The two Victorian builders have gone out of business and one stricken homeowner has spent $300,000 on a semi-finished home.
Two Victorian construction firms are the latest victims of the construction crisis that went bankrupt on Wednesday, with one homeowner paying $300,000 for a now half-finished home.
The first company, Wulfrun Construction, went into voluntary liquidation with bankruptcy firm BDO Australia appointed as administrators.
Father of two Mark, who didn’t want his last name used, is a homeowner hit by the construction company collapse after signing up to build a new home for a fixed price of $660,000 last year.
The original Newport suburban home 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 laid and framing it in the house.
But then the work stopped around April this year.
The mortgage broker said the builder was candid about “cash flow” issues and Mark was happy to shell out an estimated $50,000 extra to continue the project.
But the father, whose two children are aged 12 and 9, claims other homeowners who worked at Wulfrun Construction were unwilling to do the same.
Now he is in a “desperate situation” saying it is “absolutely devastating”.
“The underlying feeling is that fear of losing your home, that piece of land that has been in my family since the 1980s, where you grew up and spent your childhood. There’s that guilt of demolishing a house that actually had to be demolished — it was built 70 to 80 years ago — it was essentially a wood-planked house and needed updating, but having young children was quite disruptive,” he told news.com.au.
“We moved out of the house into a rental property in February 2021, but the owners wanted to take the property back to renovate so we moved to this place. So we moved twice in a span of about five months, which was really disruptive, and with Covid and home schooling, it was a pretty tough time.”
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Mark has been trying to find a solution to keep the frame covered so it won’t be destroyed by bad weather, especially since he doesn’t know when to get another builder. He thinks he has to pay $3000 to keep it covered.
But the 48-year-old said he feels no anger at Wulfrun Construction as he acknowledges the unprecedented situation the construction industry is going through.
He added that he owes no money from Wulfrun Construction and understands that the builder was pouring his own savings into trying to keep things going.
‘Exorbitant’ rise in costs to continue building
But now Mark faces “exorbitant” costs to continue building.
He feels “let down” by the insurance system, which he said doesn’t cover the nightmare situation, with the father fearing his family could face “financial ruin”.
“The insurance is inadequate. So your standard warranty insurance for domestic construction companies is 20 percent 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 it’s more likely to be $550,000 plus additional rent, so you can see how inadequate that insurance is. It’s going to cost me at least $200,000 to finish this house over and above what I’ve already financed and I have insurance for $130,000. The challenge there is that everything seems inadequate in these unprecedented times.
“The insurance company takes it into account if the construction industry is not under stress and we are now dealing with a cost snowball effect.”
To complicate matters further, there are fears that he will not be able to increase the amount he can borrow as he has just left his full-time job to become self-employed.
He is also concerned about bringing in another builder who could also go bankrupt.
Mark added that his 12-month grace period for the loan also expires next month, meaning the repayments on his half-finished house are going up.
“We are fighting an uphill battle. The house will not be finished if we go back through a registered contractor and insurance,” he said.
“It will take 18 to 24 months to complete, so that’s two years from today and that’s $60,000 in rent.”
Wulfrun Construction’s liquidators BDO declined to provide details to news.com.au about the company’s outstanding debt, the number of creditors affected and what went wrong with the company.
“The liquidators are collecting background information on the company’s affairs and have contacted the construction insurer about the company’s outstanding projects,” a spokesperson said.
“An update to creditors will be provided in the first report on June 8, 2022. We cannot comment at this stage.”
‘Significantly affected by the company’s bankruptcy’
Another Victorian company called Westernpoint Construction Pty Ltd also went into liquidation on Wednesday and Pitcher Partners was appointed to handle the collapse.
Pitcher Partners liquidator Innis Cull told news.com.au that the company had been newly appointed.
“Right now, we are aware of one homeowner who has been significantly affected by the company’s bankruptcy,” he said.
“The homeowner had to sue the business through the Victorian Civil and Administrative Court for compensation before dissolving the business.
“We will now examine any other potential creditors and the level of outstanding debt.”
Crisis in the construction sector
Australia’s construction industry has been ravaged by a wave of collapse this year.
Earlier this week, two construction companies both settled in NSW were the last victims of the crumbling construction industry.
Affordable Modular Homes Pty Ltd, a local Central Coast company specializing in small homes, has closed its doors for good, with tens of thousands of debts owed to various creditors, including Bunnings Warehouse.
Another NSW builder, Statement Builders Pty Ltd, headquartered in Sydney’s CBD, has also shut down.
At the end of last week Geelong-based builder Waterford Homes, which had 10 homeowners with current build in various stages of completion and 60 creditors who owed at least $600,000 also went under.
A company that signed a contract for the construction industry, Fire Services Australia (FSA), also collapsed last week $10.6 million owed and an impact on 123 jobs.
Rising costs, disrupted supply chains and periodic lockdowns have led to a futile boom, with many construction companies committing to projects that are no longer financially viable due to large price increases for construction materials, experts say.
Smaller operators like Hotondo Homes Hobart and companies in Perth Home Innovation Builders and New Sensation Homes, as well as Sydney-based company Next have also collapsed, leaving homeowners out of pocket and with unfinished homes.
An industry insider told news.com.au earlier this year that half of Australian construction companies on the on the brink of collapse while acting insolvent, and it could hit the homes of thousands of people in the coming months.
One includes a Victorian construction company that is on the brink of collapse after racking up millions of debt and putting construction work on hold for months.
Snowdon Developments Pty Ltd has 15 creditors chasing it debt totaling $2.5 million requiring the Supreme Court of Victoria to issue a winding-up order to force the company into liquidation “on account of insolvency”.
There are between 10,000 and 12,000 housing companies in Australia undertaking new homes or major renovation projects, a figure estimated by APB.
Originally published as Two Victorian construction companies Wulfrun Construction and Westernport Constructions collapse