2023 has been a year of crises for the entire building industry with approximately  a dozen builders collapsed. The recent news of Porter Davis also going into liquidation, is just another sad blow to home builders with Builders being unable to afford to honour the contracts and the prices quoted for those builds with the heavy rising of supplies and shortage of good trades.   The ultimate price will be paid by the consumer and unpaid trades and creditors.

What to do if you find yourself in the situation with a build underway – but no builder in site.

1. You must confirm and locate your VMIA DBI policy.

Firstly, do you have your Domestic Building Insurance (DBI)?  In Victoria the common provider is VMIA.  Please look through your paperwork to locate it or contact each insurer with the build address to see if you have the cover.  Each insurer is listed in the Help centre under “how do I find who my insurer is”    https://www.dbi.vmia.vic.gov.au/Help-Centre?Category=%7bCCADC999-8C2C-4869-AE95-348B6B2446B3%7d#CLAIMSWHEN

This policy is very important – but sadly, there are builders who do not take this policy out for you before taking a deposit. This means there is no protection to get your deposit back.

Most important for all clients of Porter Davis to go directly to VMIA or equivalent.  Learn more now so you can take control and hopefully get back up and running as soon as possible. See the VMIA announcement for more information: https://www.dbi.vmia.vic.gov.au/Announcement-2  –

Deposit paid – Build Not Commenced

You can apply for this the moment the builder is listed as being deregistered or becomes insolvent.  Insolvent means it is now being externally administered.

You will need your:

Build Commenced and not completed. Various Stages

You can also apply through DBI but the process is more complex.  

You will need the:

  • fully signed build contract, 
  • your VMIA number and policy and 
  • receipts of the deposit paid.

    These claims can be handled reasonably quickly subject to turn around times.  

    We would urge you to move quickly on these.

  • Fully Signed Build Contract,
  • Council Approved Plans,
  • VMIA or equivalent insurance details.
  • Drawn down invoices and receipts

    Normally you can obtain an approval for 20% extra of the original contract price to allow for increase in costs. 

3. How do I finish my House?

You need to source another builder.

It will be harder to find another builder if the build has commenced and depending on the stage the property is at it may be very difficult.  Reasons:  Builders are always concerned that they are liable for the previous builder’s work, however double check with VMIA as normally the policy taken out by the builder only convers that builders work so the risk is less. But there are builders out there willing to take on a failed builder’s completion. Just keep approaching as many as possible. 

The chances are that to complete your build contract the balance of the build will be substantially higher.  This will depend how old your build contract is and when it was quoted.

4. What about my construction loan? My build may be more expensive now?

As mortgage brokers we have assisted with this before.  We have helped many people with the process.

  1. First get the Claim assessed and approved so you know how much money you have to complete the build.
  2. Source a new builder to see if they will consider taking over the build and let them know how much you have available and find out if you need more – get a new fixed price quote
  3. Contact your lender or a broker to assist you with obtaining a reapproval for your construction loan.  This needs to happen even if the prices is the same but you have a new builder.

For many this is absolutely devastating, and it has been happening often over the past couple of years now. You may be able to find a solution.  It may be harder right now due to higher interest rates and assessment rates however the earlier you address this the better.

If you need help reviewing the finance options to seek a new approval for a higher amount, feel free to chat with one of our team or if you have a current broker or lender please seek guidance early.