Last minute surprise...advice needed please!!!

What would you do (noting that I have started with a very general set of facts) ?

  • Enforce the contract and risk partial completion and loss.

    Votes: 5 22.7%
  • Walk away from the contract and start again with a different builder.

    Votes: 17 77.3%
  • Enter into a new contract with the same builder at a higher price.

    Votes: 1 4.5%
  • Walk away from the contract and sell the land.

    Votes: 0 0.0%
  • Consider approaching the media.

    Votes: 0 0.0%

  • Total voters
    22
Hello Forum Members,

After paying off a block of land over the last 10 years, and entering into a standard form MBA building contract with a well established and reputable builder through a separate sales and marketing/project management service (will leave out company and business names and location at this stage, needless to say I am in a capital city in Australia) the building permit has just been issued. Under the contract, construction must start within 10 days of the building permit issuing. Now the big issue...

The builders have just advised me that (for a variety of costing issues beyond my control or responsibility) there is a possibility that they may not be able to complete the construction at the contracted fixed price as the business may not be viable by the end of construction (again, for a variety of reasons beyond my control).

As a way forward, the builders have provided me with a number of options, some of which involve additional expense. At one end of my range of options, is a decision to walk away from the contract altogether, engage another builder, go through all the work of the past year again, and pay a new (and substantially higher) price.

At the other end of my range of options is a decision to request that construction begin, and proceed as initially planned (and contracted), accepting the risk that the builders may close their doors at any stage of the construction and leave me with a part-built house.

Somewhere in the middle of these two extremes, is the option to enter into a new contract or arrangement with the same builder and have the house built at a higher price. I'm currently seeking legal advice from a property law expert and undertaking my own risk assessment.

To provide some context about the size and significance of this long term investment, the house in question is in the $600,000 to $850,000 price range, the block of land is in a prime suburb (and cost $200,000 a decade ago) and the investment property, once completed, should conservatively be worth $1.2-$1.3M and return $1000-$1300 per week.

As a keen property investor, I've followed this great forum for years reading other people's issues and useful suggestions. This is the last thing you expect to hear a week before the slab is to be poured, so now it's me sharing my issue, and asking for useful suggestions/opinions.

Has anyone else had or heard of a similar scenario? What would you do? Any comments would be much appreciated, and I'll make sure I monitor the thread and let you know how it all ends.

Cheers:confused:
 
I'm sorry to hear you are in this position.:(

On the plus side the builder has been up-front with you about their financial position. That being the case, I would not be entering any contract with them either at the original agreed price, or a higher price and risk their collapse part way through the project.

Going to the media will not help you get what you want and may just tip the builder over the edge sooner as all their other work dries up.

Selling the land is an option, but not your desired outcome really.

If it were me, I would sign a contract with another builder for a higher price and get the house completed. I'd also look at taking legal action against the original builder to get some compensation for having to pay another builder more money.
 
Agree, would not give money to anyone who tells you they are going broke.

Even if the house was completed, if they close up then your ability to have remediation works done on the property if./when faults appear reduce drastically.
 
Is there any chance you can buy the approved plans off the builder and take them to another builder to complete? That way you don't have to go back through the choosing-plan-and-getting-approval stage again. Assuming you have one of those plans owned by the builder here not one you got drawn up yourself by a draftie or architect.
 
Is there any chance you can buy the approved plans off the builder and take them to another builder to complete? That way you don't have to go back through the choosing-plan-and-getting-approval stage again. Assuming you have one of those plans owned by the builder here not one you got drawn up yourself by a draftie or architect.

Good idea here I'd look into this. And if they then try and charge a bit of an arm and leg to buy it, just mention the fact that we could all go down the legal route of compensation for stuffing up our fixed price contract. Hint hint. Nudge Nudge. Hand over the plans!
 
Good idea here I'd look into this. And if they then try and charge a bit of an arm and leg to buy it, just mention the fact that we could all go down the legal route of compensation for stuffing up our fixed price contract. Hint hint. Nudge Nudge. Hand over the plans!

at the moment you're the one who wants to break the contract not them.
 
at the moment you're the one who wants to break the contract not them.

It depends. If the builder says they can't complete their end of the bargain that may be a repudiation of the contract which would mean that the builder is the one breaking the contract, not the OP.
 
Thanks for replies so far.

Thanks for the replies so far. Still waiting on legal advice at this stage. The good news is, we do own the plans as they are our own design. From some further enquiries, it appears that the builders are also undertaking quite a bit of commercial construction, so there are plenty of jobs on the books other than mine.
:confused:
 
It depends. If the builder says they can't complete their end of the bargain that may be a repudiation of the contract which would mean that the builder is the one breaking the contract, not the OP.

correct.

it sounds like they've under quoted and are trying to scare the op into withdrawing from the contract. i doubt they're warning them out of a moral sense to do so.
 
From some further enquiries, it appears that the builders are also undertaking quite a bit of commercial construction, so there are plenty of jobs on the books other than mine.
:confused:

it sounds like they've under quoted and are trying to scare the op into withdrawing from the contract.

Hmmm.... Now that is interesting. It could well be that they have just underquoted but are actually in good financial shape with a lot of work on their books. I'd do a background search on the company a bit and probably consider holding them to their contract. If they're big enough then chances are they won't go under and you'll get your simple resi job done at the agreed quoted price.

Might be just scare tactics to try and get their margin back where they want it. You could call their bluff and force the contracted construction. IF they are big enough to swallow it.

Cheers,
Michael
 
Depends on the size of the builder. If they're small, run. Even if you increase the cost of your job, it wouldn't be enough to keep them afloat to stop them going bust. That is of course assuming they're telling the truth, it seems suicidal for a construction company to be lying about going broke.

Could you go a credit check on them with some of their suppliers?
 
Further question?

The contract has 7 progress payments (standard MBA contract). It is my understanding that each payment is made to the builder for work completed. Can anyone confirm that this is always the case? Can progress payments under MBA standard contracts also include a component for materials or labour re the next stage?

This will also help inform my decision as to whether or not to proceed.

Comments appreciated - again.

Cheers
:confused:
 
Either they are telling the truth, and they're stretched too far (either financially or contractually); or their conditioning you for a higher end price (perhaps because they quoted too low, or just have enough work on to try it on).

Whichever the reason, you have been put on notice that your best interests are now compromised under their 'new' position: Personally I'd walk away, briskly.
 
Thanks for the offers....

Thanks for the few offers I've received from builders in Sydney to take over the job - much appreciated, but unfortunately I'm not in NSW. Am getting closer to making an informed decision, but it's not easy!
 
Thanks for the offers....

Thanks for the few offers I've received from builders in Sydney to take over the job - much appreciated, but unfortunately I'm not in NSW. Am getting closer to making an informed decision, but it's not easy!
 
OP

OKOKOK ...You said you are not in Sydney, can you tell us which state you are in and who the builders and marketing company are? There might be other people who are about to go with these businesses without even knowing that they are on shaky ground.

I live overseas now but still follow the Australian property and construction markets, and I'd want to know if there was a real chance of losing out in a situation like yours.

I have a block of land I am going to build on when this financial crisis gets a bit worse and I want to be sure I dont end up with your guy or any others like it...so I m reading reading reading

Thanks

Not Bob the Builder
 
start over again, builders have some of the best asset protection structures going around and there not frightened to use them when it suits them!!!
 
I would walk, they cant even quote properly. You have plans and I assume a finishes schedule. You should be able to get quotes from other builders in around four weeks tops.

Chomp
 
Top