Hotondo Homes Horsham, Sydney developer Merhis Group collapse amid construction crisis
Three more building companies are casualties of the construction crisis, with a major Sydney developer going under alongside more Victorian firms.
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A Victorian based builder called Hotondo Homes Horsham, which was a franchisee of a national construction firm, has collapsed affecting a number of homeowners.
The company had 11 homes under construction at the time of its collapse, while there are also 11 employees with outstanding entitlements.
It is the second Hotondo Homes franchisee to go under this year, with its Hobart branch collapsing in January owing $1.3 million to creditors, according to a report from liquidator Revive Financial.
Established 14 years ago, Hotondo Home Horsham, which is also known as AJ & JR Lynch Pty Ltd, fell into voluntary administration on Thursday with Worrells appointed as administrators.
The building franchise had been “extremely challenged by a range of external pressures currently facing the construction sector”, a statement from Hotondo Homes said.
“The Australian building industry is currently enduring a perfect storm of factors, navigating record levels of demand while facing widespread shortages of building materials and trades, supply chain delays, major spikes in the costs of materials and labour and the ongoing effects of the Covid-19 pandemic,” it said.
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After news.com.au learned of Hotondo Homes Horsham’s collapse all reference to the franchise was removed from the national firm’s website.
Worrells has been contacted for comment but did not respond to news.com.au’s repeated requests.
Meanwhile, when the Hotondo Hobart branch went under it left as many as 80 contractors and 40 customers in limbo with unfinished homes.
One Tasmanian couple said they have forked out $260,000 only to be left with a wall and partially built garage after the collapse of Hotondo Homes Hobart.
The Revive Financial report on Hotondo Hobart also showed some tradies were owed between $75,000 and $100,000 from work completed.
Hotondo Homes Horsham’s is the latest casualty in the construction industry, which has been plunged into crisis with a spate of collapses this year, as building giants and smaller operators alike are impacted.
The crisis has been blamed on rising costs, disrupted supply chains, labour shortages and periodic lockdowns, while companies have been locked into fixed price contracts, creating a profitless boom, according to experts.
Big Sydney developer goes under
Western Sydney high-rise apartment developer Merhis Group also collapsed this week with Stephen Wesley Hathway and Philip Raymond Hosking from Helm Advisory appointed as liquidators.
The Merhis Group had been embroiled in controversy after a 16-storey apartment building in Auburn known as the Aya Eliza towers was previously issued orders to resolve major defects.
The NSW Building Commissioner David Chandler publicly described the Aya Eliza towers, which had 229 apartments, as the worst building he had ever inspected.
Goodenia Developments, whose director was the founder of developer Merhis Group, was behind the 16-storey Aya Eliza building at 93 Auburn Road that had been subject to a multiple complaints.
Last year, Merhis Group was responsible for two 22-storey apartment towers in Parramatta’s CBD, but was issued with orders preventing it from allowing owners and tenants to move in after serious defects were discovered, reported the Sydney Morning Herald.
Known as Imperial, the towers at 9 Hassall Street contained 179 units between them but at the time Merhis managing director Dave Stickland said the developer took the matters “very seriously” and had engaged independent experts to assist in working through the issues raised.
He added the developer did not accept that there were “any outstanding serious defects”.
Helm Advisory said in the statement that the liquidators of the Merhis Group are currently conducting investigations and will be in contact with known affected creditors in due course.
Related Merhis Group companies owe $17m
Five other companies related to Merhis Group had already been put into liquidation, with Helm Advisory appointed by the Federal Court to deal with businesses known as The Stacey Group in July 2019.
“The liquidators’ investigations into the Stacey Group’s financial affairs, identified potential voidable transactions and insolvent trading claims in excess of $25 million,” Helm Advisory said.
“The liquidators publicly examined the related parties of interest and commenced recovery action.”
The directors of the Stacey Group agreed to pay outstanding debts via a settlement deed, Helm Advisory added, but ultimately defaulted.
“Despite partial payments of approximately $8 million being made towards the deed, the parties ultimately defaulted under the deed alleging various factors, including but not limited to disruptions in the market, tough economic climate, Covid-19 pandemic and delays in key project timelines resulting from NSW Building Commissioners actions,” it said.
Helm Advisory said the deed was varied on four occasions, but they were left “with no alternative but to commence action to terminate the deed and pursue the parties”.
“At the time of default, there were outstanding amount owing in the proximity of $17 million plus interest,” it said.
“The parties under the deed indicated that they were without funds to rectify the default under the deed and were also without funds to continue to operate the Merhis Group and defend any action.
“The directors of the Merhis Group subsequently offered to have the companies within the group voluntarily wound up. In order to save costs, the liquidators accepted the appointment of the Merhis Group.”
More Victorian builders collapse
Victorian builders have been particularly hard hit with a growing list of companies that have gone into liquidation.
The latest was Melbourne-based builder called Dwelling Building Group, which went into voluntary liquidation this week with three residential projects and four employees impacted, Andrew Poulter from IRT Advisory said.
Mr Poulter told news.com.au that information is still incomplete which is common with many smaller insolvencies, as “the books and records are not up to date and we have not yet received a Report on Company Activities and Property from the director”.
“There are three projects on foot which are substantially incomplete, based on verbal advices from the director, all of which are residential,” he added.
News.com.au reached out to the owner of Dwelling Building Group but he did not wish to comment.
Earlier this week, Snowdon Developments was ordered into liquidation by the Supreme Court with 52 staff members, 550 homes and more than 250 creditors owed just under $18 million, although it was partially bought out less than 24 hours after going bust.
Dozens of homeowners and hundreds of tradies were left reeling after a Victorian building firm called Langford Jones Homes went into liquidation on July 4 owing $14.2 million to 300 creditors.
The pile up of failed building companies
Earlier this year, two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, went into liquidation.
The grim list has continued to grow as a number of other high profile companies also collapsed, including Inside Out Construction, Dyldam Developments, Home Innovation Builders, ABG Group, New Sensation Homes, Next, Pindan, ABD Group, Pivotal Homes and Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.
Then two Victorian building companies were further casualties of the crisis having gone into liquidation at the end of June, with one homeowner having forked out $300,000 for a now half-built house.
News.com.au also raised questions about NSW builder Willoughby Homes, which is under investigation by the government after builds stalled and debts blew out to 90 days.
An industry insider told news.com.au earlier this year that half of Australia’s building companies are on the brink of collapse as they trade insolvent.
There are between 10,000 to 12,000 residential building companies in Australia undertaking new homes or large renovation projects, a figure estimated by the Association of Professional Builders.
Originally published as Hotondo Homes Horsham, Sydney developer Merhis Group collapse amid construction crisis
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