WA Builder Collapse: How to Vet Your Builder Before Signing a Fixed-Price Contract

The WA construction sector between 2024 and 2026 produced one of the worst waves of builder insolvencies in the state's recent history. For first home buyers who assumed a signed fixed-price contract with a major builder meant their new home was secured, the collapse of their chosen builder has been financially and emotionally devastating.

Before you sign a building contract, you need to understand how to assess whether the company you are signing with is financially stable — and what happens to your contract if it is not.

The Scale of the Problem

Business collapses in the WA construction sector surged by 24% in 2024, with over 1,200 companies becoming insolvent. This was not limited to small operators. Well-known names collapsed:

• Start Right Homes: Liquidated, leaving 24 customers with incomplete homes and signed contracts
• Inspired Homes: Placed into administration with approximately 80 unfinished homes
• Mercedes Group (trading as Zorzi Builders): Placed into administration with $4.59 million in debts — this was a premium custom builder, not a budget operator

The cause was structural. Builders had signed fixed-price contracts during the 2021 to 2022 period, promising homes at locked-in costs. Material prices then surged — steel, timber, piping, concrete — and labor became acutely scarce as the mining sector paid better wages and drew workers away from residential construction. Builders were completing homes at a significant loss on every contract. Many ran out of cash before completing their backlog.

Warning Signs of a Financially Distressed Builder

Before signing, the following indicators warrant serious investigation:

1. Demands for early stage payments not tied to actual progress

The standard progress payment schedule for a WA house build ties payments to verifiable completion stages: slab down, frame up, lock-up, practical completion, and final handover.

A financially distressed builder may pressure buyers to release stage payments early — for example, demanding the "slab" payment before the slab is actually poured, claiming administrative efficiency. This is a serious red flag. Stage payments exist to protect buyers; releasing them ahead of verified progress transfers cash to the builder without delivering value.

2. Requests for illegal variation payments

Fixed-price contracts lock the price for the agreed scope of work. During a period of cost pressure, some distressed builders attempt to pass material cost increases to buyers through variations — arguing that changes in specifications or delays justify additional charges. In most cases, these claims are legally invalid under a properly written fixed-price contract.

If a builder is seeking aggressive variation payments, it may be managing cash flow problems by extracting more money from existing contracts. Seek legal advice before agreeing to any variation above the minor administrative kind.

3. Pressure to sign the Property Completion Inspection (PCI) prematurely

The PCI is the formal inspection before handover where defects are identified and the builder is required to rectify them. Rushing buyers through a premature PCI — so the final progress payment is released before defects are properly recorded — is a documented pattern in distressed situations. Once you have signed off on the PCI and the final payment is released, your contractual leverage is significantly reduced.

4. Extended delays beyond what is contractually allowed

Some delays in WA construction are genuine and industry-wide. But if your builder is consistently missing milestones by months — not weeks — and providing vague or shifting explanations, this may indicate cash flow problems that are preventing them from paying subcontractors and keeping the build moving.

5. Subcontractor activity stopping at the site

Talk to tradies on site. If a concrete crew or framing team suddenly stops work and does not return, it often indicates the builder has not paid them and they have walked off the job. Subcontractors typically know a builder is in financial trouble before the public does.

How to Research a Builder Before Signing

Check the WA Building Services Board register

All WA builders must hold a current Building Service Contractor licence. Verify your builder's licence is current and in good standing through the Building Commission of WA. Expired, suspended, or conditioned licences are disqualifying.

Search ASIC for financial status

The Australian Securities and Investments Commission (ASIC) maintains records of companies in administration, liquidation, or receivership. Search the builder's company name on the ASIC register. If they are in any external administration process, do not sign.

Check court judgments

The Magistrates Court of WA and District Court maintain searchable records. Construction companies with multiple unpaid debt judgments against them are potentially cash-flow stressed. This is not definitive, but it is a useful indicator.

Ask for references from recent completions — and actually call them

Not clients who are mid-build, but clients who took handover within the last 12 months. Ask specifically about whether the build completed on time and on budget, and whether stage payments were demanded early.

Check the Master Builders WA and Housing Industry Association membership

Active membership in industry associations is not a guarantee of financial health, but expulsion or non-renewal can be a signal worth investigating.

Building Inspection Costs in Perth

A pre-purchase building inspection for an established home in Perth typically costs between $300 and $600 for a combined building and timber pest inspection.

For new builds, inspections serve a different purpose. A new build inspection — conducted at each construction stage — allows an independent inspector to identify defects in the work before the stage payment is released. This costs between $200 and $400 per stage inspection.

Critical point: the standard REIWA building inspection clause in the Offer and Acceptance contract for established homes only covers "Major Structural Defects" in the residential building itself. It does not cover maintenance issues, non-structural damp, leaking showers, or most cosmetic problems. Do not assume a passed building inspection means a problem-free property.

What Happens If Your Builder Collapses Mid-Build

If your builder enters administration or liquidation while your home is under construction:

1. Stop any further payments immediately. Do not pay any stage payment until you have legal advice on your position.
2. Engage a lawyer, not a settlement agent. This situation requires legal counsel.
3. Check your building indemnity insurance. WA's Home Building Contracts Act requires builders to provide insurance for incomplete works in certain circumstances. This coverage has limits and conditions.
4. Document everything. Photographs of the current state of construction, copies of all contracts and variations, all correspondence with the builder.
5. Register as a creditor with the administrator if the builder goes into formal administration, to protect your claim.

The Shift Back to Established Homes

The widespread fear of builder insolvency is one of the primary forces driving WA first home buyers back toward established homes. An established home purchased below $600,000 qualifies for full stamp duty exemption, has no construction risk, and can be moved into immediately.

The tradeoff: no access to the $10,000 FHOG, which is restricted to new builds. Buyers must weigh the certainty of an established home against the $10,000 incentive attached to new construction in a market where builder solvency cannot be taken for granted.

The Western Australia First Home Buyer Guide at /au/western-australia/first-home/ includes a complete builder due diligence checklist — the specific searches, questions, and red flags to investigate before signing any fixed-price construction contract, alongside a decision framework for choosing between established homes and new builds given current market conditions.

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