Below is a letter received by HBAG from a prominent W.A. builder, Patterson Construction Company. This builder currently completes a lot of insurance work and in their letter, they identify the main difficulties they are currently confronting.
Call for a Review and Changes in Indemnity Insurance
Dear Michael McGowan, Jason Robertson and Jason Janssen,
I am writing to express two main concerns about the current insurance limitations through QBE for takeover projects.
For the last three years, we have specialised in this type of work and have been exposed to many bankrupt builders over that period of time.
Whilst news of the deal between the government and Niche Living directors was a huge win for their clients, it is not all good news. Having now inspected dozens of their jobs, it is evident that some of their clients will still be out of pocket by nearly $100k after the payout from QBE. The typical situation this occurs in, is the ‘pretend Lock Up’ stage. And usually on two storeys at that stage. These projects are literally a shell. No ceilings, linings, electrical, plumbing, internal doors, shelving or stairs. Plus we will need scaffolding to complete these builds. The reality is they should not have paid that Lock Up claim. I would estimate that this is the situation for about 15-20 projects in the Willetton estate alone.
Proposed solution: increase the Home Indemnity Insurance limit in WA from $200k to $300k per project.
This would align more closely with a recent increase in the Eastern States ($340k in NSW) that reflected increases to building costs.
It should be noted that for mid-range (non-entry) level houses i.e. the Niche Living Exclusive brand, these clients will still be out of pocket. It could be assumed that those clients have access to personal funds to complete their homes. As a sidenote, and as I have said to these clients, the value of their projects has significantly increased over the last three or four years so they could easily refinance (provided they can afford the repayments).
The other concern is the builder’s yearly limit with QBE. With the limited amount of builders willing to take on this sort of work, it is expected that a small number of builders will be at maximum capacity very quickly. Which will likely leave many of Niche Living clients without a builder in the near future. This is evident in my many discussions with those clients who are struggling to find a builder willingness and the available insurance to take on these takeover projects
Proposed solution: Increase the existing yearly HII limits for builders currently completing these types of projects by 30%
I am suggesting this as the vast majority of Builders that I have been talking to have no available Indemnity Insurance to even consider taking on any of these Niche Living Houses. This problem could further delay the completion of these Niche Living clients homes by another year or so whilst they are waiting for Builders to have the time and capacity to commence works on their sites.
Please call me at any time for further discussion.
Thanks for your consideration
Regards,
Lucas
Patterson Construction Company