Perth firm Buildsmart WA stripped of registration

A boutique Australian homebuilder with a dozen unfinished projects on its books has been stripped of its registration.

The Building Services Board cited financial grounds for refusing to grant Buildsmart WA a renewal in October, and the State Administrative Tribunal (SAT) affirmed the decision during a review heard between December and May.

It means the Perth construction firm can no longer carry out work that requires a building permit or is valued at more than $20,000.

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“Buildsmart WA could not demonstrate the capacity to meet its debts as and when they fall due,” WA building commissioner Phil Payne said.

“The tribunal’s decision, reached after hearing extensive financial and expert evidence, confirmed the boards’ initial assessment and decision.”

The board’s decision was based on analysis that found Buildsmart’s net asset position was -$4779.74, that it was facing a cash flow deficit of more than $48,000 over the following year, it did not have access to an overdraft or loan facility, and there were “indicators of potential insolvency” including overdue taxes and cash-on-demand arrangements with suppliers.

During the SAT hearing the board alleged the builder would incur cost overruns of at least $3.18 million to complete its program of unfinished projects.

That varied significantly from the builder, which argued the amounts paid by clients would exceed construction costs by more than $540,000.

In the end, the tribunal considered new estimates that found “on a rough calculation, Buildsmart may have financial resources of approximately $400,370 to meet outgoings of approximately $1,051,196”.

Builder flags appeal

Buildsmart WA said it was disappointed with the outcome and intends to pursue an appeal.

“Our priority remains our clients and the successful progression of homes currently under construction,” a company spokesperson told 7NEWS.com.au.

“For 12 years, Buildsmart WA has proudly operated in Western Australia, navigating a number of challenging periods for the building industry and remaining committed to the clients and communities we serve.”

The company said it had been in contact with clients and remains “committed to keeping them informed and supported throughout the process”.

“Buildsmart WA remains focused on its clients, its projects and the next steps in the appeal process,” the company said.

“We remain passionate about delivering high quality homes for Western Australian families and look forward to continuing that work.”

What homeowners with incomplete or defective work should do

Clients of Buildsmart WA, which is “understood to have around a dozen building projects still in progress”, have been urged to contact their home indemnity insurance provider to discuss claims and consider whether another firm can take on their projects.

Payne said registration renewal is never a routine “rubber stamp” exercise.

“Financial requirements protect consumers and bolster confidence in WA’s building and construction industry,” he said.

“This outcome should remind every WA registered builder that financial requirements will be applied rigorously at renewal.

“Builders must be able to demonstrate, with accurate, complete and timely financial information, that they have the means to complete their building contracts and pay their debts as and when they fall due.

“Importantly, the tribunal’s decision confirms that the cost to complete unfinished projects is highly relevant in determining whether a building contractor meets the financial requirements for registration.”