In an age of economic uncertainty your choice of builder has an added facet to it. A builder is only as good as their last job, says David Snell, and the strains of the economic downturn can manifest themselves within the lifetime of your project.

Make Sure You Spot the Signs That Something’s Wrong

There are signs to watch out for. They’re not exclusive and there can, of course, be other explanations. The first may be long gaps in the work or a general loss of continuity. In itself this may not cause a problem and, indeed, it may be that the builder you’ve chosen is not particularly good at organising things. But surely that’s one of the items you asked their previous clients about? So if this is something new, then it may be a symptom of something going wrong. The fact remains that the job that ‘maintains continuity’ tends to be the job that comes in on time and on budget.

The second sign is trades not turning up to finish work that they’ve started. For example plumbers and electricians failing to return for the second fix. Could it be that they haven’t been paid for the first fix? Materials failing to arrive when expected or needed can have a variety of explanations. But taken with the other two happenings, it could point to financial difficulties. The clincher, of course, is a request for monies in advance of an agreed stage. If that happens then you really need to demand the truth from the builder, telling them that you’ve noted the signs.

What Do You Do if Things Go Wrong?

Count up where you are with payments to the builder. If the builder is in trouble, it may be that you can help him over the hump. Your priority is to get your job finished. Probably your best bet is to try to keep the builder going.

The first thing you can do is to take responsibility for buying materials from that point onwards. That way, if anything gets worse, title of the goods will be yours. The second is to offer to pay the subcontractors from that day onwards and perhaps to pay the builder a management fee to keep him on site. You have no obligation to pay subcontractors for work they did prior to this point. But you may well be on cash-in hand terms and will perhaps make the choice to pay them something to keep them on site.

And if the Builder Still Goes Broke?

Then you need to act fast and decisively. Get to site as quickly as possible. Change all the locks. Padlock the site security fencing. Affix a notice on the site warning against any entry other than that authorised by you and, if necessary stay on site or camp overnight, telling the police of the situation.

There will be aggrieved people and companies who will do anything to mitigate their losses. Respectable builders’ merchants may send lorries to grab anything that they can. Tradespeople may seek to recover goods they have fixed and not been paid for, even to the point of trying to rip boilers off the wall.

Be Prepared When Dealing With the Liquidator

f the builder has gone broke, then a liquidator will be appointed and it is their job to recover as much as they can from the builder’s assets and distribute this to their creditors. Of course, the easiest assets to identify will be the materials on your site. But if title has not passed then it remains with the supplier and your best bet is, therefore, to try to come to some arrangement with them. Builders’ merchants will recognise that the value of the goods will have been considerably diminished given the fact that, as they have been unpacked, they are second hand.

Subcontractors may not be so pragmatic and the negotiations with them will be tougher. The liquidator will have an interest in materials where title has passed to the builder. Once again, if they are unwrapped (and it would be prudent to make sure that they are, in order to check their quality) then their value is diminished.

The liquidator may also want to know why you’re not paying any stage payments due in whole or in part to the builder. In reply you will detail the expenses you have incurred, your costs for putting things right and an amount for the distress that the whole episode has caused you.

Clarify the Warranty & Insurance Position As Soon As Possible

You need to notify the warranty providers as soon as possible. If they have been inspecting, they will have made sure that the work was up to scratch. If it wasn’t then they would have put in a schedule of the remedial works required. Hopefully these works have been carried out. But the builder may well have lost interest if he knew what was going to happen. You should inform the liquidator that such work needs to be carried out, the costs of which will be deducted from any monies owed to the builder. You will need to negotiate the continuation or passing of the warranty obligations to another builder or to yourself if you decide to carry on with subcontractors.

Those with an NHBC warranty will be luckier than others in that the NHBC will arrange to either get another builder or pay for the work to be completed. This liability must be no greater than 10 percent of the house value or £100,000, whichever is the greater.

If the only site insurance has been the builder’s then you will need to take out your own site insurance to cover you for Contractors’ All-Risk, Employers’ Liability and Public Liability, as quickly as possible.

What to Do if the Builder Resurfaces…

The builder may well try to come to some arrangement with you to continue the job in one capacity or another. Before they went broke, that was the sensible option. Once they’ve gone bust it may not be. Firstly there will be the undoubted enmity of subcontractors who may have lost considerable sums of money. You need them more than the builder, especially trades such as electricians and plumbers who work on a supply and fix basis. Getting another electrician or plumber to continue second fix work where somebody else has done the first fix is all but impossible. Even if you do find somebody to take on the job, if ever anything goes wrong in the future, it’ll be next to impossible to sort out who’s to blame for what.

If the builder ‘phoenixes’ and comes back to you under a new name or company then the problems with tradespeople or suppliers may still be there. If they try to take up the old contract then don’t pay them money owed to them in the previous capacity as the liquidator may, quite rightly, say that they have an interest in that. Best to make a clean break.

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