Tradies ripped off by rogue builders have “no middle ground” to recoup their losses, a building consultant and advocate says.
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Rob Berry, a consultant to subcontractors alliance Subbies United, said the industry passed risk down the line to be shouldered by tradespeople and suppliers.
Last week The Courier revealed dozens of tradespeople were owed thousands by a Ballarat builder, who they said had gone to ground. Most said they expected to swallow their losses. The Courier has chosen not to name the builder for legal reasons.
“For a long time the Victorian Building Authority has been the toothless tiger as a regulator. Builders can altogether fall off the planet and you’ve got to take legal action against the company,” Mr Berry said.
“There’s no middle ground, you’ve got to take legal action or nothing.”
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Clients and subcontractors said the builder stopped returning their calls about a month ago. Some were paid piecemeal and still have more than $10,000 outstanding.
Others said bad debt from as far back as 2013 almost sunk their fledgling business.
Most had unpaid invoices which fell outside the three month window set by the state government’s Security of Payment scheme. The Act is intended to cover subcontractors and suppliers waiting on payment under a construction contract.
But Mr Berry said payment cycles were “ slow and inconsistent”.
“A lot of subbies wait cap in hand hoping the builder is going to pay. When they do go through the formal process they’ve lost a lot of time waiting and they might be beaten by the clock and when the sums are too big taking legal action can entrench the issue.”
Builders can altogether fall off the planet and you’ve got to take legal action against the company.
- Subbies United consultant Rob Berry
Cabinetmaker Brad Lockyer said $12,500 owed to him by the builder had his business back 12 months. Mr Lockyer fit out three homes.
“Twelve months ago this would probably have buried my business. I was told to remove the cabinetry that hasn’t been paid for to try and recover costs of materials,” Mr Locker said.
“But I don’t want to do that because that will just cause more issues for the homeowner.”
Subbies United is pushing for project bank accounts where a builder sets up an account for suppliers and subcontractors to draw on when work is completed.
A project bank account “circumvents the builder having control of those funds directly” and is standard in most OECD countries, Mr Berry said.
Mr Berry said Watersun Homes, which collapsed earlier this year, had “played a straight bat” when compared to builders who refused to go under.
By going into administration, the Geelong-based builder triggered insurance for affected homeowners and subcontractors which protects consumers in cases where builders have died, disappeared or become insolvent.
“When you have a builder that knows they’re insolvent but doesn’t appoint anyone it’s fair to say they’re not playing a straight bat. You’ve still got creditors left in hope they’re going to get paid even though the builder knows they’re effectively trading insolvent,” Mr Berry said.
“It’s very common for the smaller size builder - the owner-operator size. They want to maintain their trading without meeting their obligations.”
When you have a builder that knows they’re insolvent but doesn’t appoint anyone it’s fair to say they’re not playing a straight bat.
- Subbies United consultant Rob Berry
A spokesperson for Planning Minister Richard Wynne said Security of Payment was just one avenue for debts to be pursued.
“It is a quick and easy method that allows contractors and sub contractors to claim earnings that they are entitled to,” they said.
“Affected parties are not precluded from accessing other debt recovery measures - such as the courts.”
Master Builders Association Victoria also offered the courts as an alternative for unpaid tradespeople.
“We consider that the security of payments laws are sufficient to protect the interests of builders and subcontractors,” chief executive Radley de Silva.
“Master Builders believes that the three months period contained in the security of payments laws is a generally sufficient window for a subcontractor to make a claim, considering that there will still exist traditional avenues to pursue any outstanding payments, such as through the courts.”