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What to do when your builder goes bust?

The post pandemic market of building material and labour force is absolutely bonkers. You might have more luck throwing a load of spaghetti at the wall and watching what sticks than actually completing a building project successfully.

It is a client and consultant's worst nightmare when their builder (or contractor) files for bankruptcy. However, post pandemic, it has become a common occurrence. We are now seeing it on a regular basis. If you happen to be in the position where the builder becomes insolvent - don’t panic. The biggest question is: how have you protected your interests and what is your position in this situation?

  1. Do you have a written contract? If you do - find it now. Depending on the form of the contract it might differ slightly but it should have a basic outlay of what happens next with your project.

  2. What are your agreed payment terms? If you paid in stages for the works as completed - you can give yourself a pat on the back and breathe a sigh of relief. If you kept a retention of some sort - bonus points. Even though in terms of the programme and progress your work is going to be affected - the financial situation isn’t leaving you out of pocket.

  3. Contact the liquidators Whatever questions and queries you have - contact the liquidators. Depending on the situation of the company and the assets it owns - you might be able to claim some damages back. It might also be the case that liquidators will be trying to outsource your contract to others. Discuss with them any next steps they will be taking in relation to your case.

  4. Re tender the work. As before - do not panic! Don’t hand over the work to the first person who walks in. Depending on the stage you are at it might be easier or more complex but don’t let your emotions blindside you. As before - make it clear what work is outstanding, what has been done, what you expect in what timescale. And let builders sell themselves to you.

Finally, what can you do to prevent this situation from happening again? To be completely honest - nothing. It’s one of those things where you can only minimise the risk by running effective due diligence and minimise effects by combination of terms and requirements within your contract. Of course you have tools available such as a performance bond or insurance protecting you. But these aren’t cheap. It’s something you should really assess at the cost plan stage.

To summarise. If you are a client on a construction project where the builder has gone insolvent - do not panic. Assess your situation and consider your options going forward. If you can’t do it on your own you are welcome to schedule Project Emergency Session with me to actually go over this and build a plan going forward.

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