Builder’s Bankruptcy – Finance

So the builder has become insolvent and the house is half built…………..what are the financial implications?

To finish a partially built project using another builder is going to cost more than if your original builder finished the project. For an idea of possible costs see Is The Insurance Enough?

Builders don’t like taking over half built projects and you aren’t in a buyers market so rates will be higher.

There should to be a couple of things that could help you:

  • Unless progress has been slow there is likely to have been a fair bit more work done than you have paid for since your last Stage Payment. – Under most contracts you don’t have to pay the builder for work completed prior to the bankruptcy until the house is completed and you can deduct any additional costs from any payments due to the builder, or his administrator.
  • Many states now require the builder to have insurance against insolvency. This insurance should allow you to claim up to a percentage (typically 20%) of the total contract value to have the house finished by another builder. This completion must be to more than the original specification.

I’ve spoken before about the importance of records and when dealing with completion of your house it is vital that you keep good records of all costs associated with the completion of the house.

Make sure your costs include all professional advice from lawyers, project managers, and other building professionals that you may need to engage.

If you want to find out more about Builders insurance Its worth looking at the QBE website.

A friend of mine whose builder went bust told me that the recovery added another $30,000 to the cost of the house………………How much did it add to your house?

For more legal posts see Contracts



  1. Haido

    So will the insurance be enough to finish the house?

    1. Brian Ashworth (Post author)

      It depends.

      I will prepare a worked example of a likely scenario for posting in the next week. See


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