Building a home this year? How to choose a builder that won't go bust

A partially finished Porter Davis home in Rochedale, south of Brisbane. Building works have stopped immediately on more than 1700 properties in Victoria and Queensland as a result of the company's collapse. Source: AAP / JONO SEARLE/AAPIMAGE

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Published 13 April 2023 11:27am

By Sumeet Kaur

Source: SBS

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In the wake of the recent collapse of construction giants like Porter Davis and Lloyd Group, Melbourne-based building consultant, Parmeet Jassal, says it's vital people understand building contracts and select the right builder amid these challenging times.

Key Points

The recent collapse of Porter Davis left 1700 properties in jeopardy across Victoria and Queensland.
Data from the Australian Securities and Investments Commission (ASIC) show just under 1500 (1495) companies in the construction sector have gone into liquidation, receivership or administration so far in the financial year 2022 to 2023.
Parmeet Jassal, director of a building advisory group, shares some important information on how new homeowners can escape these scenarios before signing building contracts.

The recent liquidation of many businesses has shaken both the industry and wider community, leaving many people with unfinished homes.

The collapse of Porter Davis left 1700 properties in jeopardy across Victoria and Queensland, while the status of more than 50 projects through Lloyd Group remains unclear.

Parmeet Jassal, director of New Home Guide, a building advisory consultancy, says: "Greed, mismanagement and government incentives played a big role in the collapse of several major companies."

Speaking to SBS Punjabi, he says he believes that the companies kept signing new contracts to get more leverage from their banks to buy new development sites to make more money, but didn't want to deliver existing projects as margins were low.

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Data from the Australian Securities and Investments Commission (ASIC) show that just under 1500 (1495) companies in the construction sector have gone into liquidation, receivership or administration so far in the 2022-2023 financial year.

Warning signs when choosing a builder

Mr Jassal says that building a house is one of the biggest investments of anyone's life, and should be a joyful, not a stressful, experience.

"When choosing a builder, there are many warning signs to look out for, like checking the builder's history and conducting reference checks, ensuring the builder holds the correct insurance, and most importantly, understanding the building contract," he says.

I speak to so many people, and they are getting mistreated by their builders; once the contract is signed, many builders take the customer for a roller coaster ride.
Parmeet Jassal, building consultant

Understanding the building contract

Mr Jassal advised homeowners building their own homes to pay for a contract review to get an unbiased opinion.

"Make sure this opinion is not coming from other builders as it will be a conflict of interest. It may cost you a little now but can save you a thousand later, and you know your contract has all the inclusions you need," he said.

Mr Jassal, who educates people about building new homes and investing in real estate, says he has spoken to many people about this topic in the past few days and was surprised how unaware they were about their rights and also to the contractors who have pending dues with Porter Davis.

The Victorian government is currently investigating whether collapsed building company, Porter Davis, illegally left customers uninsured after taking their deposits.

Disclaimer: This podcast/article is general information. Please see a professional for legal or financial advice.

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