If you are planning an extension or thinking about a self-build project, make sure you have given serious thought to what would happen if the builder goes bust, and whether you would be protected.
That’s the advice from Ann and Kevin Ruck, who are embroiled in an “absolute nightmare” after their builder went into administration before he had finished work on their £300,000 “eco house”, a striking wedge-shaped building made with local materials.
The couple had handed over almost all the money because it was supposedly more or less finished. But after the builder left the site, it emerged that the Rucks would have to spend tens of thousands of pounds to put right a long list of problems and complete work that was already supposed to have been done.
Ann says they have learned, to their cost, that there seems to be little or no consumer protection when a builder goes bust, adding: “You have more protection when spending £500 on a package holiday than when spending thousands on building work.”
Their experience could serve as a warning to homeowners thinking about taking advantage of the relaxation of planning rules announced by the government this month, which, some say, could spark a rush to build larger extensions.
The Rucks had decided to build an environmentally-friendly home overlooking the sea near Gairloch on the north-west coast of Scotland where “we could spend some quiet time as we start to work a bit less”.
They were keen for it to be a sustainable build, using Scottish materials such as oak and Caithness stone, with the whole property highly insulated for energy efficiency.
The builder started work in May 2010 and was supposed to finish six months later, but the work “dragged on” until early 2011. In March of that year, the builder wrote to the architect to say he was temporarily ceasing trading “due to increasing bad debts”, and walked off the site. Shortly afterwards he went into administration.
“We had paid just about all the money and had thought the build pretty well complete, so at first we weren’t worried. It wasn’t until I got on site that I realised the extent of the problems,” says Ann.
“The sewage system had not been done as per the contract. There was extensive remedial and completion work including replumbing, electrics, extensive interior plastering, large windows needing to be replaced because they had not been fitted correctly – it goes on and on.”
This work – which the Rucks are having to fund out of their own pockets – is still not finished. They have had to employ another builder and pay a surveyor to investigate potential problems.
The couple, who live near Maidstone in Kent, say they thought they had done all the right things. They interviewed four architects before choosing one, while the builder was suggested by the architect but also competed in a tender process. They paid the builder on time, with the architect employed to administer the contract and sign off the work for payment at key stages. “Yet we find ourselves in this position,” says Ann, adding that it seems “everyone is protected except the consumer”.
Before work started on the house, Ann asked the architect whether they should take out a National House-Building Council (NHBC) warranty – which can, in some cases, offer protection if a builder goes bust (see right) – but he emailed: “We’ve never done a building that is NHBC guaranteed. Waste of money. I would hope that all our houses surpass their standards without you having to pay someone to come and do expensive checks.”
Ann says the builder was a limited company with no assets to speak of, so they have been advised there is no point in suing him.
She says they may have a case against the architect – who is a member of Rias, the Royal Incorporation of Architects in Scotland – on the grounds that he signed off work that was not acceptable to building control. But “because the builder has gone bust, he is able to use this as his defence – ie, if the builder hadn’t gone bust, he would have made him put it right”.
In an email to Ann, the architect said: “Much as I am furious… and much as I regret the situation, we are not culpable for the fact that [the builder] did not carry out the works in accordance with the specification or rectify the works prior to ceasing trading.”
She says they may be able to make a claim against the architect’s professional indemnity insurance, but this would be expensive, “and, frankly, I don’t know that I can afford it”.
She adds: “If people are going to embark on a building project, think about how you are going to be protected should the builder go bust, particularly if it is a limited company and goes into administration.
“The onus here seems to be totally on the consumer to protect themselves, whereas in other situations it’s the industry that funds the protection.”
Ways to avoid problems
No one can guarantee that the builder you pick will not get into financial difficulty or turn out to be a nightmare to deal with. But there are things you can do that will hopefully help to minimise the risk of problems later on.
Finding a builder Consumer organisation Which? says the best scheme to help people find a good builder that it has identified is Buy With Confidence , set up by a group of local authority trading standards services. Every business listed has undergone detailed checks before being approved. But it only covers some parts of the country – mainly in southern England.
Which? runs its own service for members called Which? Local, which carries recommendations for a range of businesses.
Consider using a builder who belongs to a recognised body such as the Guild of Builders and Contractors or the National Federation of Builders.
Ask for references, and check them out, and look online to see if there are reviews.
Paying a builder “Never pay for all building work upfront,” Which? says. “Draw up a schedule of payment for each stage of the work. Ideally, you should agree to release money only when each stage of the work is finished to the specification provided and to your satisfaction.”
Paying for at least some of the work with a credit card gives you extra protection in the event of problems.
Insurance and guarantees Make sure your builder has insurance that covers things such as the risk of someone getting hurt on your property. Some builders will offer you an “insurance-backed guarantee” on the work, which may include some protection against insolvency.
The National House-Building Council (NHBC) describes itself as the leading home warranty and insurance provider; its Buildmark warranty covers around 80% of new homes built in the UK and includes some “pre-completion insolvency cover”. But Buildmark is only for builders on the NHBC register (there are around 14,000).
The NHBC offers a policy called Solo for people who plan to build (or use a firm not registered with the NHBC to build) their own home. But it doesn’t cover “contractor insolvency”.