According to ASIC insolvency data, there were 2,975 building companies that entered external administration in 2023-24, representing some 27% of all insolvencies.

The collapse of Porter Davis on 31 March 2023, left some 1,700 homeowners across Queensland and Victoria having to deal with the fallout.

These are extremely sobering figures. The reality for homeowners is that they are often left dealing with liquidators without many options and faced with substantial losses.

What can you do if you suspect your builder is facing financial difficulty?

The Porter Davis liquidation in early 2023 put into sharp focus the practice of some builders taking deposits from owners before obtaining domestic building insurance for their work, insurance that helps to protect owners in the event of a builder’s insolvency.

In the case of Porter Davis, this practice left thousands of owners without insurance to recover the loss of their deposits, leading the State Government to implement a relief scheme to compensate home owners over $28 million, later extended to 20 February 2024 and expanded to other builders in liquidation.

On 31 December 2020, the extension of the temporary relief measures introduced by the Federal Government on 22 March 2020 came to an end.

In their place, the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 (Cth) (Act) and corresponding Regulations took effect on 1 January 2021. The Act provides for a debt restructuring process which will allow:

The new Coronavirus Economic Response Package Omnibus Act 2020 (Cth) (CERPO Act) provides support to businesses and individuals suffering financial distress for at least 6 months from 25 March 2020. Relief has been given to businesses, individuals and directors.

Businesses – Creditors Statutory Demands

The Federal Government will extend the temporary relief measures for financially distressed individuals and businesses to 31 December 2020.

The measures include:

1. The period within which a statutory demand must be complied is extended from 21 days to 6 months.

2. The minimum amount for a statutory demand is $20,000

3. The period within which a bankruptcy notice must be complied is extended from 21 days to 6 months

4. The minimum amount for a bankruptcy notice is $20,000