It’s a big life decision, but choosing a builder often relies on word-of-mouth

It’s a big life decision, but choosing a builder often relies on word-of-mouth
  • PublishedSeptember 16, 2023

He signed a contract three years ago at a new development in Port Adelaide.

But this week’s collapse of the builder, Qattro Built, has left him and about 200 others unsure of what will happen to their partially-built homes.

“It’s been an emotional couple of days but I’ve tried to remain focused on being positive through this ordeal,” he said.

Qattro was the third builder to enter liquidation in South Australia in recent months, following the collapse of Felmeri Homes and 7 Star Construction.

“It’s devastating what’s happened this week, it affects so many people,” Mr Brook said.

A man wearing a sunglasses looks to the side of the camera. Behind him is a housing development under construction
Rick Brook says recent events were “devastating” for both him and the industry more broadly.(ABC News: James Wakelin)

“I have so much empathy for the people that work for these building companies — they lose their jobs. The tradespeople that lose money.

“And for myself personally, it will affect me financially, which is really disappointing and frustrating.”

Mr Brook expects he will receive a building indemnity insurance payout of up to $150,000.

But with some of the work on his home needing to be redone, the payout will unlikely fully cover the costs of finishing the build.

Adding to his frustration, he said he made a “significant payment” only last week.

“So that’s probably taken me above what’s been done on the project as far as completion,” he said.

“I do have a fair bit of rectification work as well.”

‘Are people going to have confidence in building?’

While the state government and the Housing Industry Association (HIA) believe the worst is over for the industry, discussions are underway to see what improvements can be made to protect consumers and prevent other companies from collapsing.

Building inspector Mike Pearl, who has worked with many of the home buyers left in limbo by recent company collapses, said it has been “very hard” for builders to manage on fixed price contracts in the years since the pandemic began.

“A lot of builders signed a lot of contracts, there was a lot of supply issues, pricing went up,” he said.

“If you’ve got a fixed price contract, what cost $1,000 three years ago is now costing $1,400.”

South Australia’s Minister for Consumer and Business Affairs, Andrea Michaels, said such “historical problems” were easing.

A woman speaking and gesturing with her hands
Andrea Michaels says Consumer and Business Services has been meeting with builders it has received “increasing complaints” about.(ABC News: Lincoln Rothall)

Mr Pearl said while South Australia had been “fairly insulated” so far, he fears there may be a few more builders pushed to the brink.

“Unfortunately it’s probably a matter of time before another one or two don’t make it,” he said.

“We hope they do.”

He said other trades will also be significantly impacted.

“Typically mum-and-dad businesses, sole traders, small companies, that will be hit with a $50, $80, $100,000 loss from the builder, some of them unfortunately won’t get through it either,” he said.

Ms Michaels said Consumer and Business Services (CBS), the state government division that aims to protect consumers and support and regulate business, has been meeting with the industry.

“There’s also been interviews with particular builders where we sense there’s increasing complaints to try and step ahead of it,” she said.

Two men wearing tshirts and sunglasses on their hand stand in front of a house under construction
Rick Brook has enlisted the help of building inspector Mike Pearl.(ABC News: James Wakelin)

Mr Brook said the collapse of any building company was “devastating” for the industry.

“We’ve got a lot of good builders in South Australia … unfortunately we’re a victim in this particular project but hopefully there’s some learning from this moving forward so we can protect the industry,” he said.

He wants the government to speak with him and other affected home buyers to see what changes can be made.

“Are people going to have confidence in building in the future?” he said.

“So this is why it’s really important that we get together as a collective, we listen and we communicate and we try and resolve moving forward so we can protect the building industry.”

Consumers forced to rely on word-of-mouth

Consumers can search CBS’s website to check if a builder is licensed, and what conditions, if any, have been imposed.

They can also see if the license holder has entered into any enforceable undertakings or assurances with CBS.

But, for the most part, consumers looking for a builder are left with old-fashioned word-of-mouth.

Ms Michaels recommended consumers looking to sign with a builder “get a number of quotes and do your due diligence”.

A woman looks off camera with a serious expression
Andrea Michaels says consumers should check their builder has taken out building indemnity insurance on their behalf.(ABC News: Lincoln Rothall)

“Word-of-mouth is very strong in the building industry so have a talk to other people who have used that builder,” she said.

“If you’re signing up a contract, make sure you check that the building indemnity insurance is there.

“You can do that through the QBE website and verify independently yourself.”

The importance of word-of-mouth was also highlighted by the HIA’s Stephen Knight.

He said builders were also now “building in margins” to cater for cost increases.

“Those builders who have got through to now, I would think, would be strong and would be able to complete the work on a reasonable time frame and for the contract sum,” he said.

A red sign reading Felmeri Home on the ground, with construction material and houses in the background
Felmeri Homes are one of three South Australian builders to enter liquidation recently.(ABC News: Che Chorley)

Mr Pearl said research was crucial when choosing a builder.

“Speak to previous people who have built with them, see what their experience was like,” he said.

But he acknowledged even a good reputation does not guarantee protection from a business going under.

“I don’t know how you can ever guarantee that, but you need to minimise your risk,” he said.


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