Navigating Builder Insolvency: Advice and Support

Whether you are building a house or undertaking renovations or extensive rectification works, if your builder becomes insolvent, it is essential you know what to do.

The Victorian Building Authority (VBA) understands and shares the concerns of consumers and impacted parties in the event a builder becomes insolvent.

The VBA recognises these circumstances are very challenging for all those involved. We work with government agencies and appointed building surveyors to support homeowners with information and guidance.

This webpage includes useful information that may assist you if your builder becomes insolvent:

The VBA has developed a Builder insolvency and financial difficulty fact sheet (PDF, 114.44 KB) that includes information about what to do if your builder is insolvent and the VBA’s role when builders become insolvent or face financial difficulty.

What the VBA does when a building company is insolvent

When the VBA becomes aware of a building company being insolvent, it commences a process to assess whether the directors should continue to be registered practitioners.

This commences with an assessment as to whether immediate suspension is warranted. This includes assessment of reports prepared by the administrator/liquidator as part of the external administration. Practitioners who engage are generally taken through the show cause process, while those who do not engage are suspended.

The VBA works with practitioners whose building companies are in external administration on a case-by-case basis. The VBA does not immediately suspend directors’ registrations where a company is in voluntary administration and is seeking to trade out of difficulty or where a practitioner makes a reasonable response to the VBA’s initial approach.

A building company which seeks to enter into major domestic building contracts or perform domestic building work under its company name must have at least one director who is registered as a building practitioner in the same registration class as the company.

If a director of a company in external administration also holds another company, that company must have another director with appropriate registration.

You may be able to make a claim against a domestic building insurance (DBI) policy if your builder becomes insolvent.

If domestic building work is valued at more than $16,000, DBI is a mandatory requirement.

An owner-builder is someone who takes responsibility for domestic building work carried out on their own land.

The VBA has dedicated resources that explain the roles and responsibilities of an owner-builder and how to apply.

VMIA offers domestic building insurance (DBI), which covers homeowners for incomplete or defective building work when the builder has died, disappeared or become insolvent; or has failed to comply with a Tribunal or Court Order. Insurance claims can be lodged with VMIA.

Builder insolvency and work valued at more than $16,000

If domestic building work is valued at more than $16,000 and the builder becomes insolvent, you should be able to make a claim on the DBI policy.

Lodge your claim within 180 days of becoming aware of the builder’s insolvency.

Visit the VMIA website to make a claim.

If you do not have a copy of the policy or certificate of currency, the builder, building surveyor or local council may be able to provide it. If not, you can contact insurance companies that provide DBI to check whether they issued insurance for your building.

Builder insolvency and work valued at less than $16,000

If domestic building work is valued at less than $16,000 and the builder become insolvent, contact the external administrator or liquidator and submit a claim as an unsecured creditor.

Notices of administration often appear in the press or on the trader’s website.

CAV provides guidance and information to consumers on renting and accommodation, estate agents and building.

A builder cannot operate when insolvent. To find out if your builder is insolvent:

If you suspect your builder is insolvent, seek legal advice and contact the Building Information Line on 1300 55 75 59 between 9am and 5pm, Monday to Friday (except public holidays). Calling this number costs the same as a local call. Additional charges may apply if you are calling from overseas, on a mobile, or payphone.

For more information about Domestic building insurance and insolvency, visit the Consumer Affairs website.