Builton failure a costly housing hit

The collapse of yet another Western Australian residential builder appears set to further upset the delicate state of the sector, with financiers, insurers, 350 trade creditors and as many as 130 home owners facing losses.

Builton, which last year moved to a new $7 million office in Burswood, appointed external administrators yesterday, making it the second biggest residential builder to fail since the end of the mining boom.

Newly appointed Cor Cordis administrators Dino Travaglini and Jeremy Nipps said they were just coming to grips with the extent of Builton’s failure, which appeared likely to cost creditors at least $30 million, before accounting for the home building customers.

Mr Travaglini said the poor performance of Builton’s commercial building arm was at the heart of the group’s financial collapse. Unsecured trade creditors amounted to $16 million at this stage, while at least two secured financiers had emerged with potential claims of $14 million, most of which was with one unnamed firm.

The insolvency expert said he would be investigating the failure in order to ascertain if insolvent trading had taken place.

At least one creditor claiming to be owed a ‘financially crippling’ sum contacted Business News, saying that more than a year ago the company called in subcontractors to explain a restructuring plan that included repayment promises at the time as well as potential legal consequences for those who objected to its terms.

Cor Cordis estimates between 110 and 130 residential building customers have been left with homes at various stages of completion, putting Builton in the top league of construction collapses, second only to Capital Works Constructions, which failed in May 2015 with 229 homes under construction and a further 84 customers signed up to its Freelife Homes banner.

Builton, formerly headed by Troy Felt, did pick up some of Freelife's work.

As with Freelife, the Builton collapse has implications for the state government.

WA’s housing indemnity insurance scheme, in place since 1996, requires any residential construction work valued at over $20,000 to be insured in case the builder is unable to finish the work, or to rectify work of poor quality due to death, disappearance or insolvency.

However, QBE Group has been the only major player in the sector, controlling around 90 per cent of the market, and is understood to be main insurer of Builton customers.

The current arrangements provides for the state to reinsure 100 per cent of these WA policies issued in WA, not for just for the liabilities stemming from the collapse of a single builder to the value of between $10m and $90m, which was one of the terms of QBE’s agreement struck with the state government in 2010. 

Mr Travaglini was uncertain as the potential scale of outstanding work for up to 130 Builton residential customers.

Other recent failures, such as those of Quattro Homes and Collier Homes, had much smaller works in progress. Collier had 29 homes under construction in WA, while Quattro was building about 20 houses a year.

Builton traded under brands such as Platinum Homes, Aspireon Homes and Multi Living by Design.

Its commercial work included six projects – The Abernathy Apartments in Cloverdale, Greenwich on Bulwer in North Perth, Wandi Apartments in Wandi, Vue Apartments in Maylands, Quattro in Burswood and Orchard by the Sea in Spearwood.

It also built its Burswood headquarters last year, a property owned within the group, according to the administrators.

In housing, it was a small land developer with at least five current projects – High Wycombe Homes, Tapping Villas, Beachlife Spearwood, Riverview Estate (16 lots) and Mandurah Junction.