Builder with cash flow problems

[Jellybean]

This weekend the NZ herald carried the article that our builder (BC) has just been expelled from his lifetime status as a master builder. He met with us 2 days before to let us know he had had a meeting with his creditors and that he had offered to pay them 50c to the dollar. The builder claims his company is going under because he stood by and tried to fix some leaking home problems from years ago. He was trying to do the honourable thing but its sinking his company.

He also said that some of the bigger creditors have said they will support him in helping him complete the builds he had started (apparently about 10 homes) in the hope that they recoup some of their "investment" into those houses - by which I expect they mean their building materials, that has not been paid for. I see all the small tradies being burnt by this as they may not be able to survive carrying debts that big or for that long. That is very devastating.
The builder is proposing that he will draw up a legal document saying that we pay only for a specific invoice on our own builds and he will email proof that he forwards that payment immediately. In that way he hopes to complete the builds he started so that his creditors recoup some of their losses and he does the "honourable" thing by completing our homes. We haven't seen the document yet but plan on handing it to our lawyer. Im not keen as I can see some tradies that have been burnt trying to claw back some of their losses directly from us or using our monies as leverage against the builder for past debts. Also Im concerned that since we have to have "stage payments" we maybe hit later with the full stage payment and thus have to double pay on an invoice - although I suppose the lawyer will catch these things. Hubby wants to see the document as he believes our "fixed price contact" would have escalated by least another $100K over the past 2 years.
In the meantime we have contacted a few of the other clients and hope to meet and discuss as a group.

[PTWhatAGreatForum]

This weekend the NZ herald carried the article that our builder (BC) has just been expelled from his lifetime status as a master builder.
.....

The builder is proposing that he will draw up a legal document saying that we pay only for a specific invoice on our own builds and he will email proof that he forwards that payment immediately.

Well, my advice is vindicated.

My concern here is you still seem to be trying to cling to some vain hope of rescuing this situation in much the same way as a gambler at the casino places another bet to try and recover the money they have lost.

Don't you get it yet? The guy is a dud. Cut your loses and run. Work in your own best interests. Don't give him another cent. Is there any part of this you still don't understand?

He met with us 2 days before to let us know he had had a meeting with his creditors and that he had offered to pay them 50c to the dollar. The builder claims his company is going under because he stood by and tried to fix some leaking home problems from years ago. He was trying to do the honourable thing but its sinking his company.

He also said that some of the bigger creditors have said they will support him in helping him complete the builds he had started (apparently about 10 homes) in the hope that they recoup some of their "investment" into those houses - by which I expect they mean their building materials, that has not been paid for.

Blah blah bull****. The only thing you can be sure of is his large creditors will look after themselves.

[jappronz]

I read this article and was surprised by his comments and even more surprised by the creditors comments regarding his character, it is very rare someone out of pocket supports the person that put them that way! Sounds like the guys a good tradie. Never the less if it was me i would be moving on and finding another team. All the best for the rest of the build!

[Door Hardware Guru]

Please keep updating us, this is an interesting and educational thread. I have had family in a similar position.

We are an architectural hardware supply company, we have supported several companies where they have been in a position of insolvency but have negotiated with creditors to trade their way out of it. But it does come down to how far in the poop they are, to put it bluntly. Some are unsavable so we have had to swallow the loss - these are usually the ones that you hear little about until it goes really smelly.

My experience is that the ones who are up-front and discuss solutions usually have a good chance of being able to resolve things with as less pain as possible, but it's never painless!! I would suggest staying in communication with the builder as much as practical also.

I would be cautious about moving on to another team in haste. I know from experience that it usually costs alot more as the new builder has to allow for alot of unknowns, so will price to suit.
My brother-in-law had a similar situation, he managed to negotiate a deal where he paid the suppliers directly and paid the original builder a set rate as a project manager to see the project through.

Good luck!

[jimO]

another fishook is the LBP scheme, how much responsibility will the "new" builder take for anything existing, i know of a builder who did a small repair on a leaky home and when the excrement hit the spinning thing a couple of years later he was dragged into the court case even though he had no part in building the house