Is your builder in liquidation?

Recently, the extraordinary downfall of a number of construction giants across Australia has highlighted the importance of homeowner’s having an understanding of what steps to take if their home is incomplete and their builder enters into liquidation.

In Queensland, lodging a claim with the Queensland Building and Construction Commission (QBCC) under the Queensland Home Warranty Scheme (QHWS) is usually the first step however QBCC will not accept a claim unless the building contract has been validly terminated. This can happen in one of two ways which will depend on whether or not the builder’s QBCC licence has been cancelled.

Section 4 of Schedule 6 of the Queensland Building and Construction Commission Regulation 2018 (Qld) (the Regulations) provides that a fixed price residential contract comes to an end if the builder is bankrupt, insolvent or enters into liquidation and its QBCC licence has been cancelled. Therefore, if the QBCC licence has been surrendered/ cancelled, a homeowner is eligible to commence a claim under the QHWS without taking any formal steps to terminate the contract.

If however, the QBCC licence has not been cancelled, then homeowners will need to take steps to validly terminate the contract before they can commence a claim under the QHWS.

A common misunderstanding in circumstances where the QBCC licence is terminated, is that the contract is no longer enforceable. Section 4 of the Regulations brings a contract to an end only in relation to the homewoner's eligibility to commence a QHWS claim. The contract is not otherwise terminated and a homeowner’s obligations under the contract are technically still enforceable.

If you have a contract with a builder that has entered into liquidation, you should seek legal advice on how to validly terminate your contract to ensure you protect and preserve your rights under the contract and avoid any legal complications arising in the future.