your Partner in Incomplete Work Rectification and Fulfilment
With over 30 years of experience, we are dedicated to building homes that transcend mere bricks and mortar. Our expertise and meticulous attention to detail ensure that each construction project reflects unique styles and visions. Moreover, our extensive industry knowledge allows us to expertly complete homes abandoned by previous builders, showcasing our reliability and dedication to quality in every construction project.
Call our experts to learn more and schedule a consultation.