Warning over construction company collapses and buying off the plan

As a number of Aussie construction companies collapse like dominoes, experts have warned of the nightmare that will follow for thousands of homeowners.

The collapse of two major Australian construction companies means people could miss out on ever moving into their “dream homes” or be left to fix up defective buildings, according to an insolvency expert.

Shockwaves were sent through the industry when Gold Coast-based construction company Condev Construction went into liquidation last week after its owners Steve and Tracy Marais were unable to secure a reported $25 million bailout from developers.

It came not long after the collapse of construction giant Probuild, which was working on a number of high profile projects, including 264 luxury residential apartments in Brisbane with the site reportedly taken back by the developer.

Notable projects in Condev’s reported $1 billion development pipeline include the Cannes Waterfront in Surfers Paradise, The Brookes Residences in Varsity Lakes, Natura and Brake Street both in Burleigh, and the Jindi Apartments in Palm Beach.

Condev building site on the Gold Coast. Picture: Nigel Hallett

Condev building site at Main Street, Varsity Lakes. Picture: Nigel Hallett

But there are no guarantees that people who purchased a home as part of these developments will ever get the keys, according to Andrea Joyce, special counsel at Gold Coast-based law firm Twomey Dispute Lawyers.

She warned that buying off the plan could be a gamble for people looking to get into the property market.

“That’s a risk you take when you buy off the plan that the builder could go into liquidation or there could be unforeseen delays with council approvals that could mean the project can’t be completed and settlements can’t be completed,” she explained.

“If that’s the case, then the people who have been waiting for their dream homes to be built may not see that day.”

Andrea Joyce, special counsel at Twomey Dispute Lawyers. Picture: Supplied

Sunset clause problems

Buying off the plan can be particularly troublesome in Queensland where sunset clauses can be used to terminate a contract.

Other states around Australia have moved to put more protections in place for buyers who are purchasing off the plan.

In New South Wales and Victoria, special laws were established requiring sellers to get consent from the purchaser or the Supreme Court before using the sunset clause to terminate an off the plan contract.

Condev building site at Main Street, Varsity Lakes. Picture: Nigel Hallett

The Condev site at 17 Cannes Ave, Surfers Paradise. Picture: Nigel Hallett

Joyce said the situation for people caught up in the construction collapses will be based on what buyers agreed to in the contract, although there have been reports that developers have been shortening sunset clauses as the cost of construction has skyrocketed.

“It will depend on the individual contract and the buyers but if they are putting in shorter sunset dates in off the plan contracts, then possibly if its two years, and it will take 12 months to find a builder and 12 months to complete, the developers may decide not to do anything, withdraw from the contract and wait until the financials are more viable to get on with the project,” she explained.

A mum shared pictures of a Condev townhouse build. Picture: Supplied

She was unimpressed with build quality. Picture: Supplied

The issue of defects

A mum who moved into a townhouse built by collapsed Aussie construction giant Condev recently described the horror living conditions inside the home, adding she wasn’t surprised the company had gone under.

So even if people get into their homes there is also the issue of fixing defects, Joyce added.

“The other thing is where you have a construction company that has failed, they will have buildings that have been completed that have a liability period,” she noted.

“Roughly 12 months after completion if any defects are found, the construction company is required to rectify the defects but in this instance if a construction company has gone into liquidation, they are not going to be available to remedy.

“It could lead to body corporates and individual owners having to deal with rectification work on their own behalf, which is another concern.”

Condev’s collapse was pretty much impossible to foresee. NewsWire / Sarah Marshall

Joyce recommended people do their research on developers and building companies, although she noted that Condev was a reputable company and there was nothing to suggest it would go under.

“Its possibly not foreseeable even if you do your research, but obviously buyers can mitigate the risk if they do want to buy off the plan,” she said.

“They can buy as close to completion as possible so the majority of work has been done and so close to settlement that the risk of anything going bad is probably minimal.”