Geoff Browne and his family should have been settled into their first home, instead they’ve paid tens of thousands of dollars worth of debts and sold their dream home because it was falling apart before it was even finished.
The Adelaide family have been scathing of South Australia’s consumer watchdog, labelling it a “toothless tiger” for failing to support them and act against builders who’ve allegedly broken the law.
Consumer Business Services (CBS) said it cannot comment on whether it intends to take two Adelaide builders who did not have compulsory indemnity insurance for customers because it is still investigating the cases a year on.
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Browne purchased a three-bedroom townhouse on Anzac Hwy in Plympton for $515,000 in December 2020, with a completion date of December 2021 stated in the contract.
It was the perfect fit, near his daughter’s school, a great size and a reasonable price, he described.
But the dream of moving in soon turned into sleepless nights and an all-consuming effort to have someone act against his builder, 7 Star Construction.
Browne became seriously uneasy when the builder invoiced him without rectifying defects in the home or completing frames.
He raised his concern with CBS in 2022, but was told the watchdog would only take note of the issues he raised.
“It was just an uphill battle from there. No one was able to do anything or willing to do anything. They just didn’t care,” Browne said.
“We put that much money into the government through our taxes and stuff and every department just turned their back on us.”
Meanwhile, the family was paying a $5000 a month for their mortgage, interest on their construction loan and legal bills as they sought a way out of their nightmare.
“I would spend almost every day chasing lawyers and chasing CBS and the treasurer’s office, my local MP and just trying to get people to do their job,” Browne said
“(I would) wait weeks for responses … do the legwork for them … the only way I got anywhere was by making a lot of noise.
“They need to see the effects it has on families by allowing this to go ahead.”
No compulsory insurance but no penalty
Browne had been waiting a year over the expected completion date when he found out the builder had allegedly not taken out compulsory building indemnity insurance for him and other homeowners
The insurance covers homeowners for the remaining price of their build if the builder dies, disappears or goes into administration.
Browne said all the businesses and agencies involved in the development and loan approval failed his family, as they could have identified issues with his builder earlier, had they investigated complaints or thoroughly checked the builder’s paperwork.
“People were just signing pieces of paper without doing their job and all these people walked away without a slap on the wrist,” he said.
CBS cancelled 7 Star’s license in mid-2023, six months after it was informed about no insurance, and the builder was forced into bankruptcy.
The South Australian government took out indemnity insurance to cover the customer’s without it, but the $150,000 policy was nowhere near the amount needed to finish Browne’s home.
The frames of his house had been exposed to the weather for so long they needed to be replaced.
Moreover, he’d racked up about $20,000 in legal fees and $5000 in building inspection reports.
The family was approached by a person interested in buying the half-finished home and sold it for $260,000, which, after paying off their bills, left them with no deposit, locking them out of the housing market.
Builders breaking laws with no reprisal
7 Star’s appointed administrator said in a report he suspected the company had been insolvent trading two years before going bust, and by 2023 he owed about $900,000 to creditors over the projects in Modbury and Plympton.
A final report is expected by July.
Despite also not having taken out compulsory indemnity insurance, CBS is yet to act against 7 Star.
Browne said his case was a prime example of the SA system being “rotten to the core”, with consumers left without adequate support and builders having no deterrent to not break the law.
“If they don’t do anything, they need to be closed and replaced,” Brown said about CBS.
CBS is also yet to act against Felmeri Homes, which it’s been investigating since last year, when the company entered liquidation and allegedly left some customers were left without indemnity insurance.
The watchdog received complaints about the company three years before it barred it from taking on new clients.
A spokesperson for the CBS said it is still investigating 7-Star construction and Felmeri Homes, so is unable to comment on whether it intends to take legal action against them.
“We appreciate that delays in finalising construction of a new home can be extremely stressful for consumers, and endeavour to respond to their calls in a timely fashion,” they said.
“However, when matters are under investigation, we are often limited in what information can be conveyed.
“CBS takes its responsibilities as regulator very seriously, with 14 prosecutions finalised in 2022-23.”
PGC Legal partner Brenton Priestley has 17-years experience working on construction disputes.
He said the agency had to tread with caution when considering whether to pursue court action.
“There’s always a risk that the court might find CBS overreached in terms of what it did in relation to the builder’s license. If the builder successful wins the case, then there’s a risk CBS may be required to pay the builder’s costs,” Priestley said.
Improving the dispute system
Currently, if a builder fails to meet an agreement reached during a CBS conciliation meeting with a customer, the customer is told to seek legal advice.
The Law Society of South Australia has recommended the state government establish a building tribunal because the court system is not ideal for resolving building disputes. The Housing Industry Association has supported the proposal.
Law Society president Alex Lazarevich said taking legal action can be pricier than the cost of the alleged defects.
“The court process for building disputes involves a number of steps which often takes years to get through, and you have to engage expert witnesses and the cost of doing that can literally run into hundreds of thousands of dollars,” he said.
Through a tribunal, a building expert can inspect the work, making a biding decision on whether it needs to be rectified, and if the builder fails to comply they can be penalised, he said.
A similar system exists in Victoria, New South Wales and Queensland.
Priestley said given the current challenges facing the construction industry, CBS does not have the resources to respond to customer concerns in a timely manner.
“It may be that more and better resources would enable the agency to act more aggressively.
“Even if there were to be significant funding increases to deal with the complaints process, there’s still a lead time in recruiting and training the staff needed,” Priestley said.
He agreed a tribunal would “provide access to justice for homeowners and builders alike in a quicker and more cost-efficient way.”
The South Australian Government is reviewing the building laws and protections, including developing an easier dispute process for consumers.
CBS Minister Andrea Michael said $1.1 million was committed in the state budget to the agency and increasing staff numbers.
The City of West Torrens said the building approval process has been improved through PlanSA, so builders cannot upload notifications of commencement of works without builder indemnity being provided.