Both Victorian builders went into liquidation and an affected homeowner spent $300,000 on a half-finished home.
Two Victorian building companies are the latest victims of the building industry crisis after going into liquidation on Wednesday after a homeowner shelled out $300,000 for a half-built home.
The first company, Wulfrun Construction, went into voluntary liquidation with insolvency firm BDO Australia named as administrators.
Mark, a father-of-two, who did not want his last name used, is a landlord who was hit by the collapse of the construction company after pledging to build a new house last year for a fixed price of $660,000.
The original house in suburban Newport had been in Mark’s family for 40 years and was demolished to make way for a new two-story, four-bedroom home.
Mark said he was pleased with the builder who, despite delays to the expected completion date of December 2021, had the slab and frame laid in the house.
But then the work stopped around April this year.
The mortgage broker said the builder was candid about “liquidity” issues and that Mark was happy to pay about an additional $50,000 to keep the project going.
But the father, whose two children are 12 and 9, says other landlords working with Wulfrun Construction were unwilling to do the same.
Now he finds himself in a ‘desperate situation’ and says it’s ‘absolutely devastating’.
“The underlying feeling is this fear of losing your home, this piece of land that has been in my family since the 80s, where you grew up and spent your childhood. There is this guilt of tearing down a house that actually needed to be demolished – it was built 70-80 years ago – it was basically a wooden house and needed updating, but having young children was quite unsettling,” he said. told news.com.au.
“We left the house in February 2021 for a rental but the owners wanted to take over the property to renovate it and so we moved to this place. So we moved twice in a period of about five months, which was really disruptive, and throwing Covid and home schooling out, it’s been quite a difficult time.
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Mark struggled to find a solution to keep the frame covered so it wouldn’t be destroyed by bad weather, especially since he doesn’t know when he’ll be able to bring in another builder. He thinks he’ll have to pay $3,000 to keep it covered. .
But the 48-year-old said he felt no anger towards Wulfrun Construction as he recognized the unprecedented situation facing the construction industry.
He added that Wulfrun Construction did not owe him any money and he understands that the builder dipped into his own savings to try to make things work.
“Exorbitant” increase in costs to continue building
But now Mark is facing “exorbitant” costs to continue construction.
He feels ‘abandoned’ by the insurance system, which he says does not cover the nightmarish situation, with the father fearing his family will face ‘financial ruin’.
“Insurance is insufficient. So your standard warranty coverage for domestic builders is 20% of the contract price, so in my case we have coverage for $131,600. My contract says I have $360,000 left to finish the house,” he said.
“The reality is that it’s more likely to be $550,000 plus additional rent, so you can see how inadequate this insurance is. It’s going to cost me at least $200,000 to finish this house above which I have already financed and I have $130,000 insurance The challenge there is everything seems insufficient with these unprecedented times.
‘The insurance company factored in things when the building industry isn’t struggling and now we’re facing a cost snowball effect.’
To further complicate the situation, there are fears that he may not be able to increase the amount he can borrow because he has just quit his full-time job to become self-employed.
He is also worried about hiring another builder who could also go bankrupt.
Mark added that his 12-month interest period for the loan also expires next month, meaning repayments will increase for his half-built house.
“We are fighting an uphill battle. The house will not be finished if we go back to a registered builder and insurance,” he said.
“It’s going to be 18 to 24 months before it’s finished, so it’s two years from today and it’s $60,000 in rent.”
BDO, the liquidators of Wulfrun Construction, declined to provide details to news.com.au on the company’s outstanding debt, the number of creditors affected and what went wrong for the business.
“The liquidators are gathering general information about the business of the company and have been liaising with the building’s insurer regarding the company’s ongoing projects,” a spokesperson said.
“An update will be provided to creditors in the first report dated June 8, 2022. We are unable to comment further at this time.”
“Dramatically impacted by business failure”
Another Victorian company called Westernpoint Construction Pty Ltd also went into liquidation on Wednesday with Pitcher Partners appointed to deal with the collapse.
Liquidator Innis Cull of Pitcher Partners told news.com.au the company had been newly appointed.
“At this point, we know of one owner who has been significantly affected by the failure of the business,” he said.
“The owner was required to sue the business in Victoria Civil and Administrative Court for compensation before proceeding to wind up the business.
“We will now investigate any other potential creditors and the level of outstanding debt.”
Australia’s construction industry has been plagued by a series of slumps this year.
Earlier this week, two NSW-based construction companies became the latest victims of the crumbling construction sector.
Affordable Modular Homes Pty Ltd, a local Central Coast business specializing in tiny homes, has closed for good, owing tens of thousands to several creditors, including Bunnings Warehouse.
Another NSW builder, Statement Builders Pty Ltd, headquartered in Sydney’s CBD, has also folded.
Late last week, Geelong-based builder Waterford Homes, which had 10 owners with current builds in various stages of completion and 60 creditors who owed at least $600,000, also went bankrupt.
A company that contracted for the construction sector, Fire Services Australia (FSA), also collapsed last week owing $10.6 million and affecting 123 jobs.
Rising costs, disrupted supply chains and periodic lockdowns have created a profitless boom, with many construction companies embarking on projects that are no longer financially viable thanks to steep rises in the price of building materials, according to the experts.
Earlier this year, two major Australian construction companies, including Gold Coast-based Condev and industry giant Probuild, went into liquidation.
Smaller operators like Hotondo Homes Hobart and Perth, Home Innovation Builders and New Sensation Homes, and Sydney-based Next have also collapsed, leaving homeowners out of pocket and with homes unfinished.
Late last month, two Queensland businesses collapsed within days of each other, Pivotal Homes and Solido Builders.
An industry insider told news.com.au earlier this year that half of Australian construction companies are on the verge of collapse as they are insolvent, and it could see thousands of homes affected within months. coming.
One includes a Victorian building company which may be on the verge of collapse after racking up millions in debt and building work has stalled for months.
Snowdon Developments Pty Ltd has 15 creditors suing it for debts totaling $2.5 million who are asking the Supreme Court of Victoria to impose a winding-up order to force the company into liquidation “due to insolvency. “.
There are between 10,000 and 12,000 home building companies in Australia undertaking new homes or major renovation projects, a figure estimated by APB.