Locals impacted after builder goes into voluntary administration

Locals are in limbo after another builder went into voluntary administration. Picture: GENERIC

By Violet Li

Affected families by the collapse of the Victorian builder Montego Homes are reeling from losing their deposits and their dream houses.

The South Melbourne builder had advertised house and land packages in Pakenham and Officer, as well as the Casey South region, among other areas.

The builder went into voluntary administration in January, with Sam Kaso and Shaun Matthews of insolvency service Cor Cordis appointed as administrators to assess the best way to restructure or recapitalise the business.

Key initial findings have shown that 63 homeowners are affected by the company not having appropriate insurance in place for deposit holders.

According to the Victorian Building Authority, when a building contract is worth more than $16,000, builders are required to purchase Domestic Building Insurance (DBI) for their clients, which would cover incomplete or defective building works.

By law, a builder cannot take any payment, including a deposit from the client, until the insurance is in effect and the client has been given a copy of the insurance certificate.

Uninsured creditor Nicole Clarke, who bought a block of land in Cranbourne East, has still been processing the news with a heavy heart.

She lost $13,825, which took her over a year to save.

“It’s not huge, but it’s decent enough to be upset about this because you can’t get it back,” she said.

“Trying to buy anything at the moment in this climate is just ridiculous. Almost impossible. So, saving money for a deposit and then losing it is pretty devastating.”

Ms Clarke signed the contract around late November in 2023 and was urged to pay for the deposits over and over in the following month.

She eventually paid the 5 per cent deposit on 9 January this year and received an email from one of the directors Lachlan Lyndon saying thank you and wishing her a happy new year.

“I am assuming everything is okay,” she said.

“Then on 17 January, I found out that they had got into a voluntary liquidation.”

Having missed the State Government’s Liquidated Builders Customer Support Payment Scheme that pays out the creditors of 16 collapsed builders during the last two years and closes on 29 January, she had to restart.

However, she was hesitant to go out and look for another builder as she lost trust in the industry.

“I don’t want this to happen to me again and have to restart all over again and re-save again,” she said.

“I was thinking about selling it [the land].

“This is my first time buying a house. I knew it was going to be difficult, but I didn’t expect it to be this difficult.”

Ms Clarke said there had to be harsher penalties for builders who skip the insurance.

“These builders need to be held accountable for what they do,” she said.

“There has to be some consequence to their action because we’re paying for it.”

Paul Elsharouny, another uninsured creditor, lost over $15,000 from a deposit for his single-story house in Clyde North.

He signed the contract in March 2023 and immediately paid the deposit.

Ten months later, he was in shock when he discovered the collapse of Montego Homes through an email.

“As soon they sign a contract with a customer and take a deposit, they should look at the price of some materials and they should purchase as much material as they can to avoid the surprise raise for the material cost.

“But obviously they didn’t do that. One year later, when the land is due to be built, they find out that all material costs have been raised by 10 or 20 per cent.”

Mr Elsharouny said the government failed to observe and audit those builders.

“After what happened with Porter Davis last year, the government should have been warned and put more strict laws in place to observe these builders, but this didn’t happen,” he said.

“We lost our life savings, and we still need to continue with our life.

“We still need to go to another builder and make a new deal according to the current price market, which is more expensive than when we did with our original company.”

Shadow Minister for Home Ownership and Housing Affordability Evan Mulholland said Porter Davis should have been a wake-up call for Labor but the serious issues with domestic building insurance non-compliance clearly had not been addressed.

“No Victorian should lose a home deposit because of Labor’s incompetence. Jacinta Allan must commit to extending the support scheme until the issues plaguing domestic building insurance are resolved,” he said.

Shadow Minister for Planning James Newbury said Labor wasn’t doing enough to protect Victorians and their families from rogues.

“Buying a home is tough. New homebuyers shouldn’t also be fearful of a building company collapsing, and losing hard-earned deposits, because the State Labor Government isn’t strong enough to stand up to dodgy behaviour,” he said.

A government spokesman told The Age that a bill had been introduced to the Parliament to create tough penalties for builders failing to meet their DBI requirement.

The State Government has been contacted for comment by Star News.