A project underway, payments made, and the builder goes under. It happens more often than most people expect — and the first week after it happens matters more than most people realise.
When a builder enters voluntary administration or liquidation, work stops. The administrator takes control. The owner is left with an incomplete project, money already paid, and no certainty about what happens next. What determines how much is recoverable is not luck — it is how quickly and precisely the owner acts in the first few days.
If your builder has entered administration or liquidation, get legal advice before you do anything else. The first week determines your options.
Book a Free Consultation →What Happens When a Builder Enters Administration
When a builder enters voluntary administration, an external administrator is appointed. Work on all active projects stops. The administrator's role is to assess the company's financial position and determine whether the business can be restructured or should be wound up.
For property owners mid-project, this typically means: no work is being done, no materials are being delivered, and any payments already made are now in the hands of the administrator. Subcontractors who are owed money by the builder are in the same position — they are unsecured creditors.
The administrator may write to you. They may ask you to sign documents or make further payments. Do not do either without independent legal advice.
What to Do Immediately
- Secure the site. Change locks if necessary. Prevent theft of materials and unauthorised access.
- Document everything. Photograph and video the state of the works in detail — what has been completed, what hasn't, and any defects visible. This is your evidence base for any claim.
- Do not make any further payments. Once the builder is in administration, payments should not be made to anyone without legal advice. Paying the wrong entity can reduce your recovery position.
- Gather your documents. Locate the building contract, evidence of all payments made, the building permit, domestic building insurance certificate (if issued), plans, and any correspondence with the builder.
- Get legal advice. The options available narrow quickly. The earlier a lawyer is involved, the more options remain open.
Your Insurance Options
The insurance position depends entirely on when your building contract was signed.
Contracts signed before 1 July 2026 — Domestic Building Insurance (DBI). The old scheme. DBI was last resort — you could only claim if the builder died, disappeared, or became insolvent. Cover was up to $300,000. Structural defects were covered for 6 years and non-structural for 2 years from completion. If your builder has become insolvent, this trigger has been met — you should lodge your DBI claim within 180 days of becoming aware of the insolvency.
Contracts signed on or after 1 July 2026 — Home Warranty (FHWS). The new scheme administered by the Building and Plumbing Commission. Home Warranty is first resort — you can claim where work is incomplete, defective or non-compliant, regardless of the builder's status. Maximum cover is $400,000. You must notify the BPC within 12 months of an insurable event. Cover expires 6 years after completion for major defects and 2 years for other defects.
The BPC now manages claims under both schemes — including VMIA policies issued before 1 July 2026.
What Determines How Much You Recover
Several factors determine the recovery outcome, and most of them are established before the builder goes under:
- Whether the building contract complied with the Domestic Building Contracts Act — if it didn't, certain protections may not apply
- Whether deposits were held on trust or paid directly and mixed with the builder's general funds
- Whether the builder was registered with the Building and Plumbing Commission
- Whether valid insurance was in place and a claim can be made
- Whether progress payments were made in line with the contract stages — overpayment ahead of work completed reduces the recovery position significantly
How Phan Campbell & Associates Can Help
At Phan Campbell & Associates in Footscray, we act for property owners dealing with builder insolvencies in our construction litigation practice. We assess the insurance position, prepare the claim, deal with the administrator on your behalf, and where necessary, pursue recovery through VCAT or the courts.
The clients who recover the most are the ones who move quickly. If your builder has gone under, talk to us before you do anything else.
Frequently Asked Questions
1. What should I do first if my builder goes into administration?
Secure the site, photograph and document the state of the works in detail, and do not make any further payments. Do not sign anything from the administrator without legal advice first. Contact your lawyer immediately — the first week determines how much is recoverable.
2. Can I claim on my insurance if my builder goes insolvent?
It depends on your contract date. For contracts signed before 1 July 2026, claims are made under the old DBI policy (last resort — requires the builder to be dead, disappeared or insolvent). For contracts signed on or after 1 July 2026, claims are made under the new Home Warranty scheme administered by the BPC, which is first resort — you can claim for incomplete, defective or non-compliant work without proving insolvency.
3. What is the difference between DBI and the new Home Warranty?
DBI was last resort — you could only claim if the builder died, disappeared or became insolvent. Home Warranty from 1 July 2026 is first resort — you can claim where work is incomplete, defective or non-compliant and the builder fails or refuses to fix it. Maximum cover increased from $300,000 to $400,000.
4. How long do I have to make a claim?
Under the new Home Warranty scheme, you must notify the BPC within 12 months of an insurable event (including insolvency or valid termination). Cover expires 6 years after completion for major defects and 2 years for other defects. If your builder has gone under, get advice immediately — book a free consultation with Phan Campbell & Associates.