SA Best pushes for big building firms to be forced to set aside cash to pay subcontractors, amid spate of home company collapses

As a seventh SA home builder collapses in less than a year, new laws will be put to State Parliament forcing large companies to set aside cash to pay subcontractors.

• Insurance claims skyrocket amid string of building company collapses

Big building firms would be made to quarantine cash to pay subcontractors and stop them being left in the lurch if projects collapse, under proposed laws to be put to State Parliament.

As the SA industry reels from the failure of seven home builders in less than a year, SA Best will push for the adoption of new safeguards it says would protect vulnerable subbies.

Implementation of statutory trusts was recommended by a major Federal Government review from late 2017, but has met with resistance over fears it could just add “red tape” and cost.

Coast to Coast homes is the seventh SA home builder to collapse in less than a year.

Coast to Coast Homes went into liquidation on Friday leaving 15 staff without jobs and 90 homes unfinished.

The company owes 321 creditors $3.76 million according to a statement of company affairs filed by liquidators with ASIC yesterday.

SA Best MP Connie Bonaros said the spate of recent company collapses showed a fragility in the building sector and action was needed to avert a cascade of failures.

Ms Bonaros, who along with fellow SA Best MP Frank Pangallo holds a key balance of power position in the Upper House, said other states were moving towards statutory trusts.

“It’s critical we have that sort of scheme, in terms of providing relief to the most vulnerable,” she said.

“Those groups are subcontractions, usually made up of small family businesses.

“If a builder was required to quarantine X amount of dollars in terms of the contract cost then, at any given point in time, once that work is complete the contractors could be paid.”

Mr Bonaros said SA Best would consult on its plans once fine detail was finalised.

Currently, subcontractors hit by the collapse of bigger firms are forced to join a queue of other creditors and usually left empty-handed.

One of Coast to Coast Homes’ premium designs. Picture: Coast to Coast Homes.

A State Government spokeswoman said it was willing to consider SA Best’s plans when the proposed legislation came to Parliament, which is expected after the August winter break.

However, the Government stressed it was also taking immediate action to assist the industry.

“In the meantime, the Commissioner for Consumer Affairs is convening a roundtable as soon as possible with the Master Builders Association, Housing Industry Association, the Government insurer and the Small Business Commissioner to explore options for financial viability assessments for builders,” the spokeswoman said last night.

“The Commissioner will work with industry and the insurer to review current licensing criteria but also look at better ways of regular assessments of financial viability once licenced to protect consumers and subcontractors, all with the view to possible reforms.”

Master Builders Association of SA chief executive Ian Markos said trusts “create red tape, restrict cash flow, make payment terms longer, increase costs to builders and subcontractors and make construction more expensive for consumers”.

Instead, he urged a tightening of licencing as some builders were “going broke because they do not understand the financial management of running a business”.

“Licences are too easy to get and training and enforcing a minimum standard of financial knowledge must be required,” Mr Markos said.

“Until licensing is tightened up, these problems won’t go away.”