Builders’ warranty insurance is a “disgraceful system” which only gives an illusion of consumer protection, the head of the national Builders’ Collective says.
Builders’ warranty, also known as Domestic Building insurance, is only triggered in cases where a builder disappears, dies or becomes insolvent.
However proving a builder has disappeared is laborious and complex, Builders’ Collective president Phil Dwyer said. The builder has to be reported to the insurer, who will seek to contact the business director, sometimes even hiring a private investigator.
Desperate Ballarat homeowners whose builder has gone to ground say they have been left without recourse or a “trigger” for compensation because their builder has refused to go into liquidation.
Dozens of homeowners whose houses were unfinished or with significant defects told The Courier their calls had gone unanswered since mid-June .
The Courier has chosen not to name the builder for legal reasons.
Mr Dwyer said there was no “public outcry” against the system because victims were often advised against speaking out in case it jeopardised their claim.
“They think there’s got to be some kind of justice but it’s never, ever there,” he said.
”You’ve no idea how many people have been so badly hurt by this so-called consumer protection. The string of disasters where people have even lost the very home they’ve been fighting to get finished. It’s just farcical and yet governments have kept this rotten insurance going.”
In cases where the builder is a company, they are “unable to disappear” and can be only be deemed so if their business is deregistered, according to Victorian Managed Insurance Authority (VMIA) policy.
If a builder is found after the claim is lodged, the VMIA will continue to process the claim. If the builder is a partnership, all parties will have to be seen to have disappeared.
Building consultant and advocate Rob Berry this week said companies which declared bankruptcy “played a straight bat” compared to those who refused to go under and resurfaced later under another name.
In the quarter ending March 2017 the construction industry has the second highest number of insolvencies of any industry after “other services” with 369 business going under, according to the Australian Security and Investments Commission.
A spokesperson for Planning Minister Richard Wynne said there were a range of consumer safeguards in place to give recourse for those affected by malpractice.
Victorian Managed Insurance Authority advise anyone unable to locate their builder to contact the insurer for advice on 1300 363 424.