The Great Liquidation: will my build survive?

With the recent liquidation of another major building company, Oracle Building Corporation Pty Ltd, there is one thing for certain – this will not be the last!

As the recession conversation ramps up, liquidation is not only a result of the long-term effects of COVID, but also a repercussion of:

• Trade shortages;
• Supply chain disruption;
• Lack of foresight to plan for rising costs (including materials, wages and allowances); and
• Requests for variations to the build which result in significant costs

Liquidation and your build contract

Once a liquidator is appointed to the insolvent company, the construction work will stop and their QBCC licence will be cancelled.

For residential buildings, the QBCC have a Home Warranty Scheme which may prioritise your coverage where the builder has liquidated. Any claim for non-completion of work, or defective works is capped at $200,000. You can browse the Home Warranty Scheme to see how this applies to your circumstances.

For those affected by the Oracle Homes liquidation, see more information here.

Steps to take if your builder liquidates?

1. Make contact with the liquidator to make them aware of your build.
2. Advise them of the progress of your construction, any incomplete/defective works, and any money owing.
3. Make your claim with the liquidator by lodging a proof of debt and/or make a claim with the QBCC.
4. Be sure to ask when the timeframe to lodge your proof of debt and/or claim expires.
5. Keep a record of all expenses incurred by you to substantiate any claim to the insurer for your rectification works.

Choose your builder carefully

If you are now trying to find a builder to continue a half complete build or start a new build please choose carefully. We recommend you:

• Check to see if the builder has assign your contract to another contractor for completion;
• Check to see if they are QBCC licenced (free licence search here (hyperlink: https://www.onlineservices.qbcc.qld.gov.au/OnlineLicenceSearch/VisualElements/SearchBSALicenseeContent.aspx));
• Check their reviews online;
• Google search the company, and if concerned, comple a company search with ASIC to check they are solvent; 
• Ensure they can attend the worksite immediately and make it safe, including restricting trespassing; and/or 
• Obtain advice from a legal professional on your build contract before signing.

Expect there to be a delay in another builder taking over the build, meanwhile contractors can be engaged to make the property safe. However, do not be tempted to engage multiple subcontractors if the works are close to completion as there are strict compliance requirements and penalties for acting as a “builder” when unlicensed. 

Any delays may be exacerbated by price negotiations due to the builder taking over will generally propose a higher price to cover the risks involved.

If your builder is not in liquidation and you wish to switch builders, you must seek legal advice before terminating your contract. An agreement must be reached on assignment to, or novation of the new builder before termination otherwise you risk being in breach of the contract.