NSW Fair Trading has issued an update following media reports alleging possible solvency issues for Metricon Homes.

These reports are worrying for consumers who are currently building with the company or have homes recently built and still under warranty, said NSW Fair Trading reminding that there are protections for consumers provided they take the right steps.

There are protections for consumers provided they take the right steps. Below information from NSW Fair Trading will help consumers protect themselves whenever arranging building work.

1. Entering a new contract to build

Do not make payments until home building compensation cover is in place

Home building compensation cover protects homeowners as a last resort if their builder cannot complete building work or fix defects because they have become insolvent, died, disappeared or had their licence suspended.

A builder must provide you with a certificate of cover when entering a building contract for work valued at $20,000 or more. They must not ask for payment until the cover is in place.

Consumers should not make any payments until they have received the certificate of cover. If no insurance is in place, you may not be able to recover your money if the builder cannot complete the work.

The maximum deposit is 10%

A builder can only seek the maximum of 10% of the total contract price as a deposit before work is commenced. Any payment above this amount may not be recoverable under home building compensation cover.

Be aware of upfront payments

Builders commonly seek a separate agreement and upfront payment for the preparation of plans and other work before entering into a building contract. This payment is generally not covered by home building compensation cover and may not be recovered if the builder becomes insolvent.

2. Building work in progress

Progress payments

Consumers should only make authorised progress payments. A progress payment is authorised when:

• the contract clearly sets out specific stages of work and the amount or percentage of the contract value payable at the completion of each stage, or
• the contract provides for fixed payment intervals or an “as invoiced” payment, where the payment is for labour and materials for work already performed and supporting invoices and receipts are provided.

If a consumer makes a progress payment that is not an authorised progress payment (eg makes an additional or early payment) this may affect their ability to recover losses for that payment under home building compensation cover.

3. Completed builds within warranty period

The Home Building Act 1989 provides consumers with a right of action for building defects within six years for major defects and two years for all other defects, starting from the date when the work was completed.

Consumers are encouraged to promptly raise any issues with their builder. If the builder does not respond or disputes the defect, you can seek assistance from Fair Trading by lodging a complaint.

Frequently asked questions for Metricon Home consumers

How do I know if I have home building compensation cover?

You should have received a certificate of cover with your contract. Alternatively, to check you have cover, you can use the State Insurance Regulatory Authority (SIRA) HBC Check. You can search by property address, the certificate number (if known), or by the name or licence number of the contractor.

Do I need to lodge a complaint with Fair Trading?

If you are experiencing any problems in the build of your home or arranging rectification work under the warranty, you should lodge a complaint with us.

If you become concerned about the future of this company, you can also use the complaint form to provide us with details of your situation and we can keep you informed.

When do I lodge a claim under the home building compensation cover?

A claim can only be lodged if loss or damage arises from incomplete work because the builder becomes insolvent, dies, disappears or has their licence suspended because for failing to comply with a court or tribunal order to compensate a homeowner.

While there has been media coverage about the death of the CEO of Metricon Homes Pty Ltd, the business operates as a company and can continue to trade.

What happens if my home cannot be finished because Metricon does become insolvent?

A company becomes insolvent when it is unable to pay its debts. Insolvency generally occurs when a company voluntarily winds up its affairs or a court orders that to happen.

Consumers who would suffer a loss because work is incomplete, including warranty repairs, may make a claim through their home warranty insurance cover.