Is your Builder financially stable? Here's how to check before you sign
Written By Annelyse Stead | Australian Home Building & Renovation Contract Specialist | M. Construction Law | B.Construction Management
Start your build with peace of mind that your builder isn’t in financial difficulty.
Over the past 8 years, I've helped hundreds of Australian homeowners navigate their building contracts. One of the most devastating situations I encounter? Builders going into liquidation mid-project, leaving families with half-built homes and depleted savings.
You've probably heard the horror stories. Maybe you even know someone who's lived through it. But here's what most people don't realise: There are three simple checks you can do before signing that dramatically reduce your risk.
In this post, I'll share my tips on exactly how to verify your builder's financial stability - before you hand over your deposit.
Why builder financial checks matter more than ever
According to recent Australian Securities and Investments Commission (ASIC) data, construction company insolvencies increased by 38% in 2023-2024. That's not just a statistic - it's real families losing their new home.
I worked with a couple in Melbourne who paid $180,000 in progress payments before their builder entered voluntary administration. They had to spend an additional $95,000 to complete the build with a new builder - and they're still fighting to recover some of their losses two years later.
The good news? This situation can be preventable with three simple checks.
Check #1: Request a Credit Report
Most Australian builders operate on credit cashflow arrangements. They order materials and pay for labour on credit, then repay those debts when you make your progress payments.
This system only works if your builder has solid credit. A builder with a poor credit history or maxed-out credit facilities can one unexpected expense away from serious financial trouble.
How to check your Builder's Credit
Step 1: Ask your builder directly for a credit report from their agency. A financially healthy builder with nothing to hide will usually provide this.
Step 2: If they refuse or hesitate, use an independent verification service like CreditWatch or CreditorWatch. These platforms provide comprehensive reports including:
Credit ratings and payment defaults
Court judgments and legal actions
Business history and directorship changes
Financial statements (for some companies)
These reports typically cost between $50-$200, depending on the level of detail. It's a small investment that could save you hundreds of thousands.
Red flags to watch for:
Multiple payment defaults in the past 12 months
Court judgments from suppliers or subcontractors
Recent changes in company structure or directorship
Poor credit rating (below average for construction companies)
I had a client who ran a credit check and discovered their builder had 7 payment defaults totaling $83,000 in the previous 6 months. They walked away before signing. That builder went into liquidation 4 months later.
Check #2: Verify your Builder's Licence and Registration
Every Australian state and territory requires builders to maintain current registration. But registration alone isn't enough - you need to check for complaints, disciplinary actions, and unresolved disputes on their record.
A builder with multiple complaints or ongoing disputes is a warning sign of either poor work quality or financial struggles that lead to cut corners.
How to verify registration (By State)
Victoria: Use the Victorian Building Authority (VBA) practitioner search to verify registration and view any disciplinary actions.
New South Wales: Check the NSW Fair Trading website for builder licensing and complaint history.
Queensland: Use the Queensland Building and Construction Commission (QBCC) licence search.
Other states: Each state has a similar regulatory body with online verification tools.
What to look for:
Current, valid registration (not expired or suspended)
Appropriate licence class for your project value
No current disciplinary actions or investigations
Limited complaint history (check what types of complaints)
Recently, I discovered a builder had their licence suspended 18 months earlier for failing to maintain adequate insurance. While they'd since had it reinstated, this pattern suggested ongoing financial and administrative issues. My client chose a different builder.
Check #3: Request current Insurance Certificates
This is the check most homeowners skip - and it's one of the most revealing.
Your building contract requires your builder to maintain specific insurance policies throughout the project. But here's what many don't realise: Insurance companies conduct their own financial assessments before issuing policies.
A builder struggling financially may:
Let their insurance lapse to save on premiums
Carry inadequate coverage limits
Be unable to obtain insurance due to their financial position
The three essential Insurance Policies
1. Home Warranty Insurance (Domestic Building Insurance)
Required for most residential projects over a certain value (varies by state, typically $20,000-$25,000). This protects you if your builder goes insolvent or fails to complete the work.
2. Public Liability Insurance
Covers damage to third parties or property during construction. Minimum coverage should be $10-$20 million.
3. Workers Compensation Insurance
Covers injuries to workers on your site. Without this, you could be personally liable if someone is injured on your property.
How to request and verify insurance
Timing: Request current certificates of insurance immediately after signing your contract, before any deposit is paid.
What to check:
Policies are current and won't expire during your build period
Coverage amounts meet minimum requirements in your contract
Your project address is specifically listed on the home warranty insurance
The builder's name matches exactly across all documents
During a recent Building Contract Health Check, we discovered a builder had provided an insurance certificate that was 11 months old.
What to do if you discover financial red flags
If your checks reveal concerning information, you have several options:
Before signing: Discuss with your build or consider choosing a different builder.
After signing but before work starts: Review your contract for termination rights.
During construction: If you discover financial issues mid-build, document everything, consider reducing payment amounts to reflect only completed work, and seek legal advice immediately.
Build with confidence, not anxiety
Checking your builder's financial stability isn't about being difficult or distrustful. It's about protecting the biggest investment of your life.
These three checks - credit report, licence verification, and insurance certificates - take less than 3 hours total and cost under $300. That's a tiny investment to protect a project worth hundreds of thousands of dollars.
Every client I've worked with who completed these checks before signing has told me the same thing: "I feel so much more confident now."
Ready to build with peace of mind?
My Building Contract Health Check includes a comprehensive review of your builder building contract and contract protections. In minutes, you'll know:
Whether your contract adequately protects you if financial issues arise
What insurance your builder must maintain and how to verify it
Red flags to watch for throughout your build
Exactly what to do if you suspect financial trouble
In the past year alone, I've helped clients across Victoria, NSW, Queensland, ACT, Tasmania, Western Australia, and the Northern Territory identify financial risks before they became costly disasters.
Thanks for reading, and I'll see you in my next post!
Annelyse
Construction Management | M. Construction Law
Follow me @_buildtogether for daily tips on building and renovation contracts.
