Porter Davis liquidation: what to do if you are a customer

The collapse of home building giant Porter Davis has put the brakes on the dreams of hundreds of homeowners. Here’s what to do if you are a customer.

Australia’s 12th largest builder, Porter Davis Homes Group, has collapsed despite a last-ditch rescue plan failed. 

Grant Thornton Australia on Friday was appointed liquidators of 14 companies in the PDH Group which has left at least 1700 homes unfinished across Victoria and Queensland unfinished and subcontractors.

Here’s what to do if you are a customer.

 

How to know if your builder is struggling?

There are a number of indications for people who are building their own home should be on the lookout for.

Common indicators are builders not answering phone calls; long delays in construction; the builder “walking off” the construction site without explanation; the builder’s temporary infrastructure (e.g. portable toilets and site fencing) removed.

Another red flag is if the builder asks for more than 5 per cent on top of what they are already getting from you which might be a sign they need cash flow to maintain their business.

If you have already entered into a contract and your builder starts asking for upfront payment so they can order material or pay their subcontractors, this is also a warning that they may soon be bankrupt.

What is happening in the building industry?

The industry has been hit with a triple whammy and large building companies collapses are expected to continue for the rest of 2023 and into 2024.

The basic issues are a combination of the Covid pandemic sparking a surge in material costs that put a squeeze on margins coupled with an unprecedented demand for new housing.

The third factor was that with interest rate rises there has been a slowdown in construction. With big companies needing a large workbook to keep going amid material costs rises, they signed too many contracts to keep up cashflow during the pandemic.

When the sector slowed and cash flow dried up exposed builders did not have the reserves to continue operating and had to call in administrators or liquidators.

ustralia’s 12th largest builder, Porter Davis Homes Group has collapsed.

What happens when a big builder goes bust?

Usually a liquidator or administrator takes control of the company and their licence is

cancelled immediately and they must cease carrying out building works.

If it is an administration, the administrators will judge whether the company can go on or if they make moves to sell it.

If those two aims cannot be achieved it will go into liquidation and most if not all employees will be terminated immediately.

The insolvency appointment is often an event of default under contracts. This means principals and developers can terminate contracts with the company.

A secured creditor with security over all, or most, of the company’s assets may appoint a receiver and manager.

The receiver and manager will take control of and recover assets subject to the secured creditor’s security and after payment of their costs, pay funds recovered to the secured creditor up to the balance of its debt.

Unsecured creditors, like homeowners, will have a much more difficult time to get any money back.

What are the next steps for Porter Davis customers?

1. Firstly, they should obtain legal advice on what your options are. Importantly, do not make any more payments.

This will ensure that their losses from the incomplete works are minimised and maximise the available funds available to you to re-engage another builder.

2. They will then need to contact the administrator/receiver to confirm that you are likely to be a creditor of the company for an amount that has not yet been determined. This will ensure that they are kept up to date with the progress of the administration/liquidation of the builder, including receiving copies of all reports to creditors.

It will also enable them to attend any meeting of creditors that may be held by the practitioner and vote on resolutions to put to the creditors of the company.

3. Each state has different processes in the case of builder insolvencies but all have a home warranty scheme and the process of claiming should be done as soon as possible. In Victoria contact the Victorian Building Authority.

Call 1800 815 127 or visit https://www.vba.vic.gov.au. Also, contact Consumer Affairs Victoria 1300 55 81 81.

In Queensland you can contact the Queensland Building and Construction Commission for details on the home warranty scheme. To find out more call 13 93 33 or log onto https://www.qbcc.qld.gov.au/

4. Finally, they should start thinking about who will complete their dream home. It is up to them to appoint a new builder which sometimes can be difficult with builders often being reluctant to complete a “half finished” job, depending on the degree to which the current works are defective.

It is also important to take control of the building site from the current builder, they should ensure that the site is secured, and trespassers are restricted from the site.

They may be required to assist in the return of hire equipment located on the site to the owner of that equipment.

Who owns Porter Davis Homes?

Anthony Paul Roberts founded Porter Davis in 1999 and is a director of the parent company PDH Group with Paul Anthony Wolff and Bruno Santi.

They all have shares in the business and with more than a dozen subsidiaries there are many other owners with smaller stakes.