Twenty-seven owners left with unfinished homes have no Master Build guarantee after liquidation

Friday, 8 July 2022

Sylvana Whitehouse and her family lost $250,000 on an uncompleted new build home when Jonesy Construction went into liquidation.

When Sylvana Whitehouse and her family signed their new-build house contract, a Master Builder guarantee was included in the price.

But when their builder went bust, leaving the family hundreds of thousands out of pocket and with only a hole in the ground to show for it, the Whitehouses discovered the guarantee had never been applied for.

The family is one of at least 14 clients of Jonesy Construction Ltd who provided evidence suggesting they had paid for, or completed paperwork for, a guarantee, but for whom Master Builders says no application was lodged.

Master Builders puts the number affected higher still, with chief executive David Kelly confirming his organisation has been contacted by 27 clients of Jonesy Construction who did not have guarantees.

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The site in Boeing Way, Newlands, where Sylvana and James Whitehouse were to have their home built by Jonesy Construction.

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Despite Master Builders honouring the guarantee in similar situations in the past, those affected have been told they are not entitled to coverage.

Many of the builds sit as they did when the Jonesy Construction folded early in May.

The Whitehouses’ site is in the Wellington suburb of Newlands. Sylvana says her family has already paid $329,000, with little to show for it but a hole in the ground and some retaining wall.

“We haven’t been able to figure out exactly how much we’ve lost because no one is providing information about that,” she says.

Whitehouse says her mum, Martha Toomer, recently retired and spent her life savings on the new house, and Whitehouse doesn’t know when the family will be in a financial position to resume construction.

Sylvana and husband James Whitehouse own another home in Woodridge, which she says they may have to sell if they want to complete the build.

“It’s been devastating for Mum, she’s never going to be able to make that money back,” Whitehouse says.

David Kelly says Master Builders can help find other members to progress houses left unfinished by the liquidation of Jonesy Construction, should the owners want the help.

“My husband and I feel like we have let her down.”

Kelly says he is “extremely disappointed” a member of his association had let homeowners down and engaged in practices that did not comply with standards or guarantee requirements.

Kelly says Master Builders has set up a free confidential support service which could supply counselling and wellbeing support to affected homeowners.

Sylvana says she and her husband James Whitehouse have another home in Woodridge, a few minutes from the build site.

Kelly maintains the unlodged guarantees will not be honoured, without expaining why, when it had done so in similar situations previously.

“We continue to support the liquidator in their investigations to understand if the builder acted in accordance with their legal obligations with regards to these homeowners,” he says.

Guarantee ‘only recourse’

The Whitehouse family signed the contract for their new home on Boeing Way with Jonesy director, Ben Jones, in October.

Whitehouse, who is a lawyer and a registered nurse, says the Master Build guarantee is the family’s only recourse.

Martha Toomer sold the home she had to help fund the new-build on Boeing Way for herself, her daughter, and son-in-law.

“We have no other way of being able to finish the build, there are no other protections in place, there is no money from the liquidators. He (Ben Jones) literally prevented us from having our only form of compensation, or help.”

How the guarantee works

Master Build guarantees provide two types of cover: loss of deposit cover and non-completion cover.

Loss of deposit cover ends once permanent work begins on site, and provides cover of $50,000 or up to 10% of the value of the build contract, whichever is less.

Non-completion cover provides coverage of $500,000 or 20% of the value of the contract, depending on which is less.

Any settlement is calculated as the difference between what it will cost to complete the build according to new quotes, minus the value of uncompleted work on the original building contract.

Master Builders says the guarantee does not cover advanced payments and if the guarantee includes advanced payments, it will be declined.

Whitehouse says for her, an honoured guarantee would equate to roughly $200,000 being paid out.

“No one has been able to confirm that, even though we’ve asked,” she says. “Regardless, in these situations every cent is helpful.”

Alex Shpilman says he cannot allow his two-year-old to go outside the house for fear of him falling and hurting himself.

Whitehouse says Master Builders should honour the guarantee, because the organisation has gone on the record before, saying it would in other similar situations.

Kelly says a number of homeowners did have guarantees, and Master Builders is progressing their claims.

He says Master Builders makes it clear on all documents that guarantees need to be applied for and accepted.

Each guarantee application is assessed to consider risks involved in getting the building completed, and a review of several of the contracts affected shows they would have been refused, Kelly says.

“We have worked hard to ensure that homeowners understand their obligations, including that they must contact us within 14 days of signing their application if they have not heard from us.

“We ask that all homeowners sign a statement that states they understand these obligations as part of the application. We note that these homeowners did sign this statement, and in some cases an experienced legal professional has signed as well.”

Kelly says the contract makes it clear there is no guarantee cover until an application has been reviewed and accepted in writing.

First home buyer Rahul Srivastav's home was almost complete when the construction company building it went into liquidation. (Video first published May 18, 2022)

“We regret that these homeowners, or their legal representatives, did not make contact with Master Builders when they did not hear from us, or prior to the work being undertaken,” he says.

Unsafe for kids to play outside

Alex Shpilman’s new home is a stone’s throw from the Whitehouses’. He also found himself unable to draw on a guarantee he thought he had.

His home’s interior is all but finished, but the outside and groundwork is not, which means his three children have to stay inside for safety.

“They can’t play in the backyard. If they want to play outside, we just go to a playground,” he says.

Shpilman says he paid about $100,000 for finishing work that was never done, and with the cost of materials and labour increasing, it will probably cost him $150,000 to $200,000 to have the work done.

“We don’t want to borrow more money from the bank, we have borrowed enough,” he says.

“That’s why we are doing it in stages. We are doing all the safety first, and we are likely to be doing no decking, no lawn, no backyard for a while.”

Shpilman says he is not sure what the guarantee would have covered, but it would have helped with the completion of any issues inside the house.

Whitehouse says her lawyer is considering a claim against Master Builders for a breach of the Fair Trading Act.