With major building companies collapsing every day, choosing a builder who will be around to finish the job feels like searching for a needle in a haystack.
The widespread issues plaguing the industry have building companies big and small buckling under mounting debts, leaving thousands of half-built homes trapped in limbo and customers often tens of thousands of dollars out of pocket.
Between July 2022 and April 2023, the Australian Security and Investments Commission (ASIC) reports that 1,709 construction companies across the country entered administration – more than four a day.
With industry giants once considered too big to fail, like Porter Davis and Probuild, falling alongside local building firms, it’s no surprise homeowners are growing increasingly wary when choosing their builder.
If you want to avoid becoming the next victim of the nation-collapsing construction industry, here are a few tips on spotting the builders at risk of going bust.
Check if your builder is eligible to purchase insurance
While builders keep their financial books under lock and key, customers can get a good sense of their financial situation by seeing if they can take out home warranty insurance.
Each state, except Tasmania, requires builders to take out mandatory insurance for projects over a certain amount, ranging from $3,300 in Queensland to $20,000 in WA and NSW.
Naturally, insurers don’t want to pay out claims on dodgy builders, so it’s up to insurers to inspect the company’s financial performance to see if they can finish the projects they take on.
If it’s too risky for the insurance company, it’s too risky for your next home.
In most states, you can check if a builder is taking out the insurance through a link on their licence search.
Read reviews carefully
Reviews can give homeowners a good indication of the builder’s quality. However, bear in mind unhappy customers who sign non-disclosure agreements are often gagged from voicing their opinions.
Remember that the quality of a builder can drop quickly if they run into financial trouble — so always pay attention to the most recent reviews.
Star ratings for ‘trustworthy’ builders
For lucky Aussies living in NSW, the state’s recent five-star rating system, called iCIRT, can help weed out the good builders from the bad.
Created by global ratings firm Equifax in connection with the NSW government, companies are considered “trustworthy” if rated three stars or above.
To receive a rating, the builder’s financial statements are assessed, along with criminal history checks, previous bankruptcy checks, and disciplinary action.
While only offering insight into a limited number of builders, the system does identify some big apartment developers that operate in multiple states, including Meriton, Deicorp, Billbergia, Stockland and Buildform.
Be wary though. Builders must voluntarily allow iCIRT to check their books and can opt out of publishing their star ratings if they aren’t satisfied with the outcome.
Check their licences
Most prospective homeowners can fall into the trap of not checking the licenses of both the individual builder and the company they work for.
Sometimes the builder will personally have a clean record, but the company on the contract is facing legal action for dodgy building practices, so it’s always good to check both.
While each state and territory has their own system, the pages below will show you if the builder has been banned or disqualified, served defect claims, is facing legal action or isn’t taking out mandatory home warranty insurance.
Here’s where to look in Queensland, New South Wales, Victoria, Tasmania, South Australia and Western Australia.
ASIC company search
For only $10, curious Aussies can request information on any building company from the ASIC.
Under the ‘Search company and other registers’ tab on the organisation’s website, click ‘Search within’, select ‘Organisation and business name’ and under ‘For’, type the company’s name.
Select from a list of options on the next page, then tick the ‘Current company information’ box to get the information emailed to your account.
Once you’ve received the document, scroll down until you see the ‘Director’ listed and run their name through the court database like AustLII to see past court judgements made against them.
