A wave of builder collapses has left NSW families with half-finished homes and subcontractors chasing unpaid invoices. The situation is stressful — but there are real protections and a clear order of steps. Here is a plain-English guide.
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You signed a fixed-price contract, paid your deposit and progress payments, and watched your home take shape. Then the work slows, the calls stop being returned, and you hear the word no homeowner wants to hear: your builder is insolvent. It is one of the most stressful things that can happen during a build — but you are not without protection, and the order in which you act really matters.
New South Wales has seen a high number of building company failures over the past few years, driven by fixed-price contracts signed before costs jumped, thin margins and rising interest rates. One recent example is Beechwood Homes (NSW), a long-established builder that faced winding-up proceedings in early 2026 and had a liquidator appointed in May 2026, leaving customers part-way through their builds. Whatever the company, the questions for an affected homeowner are the same.
“Insolvent” simply means the company cannot pay its debts as they fall due. In practice you will usually hear one of two terms: voluntary administration (an external administrator steps in to try to rescue or wind up the company) or liquidation (the company is wound up and its assets sold to pay creditors). You can check a company's status on the ASIC register — for an insolvency-based insurance claim, the builder's status generally needs to show that an external administrator or controller has been appointed.
Importantly, when a builder fails you usually cannot simply keep paying and carry on. Your contract, your deposit, your progress payments and your insurance position all need to be looked at together before you take the next step.
The most important safety net for NSW homeowners is Home Building Compensation cover (often still called home warranty insurance), administered through icare. For residential building work over $20,000, the builder must take out this cover before starting work or taking any money, including the deposit. It is the homeowner who is protected.
HBC cover can respond where the builder has died, disappeared, become insolvent, or had their licence suspended for failing to comply with a money order from the NSW Civil and Administrative Tribunal (NCAT) or a court. It can cover both incomplete work and defective work.
The exact figures and timeframes can change, so treat the points above as a guide and confirm the current limits with icare or a solicitor for your specific contract.
If you think your builder is in trouble, working through these steps in order protects your position:
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HBC cover protects homeowners, not the trades. If a builder you worked for becomes insolvent, you generally become an unsecured creditor — near the back of the queue when the company's remaining money is shared out. Recovery in these situations is often only cents in the dollar, which is why acting quickly counts.
Practical steps for subcontractors:
Prevention is far easier than recovery. Before you pay a deposit:
Michael Campbell Law is a boutique Hills District practice with a particular focus on construction law. Michael is a civil engineer as well as a solicitor, with experience on NSW infrastructure projects — so he reads a building contract and a defect list with a practical, technical eye, not just a legal one.
For homeowners across Baulkham Hills, Norwest, Castle Hill, the Hills District and Western Sydney, that means help understanding your contract, deciding whether and how to terminate, lodging and managing an HBC claim, and getting your home finished properly. For subcontractors, it means moving quickly to protect and recover what you are owed. If you would like to talk it through, you are welcome to get in touch.
Related reading: Building defects in NSW: your rights and the new 10-year cover · Getting paid on time: Security of Payment for subcontractors
This article is general information only and not legal advice. The law and figures described are current as at June 2026 and may change. For advice about your situation, contact Michael Campbell Law or another qualified solicitor.
HBC cover (formerly home warranty insurance) can pay for incomplete or defective residential building work where the builder has died, disappeared, become insolvent, or had their licence suspended for failing to comply with a Tribunal or court money order. It applies to residential work over $20,000, and the builder must hold it before taking a deposit.
Be careful. Rushing a new builder in before your HBC claim is assessed can reduce or even defeat your claim, because the insurer needs to assess the incomplete and defective work first. Get advice and lodge your claim before committing to rectification work.
Time limits vary by claim type. As a general guide: loss of deposit or failure to start work, up to 12 months; non-completion, up to 12 months from when work stopped; major (structural) defects, up to 6 years from completion; other defects, up to 2 years. Confirm the current limits with icare and act early.
No. HBC cover protects the homeowner, not subcontractors. If a builder you worked for becomes insolvent you generally rank as an unsecured creditor and lodge a proof of debt with the liquidator. Acting early and getting advice gives you the best chance of recovering something.
There is a cap on each certificate (currently up to $340,000), and for incomplete work the cover is generally limited to 20% of the contract price. The exact amount depends on your contract and loss, so confirm current limits with icare.
Pause and get advice before making further payments or signing anything. Paying ahead of the work actually completed can leave you exposed if the builder fails. Check the builder's status and your contract first.
Construction is one of the areas Michael handles personally. Whether your builder is showing warning signs or has already failed, you are welcome to book a free, no-obligation consultation.