For some time now there has been speculation as to the ever-looming collapse of the building and construction industry in Australia. At the start of the COVID-19 Pandemic in 2020, it was contemplated that the builders would simply not be able to trade and there would be a huge surge in insolvency in the building and construction industry. That hasn't happened as yet, for a number of reasons, but especially because of government payments that helped insulate builders and subcontractors from insolvency.
However, two years on and the financial pressure on participants in the building and construction industry is starting to take its toll. There has been a string of collapses of major stakeholders in the industry, including Privium in late 2021 who left more than 2000 homeowners with unfinished homes and close to $43 million in unsecured creditors and BA Murphy in late 2021 who again owed more than $11 million to more than 500 creditors. The lasted in the string of administrations is Probuild, who just last week was placed into administration by its parent company. Probuild is said to have more than 2300 creditors so far, with more than $14 million alone being owed to its employees. The number of creditors owed money by Probuild was so long that the Court dispensed with the need to contact them by postal mail.
Unlike some of the collapses of other builders, the potential fall of Probuild will likely cause a major shockwave in the building and construction industry within Australia given its size and the number of other industry participants it interacted with. Whether it is owners or developers that are stuck now with incomplete sites and continuing to incur costs arising out of the delay, or the subcontractors of Probuild who are now scrambling to try and recover whatever they are owed. This is definitely a space to watch.
What has caused this situation?
Probuild's parent company has blamed the tight border restrictions placed that Australia has. However, there is certainly more to consider here than border restrictions. The pressure placed on those involved in the builder and construction industry in Australia also stems from a significant increase in materials and trade costs over the last two years, a failure to collect on monies owed in a timely manner, contract administration failures, lockdowns, greater regulation and scrutiny on building works,
In the current circumstances it is essential that those involved in the industry ensure that they take steps to insulate themselves as best they can. These include:
- Ensuring that your contract is carefully negotiated;
- Carefully administering contracts and sending out appropriate notices;
- Obtaining security where appropriate;
- Managing outstanding debts and utilising the Security of Payments Acts where possible;
- Lodging proofs of debts early when a creditor goes into administration or liquidation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.