Regulators failed, reform needed, Porter Davis victims say

Several home builders in Victoria have been failing to take out the necessary insurance before taking deposits, exposing customers to thousands of dollars in potential losses.

The Age has confirmed several examples of builders being fined for insurance breaches and obtained contracts showing a major home builder delayed taking out insurance on two occasions.

Protesters called for support from the Victorian government on the steps of parliament on Sunday.Credit: Wayne Taylor

At least five builders have been fined by the Victorian Building Authority for serious breaches of insurance requirements and other failures since 2021. One of the builders was also suspended for three months and two were stripped of their registration.

The Age has obtained a Metricon contract for a residential construction that shows domestic building insurance was not provided for four months, leaving the customer exposed during that period. A second Metricon contract shows insurance was taken out three weeks later.

Consumer Affairs Victoria says builders must obtain insurance for all residential builds valued at more than $16,000 before taking customers’ deposits or any other money. The insurance, which is paid for by the builder, covers the client if the builder dies or is declared insolvent before work is complete.

When Porter Davis collapsed last month, it was revealed the builder was taking deposits from customers without having a domestic building insurance policy in place first. The Victorian Building Authority is investigating whether it broke the law.

Premier Daniel Andrews: “We can potentially support them.”Credit: Joe Armao

The practice has prompted calls for reform, with victims questioning how the failure to obtain insurance before taking a deposit had not been caught by regulators.

A Metricon spokeswoman said the company took its obligations seriously and audited contracts each week to rectify issues.

“The company has strong processes in place to ensure that home warranty insurance is taken out at the required time in each state in Australia,” she said.

When Privium collapsed in 2021, The Australian Financial Review reported that some clients did not have insurance.

Mike Tarno (left) comforts another homeowner at the steps of the Victorian Parliament on Sunday after the collapse of builder Porter Davis.Credit: Wayne Taylor

Richard Williams lost his $40,000 deposit when Porter Davis became insolvent last month despite being led to believe the company had sought the necessary insurance.

Last week, he wrote to Premier Daniel Andrews calling for reform.

Williams questioned how the failure to immediately obtain insurance had not been caught by regulators.

“Regrettably, the Porter Davis situation has laid bare the inadequacy of the current regulatory regime,” Williams wrote.

Wayne Farnham, the Liberal member for Narracan and a former builder, said the practice of delaying insurance was not uncommon.

“I don’t think Porter Davis would be the only builder that has done that, that has taken deposits without having the proper warranty insurance done. The solution to that would be that all deposits should be held in trusts until the warranty insurance and the building permits are issued,” he said.

Andrews said on Sunday that he was unaware of any other builders aside from Porter Davis engaging in the practice, but reform could be worthwhile to give the authority more oversight.

“Maybe that’s where we need to focus our efforts once we’ve established what’s happened … what are the lasting reforms that need to be made?”

Meanwhile, distressed families affected by the collapse of Porter Davis protested on the steps of Parliament House, calling on the government to help them get their deposits back.

“Hopefully, there is means with the current state budget coming up in May to be able to try to return our money or set up a fund of some sort to help these victim families,” said one protester, Mike Tarno.

Tarno said he and his partner had lost $40,000 because Porter Davis had not taken out insurance on his build.

“We’re all victims of regulators that unfortunately didn’t enforce the rules properly,” he said.

“It’s just a massive loss of a year and a half of our life. It’s all the shattered dreams that we had. You would think of yourself in this new house, this beautiful place that you could live in, that you worked 20-plus years of your life to be able to get, and then it’s all gone down the drain, literally overnight.”

The premier said the government was waiting to establish what had occurred before making a decision on any support.

“We can potentially support them. The reason I’m not making announcements today about that is because we’re just not quite ready to do that,” Andrews said.

Opposition spokeswoman for housing Jess Wilson accused government agencies of failing to oversee insurance requirements.

“A full-scale review of the domestic building insurance regime is required.”

In a statement, the Victorian Managed Insurance Authority said it had no role in compliance.

The VMIA has received about 1000 claims from homeowners who had insurance with Porter Davis since the builder became insolvent last month and a spokesman said its priority was on making sure they were paid out as quickly as possible.

“We’ve been working hard and have increased resources to process the claims as quickly as possible, so we can help people affected (to) complete their homes. This includes additional claim assessors, call centre staff, and commencing building site inspections as a matter of urgency,” he said.

The authority encouraged homeowners who did not have an insurance certificate to speak with the Porter Davis liquidator, Grant Thornton.

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