Two Victorian building companies Wulfrun Construction and Westernport Constructions collapse
The two Victorian builders have gone into liquidation with one impacted homeowner spending $300,000 for a half-finished house.
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Two Victorian building companies are the latest casualties of the construction industry crisis having gone into liquidation on Wednesday, with one homeowner having forked out $300,000 for a now half-built house.
The first company, Wulfrun Construction, went into voluntary liquidation with insolvency firm BDO Australia appointed as administrators.
Dad-of-two Mark, who did not want his surname used, is one homeowner who has been impacted by the construction company’s collapse after signing up to build a new house last year for a fixed price of $660,000.
The original home in the suburb of Newport had been in Mark’s family for 40 years and was demolished to make way for a new two storey, four bedroom house.
Mark said he was happy with the builder, who despite delays to the expected December 2021 completion date, had the slab laid and the framing done in the house.
But then work stopped around April this year.
The mortgage broker said the builder was upfront about “cashflow” problems and Mark was happy to pay out an estimated $50,000 extra for the project to continue.
But the dad, whose two kids are aged 12 and nine, claims other homeowners working with Wulfrun Construction weren’t willing to do the same.
Now he finds himself in a “desperate situation” and said it’s “absolutely devastating”.
“The underlying feeling is that fear of losing your home, that piece of land that has been in my family since the 1980s, where you grew up and spent your childhood. There’s that guilt of demolishing a house that effectively needed to be demolished – it was built 70 to 80 years ago – it was essentially a weatherboard house and needed to be updated, but having young kids its been pretty disruptive,” he told news.com.au.
“We moved out of the house in February 2021 into a rental but the owners wanted to take the property back to renovate and so we moved to this place. So we have moved twice in a period of about five months, which was really disruptive, and throw Covid in and homeschooling, its been a pretty difficult time.”
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Mark has been scrambling to find a solution to keep the frame covered so it isn’t destroyed by bad weather, particularly as he doesn’t know when he can get another builder in. He thinks he will need to pay $3000 to keep it covered.
But the 48-year-old said he feels no anger towards Wulfrun Construction as he recognises the unprecedented situation the construction industry is experiencing.
He added he isn’t owed any money from Wulfrun Construction and he understands that the builder was dipping into his own life savings to try and keep things running.
‘Exorbitant’ increase in cost to continue building
But now Mark faces “exorbitant” costs to continue the build.
He feels “let down” by the insurance system, which he said fails to cover the nightmare situation, with the dad fearing his family could face “financial ruin”.
“The insurance is inadequate. So your standard domestic builders warranty insurance is 20 per cent of the contract price, so in my case we’ve got cover for $131,600. My contract says I have $360,000 left to complete the house,” he said.
“The reality is it’s more likely to be $550,000 plus additional rent, so you can see how inadequate that insurance is. It’s going to cost me ballpark at least $200,000 to finish this house above what I already have finance for and I’ve got insurance for $130,000. The challenge there is everything seems to be inadequate with these unprecedented times.
“The insurance company has things factored in when the building industry is not under stress and we’re now facing a snowball effect of costs.”
Complicating the situation even more, there are fears he won’t be able to increase the amount he can borrow as he just left his full time job to become self-employed.
He’s also worried about engaging another builder who could also go bust.
Mark added his 12 month interest only period for loan is expiring next month too, which means repayments will go up on his half built house.
“We are fighting an uphill battle. The house won’t be finished if we go back through a registered builder and insurance,” he said.
“It will be 18 to 24 months before it gets finished, so that’s two years from today and that’s $60,000 in rent.”
BDO, the liquidators of Wulfrun Construction, declined to provide any details to news.com.au on the company’s outstanding debt, how many creditors were impacted and what went wrong for the business.
“The liquidators are gathering background information regarding the company’s affairs and have liaised with the building insurer regarding the company’s outstanding projects,” a spokesperson said.
“An update will be provided to creditors in the first report on 8 June 2022. We are unable to make any further comment at this stage.”
‘Significantly impacted by the company’s failure’
Another Victorian company called Westernpoint Construction Pty Ltd also went into liquidation on Wednesday with Pitcher Partners appointed to deal with the collapse.
Liquidator Innis Cull from Pitcher Partners told news.com.au that the firm had been newly appointed.
“At this point, we are aware of one homeowner who has been significantly impacted by the company’s failure,” he said.
“The homeowner was required to pursue the company through the Victorian Civil & Administrative Tribunal for compensation before proceeding to wind up the company.
“We will now be investigating any other potential creditors and the level of outstanding debt.”
Construction industry crisis
Australia’s construction industry has been plagued by a spate of collapses this year.
Earlier this week, two building firms both based in NSW became the latest casualties of the crumbling construction sector.
Affordable Modular Homes Pty Ltd, a Central Coast local business that specialised in small houses, has shut its doors for good, owing tens of thousands to several creditors including Bunnings Warehouse.
Another NSW builder, Statement Builders Pty Ltd, with a head office in the Sydney CBD, has also folded.
Late last week Geelong-based builder Waterford Homes, which had 10 homeowners with current builds at various stages of completion and 60 creditors owed at least $600,000, also went under.
A company that contracted for the construction sector, Fire Services Australia (FSA), also collapsed last week owing $10.6 million and impacting 123 jobs.
Rising costs, disrupted supply chains and periodic lockdowns have created a profitless boom, with many construction companies committed to projects that are no longer financially viable thanks to major price increases for building materials, according to experts.
At the start of the year, two major Australian construction companies including Gold Coast-based Condev and industry giant Probuild went into liquidation.
Smaller operators like Hotondo Homes Hobart and Perth firms Home Innovation Builders and New Sensation Homes, as well as Sydney-based firm Next have also collapsed, leaving homeowners out of pocket and with unfinished houses.
At the end of last month, two firms from Queensland collapsed just days apart, Pivotal Homes and Solido Builders.
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, and it could see thousands of people’s homes impacted in the coming months.
One includes a Victorian construction company that might be about to collapse after it racked up millions in debt and building works have stalled for months.
Snowdon Developments Pty Ltd has 15 creditors chasing it for debts totalling $2.5 million who are demanding the Supreme Court of Victoria impose a winding up order to force the company to go into liquidation “on the grounds of insolvency”.
There are between 10,000 to 12,000 residential building companies in Australia undertaking new homes or large renovation projects, a figure estimated by APB.
Originally published as Two Victorian building companies Wulfrun Construction and Westernport Constructions collapse
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