What to Do If Your Builder Goes Out of Business in Perth

Last Updated 11 June 2026

⚡ TL;DR — Quick Summary

Builder insolvencies in Perth are rising. Home Indemnity Insurance (HII) is your main legal protection.
If your builder collapses, stop all payments immediately and locate your HII Certificate of Insurance.
HII covers up to $200,000 for incomplete or defective works and up to $40,000 for lost deposits.
The insurance has significant gaps: the $200,000 cap can fall well short on larger custom builds.
Red flags before signing include no certificate before deposit, mismatched contract details, and rushed payment pressure.
A building broker vets builders continuously for financial health, insurance status, and workload before you sign.

Builder insolvencies have hit Perth families hard over the past few years. Half-finished homes, lost deposits, and lengthy insurance claims have become a reality across WA, and the financial pressure on the building industry isn’t easing. But what do you do if your builder has just gone out of business, and more importantly, how do you prevent it?

Through proper insurance verification and broker-led vetting before you sign.

First, Don’t Panic and Take Immediate Action

If you’ve just learned your builder has entered administration, been deregistered, or abandoned your site, take a breath. The system has built-in protections, but the next decisions matter.

Immediate Action Steps

1	Stop all payments immediately. Don’t make another progress payment, deposit top-up, or variation payment. Money paid after insolvency is unlikely to be recovered and may complicate any insurance claim.

2	Locate your Home Indemnity Insurance Certificate. This is the single most important document in your file. It should have been provided to you before you paid your deposit, and it names the insurer who will handle your claim.

3	Contact the administrator or liquidator. Once a building company enters external administration, an appointed administrator manages the wind-down. Register yourself as an interested party in writing. They’re required to communicate with you about your contract.

4	Secure the site (but carefully). Your instinct will be to change the locks or take possession. Don’t do this without legal advice. Under most building contracts, “taking possession” can be construed as a breach, which can void your insurance claim.

5	Get independent legal advice before signing anything new. Don’t sign a fresh contract, agree to settlement terms, or accept any insurance offer until a construction lawyer has reviewed your situation.

Understanding Home Indemnity Insurance

This is your safety net in WA. Home Indemnity Insurance (HII) is the legislated protection behind every residential building contract in Western Australia. Under the Home Building Contracts Act 1991, it’s mandatory for residential building work over $20,000, and your builder must take out the policy in your name before accepting a deposit or commencing work.

Covers: Builder Death

If the builder passes away and the project cannot be completed, HII activates to protect your investment.

Covers: Disappearance

If your builder abandons the project and cannot be located, the policy provides a claim pathway.

Covers: Insolvency

The most common trigger. If your builder enters administration or liquidation, HII covers completion and deposit loss.

Does NOT Cover

General defects, multi-storey multi-unit developments above three storeys, owner-builder projects, or stand-alone work like pools and landscaping.

HII Cover Limits at a Glance

Completion Cover

Up to $200,000

For incomplete or defective works

Deposit Cover

Up to $40,000

For lost deposits

Policy Duration

6 Years

From practical completion

HII is a floor, not a ceiling. It exists to stop families from being completely wiped out by a builder’s collapse, not to make them whole.

The Insurance Red Flags Most Homeowners Miss

In a perfect world, every WA builder would hand over a valid Certificate of Insurance before taking your deposit, with details that exactly match your contract. In reality, this is where things often slip, and where collapses cause the most damage.

⚠ Red Flags to Watch Before You Sign

No Certificate of Insurance provided before deposit. This is a legal breach. If a builder asks for any payment before producing the certificate, walk away.

Certificate details don’t exactly match the contract. Names, addresses, and project descriptions must match. Mismatches can give the insurer grounds to deny a claim later.

Pressure to pay deposits quickly. Reputable builders don’t rush deposits. Urgency is often a sign of cash-flow pressure, the same pressure that precedes insolvency.

Single-policy reliance. HII is the legal minimum. A financially healthy builder also carries Contract Works Insurance (covering the construction site itself), Public Liability Insurance, and Workers Compensation. A builder operating on the bare minimum is a builder to question.

How a Building Broker Vets Builders Before You Sign

This is where prevention beats remediation. The job of a building broker is to do the due diligence that most homeowners don’t have the time, expertise, or industry contacts to do themselves. At Better Way 2 Build, we do this continuously across our panel of builders, not just at the moment a client signs.

What Our Vetting Covers

Financial health checks. Builder registration status, ASIC company searches, payment history with suppliers and trades, and ongoing project load. Builders most likely to fail are usually overstretched, not underexperienced. We’ve covered this in our Perth Builder Health Check guide.

Insurance verification. We confirm HII is in place for every project, and we check the broader insurance stack. A builder who treats insurance seriously usually treats the rest of the build seriously too.

Track record and current workload. A builder with a strong reputation but 200 active jobs is a different risk profile from one with 30. We look at delivery timelines, recent client outcomes, and whether their pipeline matches their actual capacity.

Continuous panel discipline, with no conflict of interest. We don’t add builders to our panel based on a one-time check. We monitor them continuously, and they come off the panel before we put another client in front of them if their risk profile shifts. Because we’re paid by the builder at a fee equal to or less than their internal sales commission, our service costs you nothing extra, and we have no incentive to push a struggling builder onto a client.

For more on red flags to watch for yourself, see our guide on how to choose a builder in Perth.

Book a Free Builder Vetting Consultation

What HII Won’t Cover

This point is why vetting still matters. Even when HII works exactly as designed, it’s not the safety net most homeowners assume.

The Real Gaps in HII Cover

The $200,000 completion cap can fall well short on larger custom builds.

Example: if your home is mid-construction at the $700,000 mark and the cost to complete is $300,000, the gap comes out of your pocket.

Emotional, time, and accommodation costs are not covered.

Months of paying rent while also paying a mortgage on an unfinished home, storage fees, and lost time off work for inspections and meetings are all on you.

Claims processes take time, often months.

You can’t just resume building the next day. You’ll need an independent inspection, scope of works, quotes from a replacement builder, and approval from the insurer before any practical work resumes. Insurers are commercial entities and will challenge what you’re owed if there’s any room to do so.

Each of these realities is an argument for properly vetting upfront. The best HII claim is the one you never need to make.

Your Pre-Build Insurance Checklist

If you’re about to sign a building contract in Perth, work through this list before you commit.

Important: If you can’t tick all of these boxes, you’re carrying more risk than you should be.

Pre-Build Checklist

☐	HII Certificate of Insurance sighted before you pay any deposit
☐	Names, addresses, and project details on the certificate match your contract exactly
☐	Builder verified as currently registered on the WA Building and Energy register
☐	Builder also carries Contract Works, Public Liability, and Workers’ Compensation insurance
☐	Contract independently reviewed (by a broker, lawyer, or both) before signing
☐	Builder’s financial health and current workload checked
☐	References from recently completed clients followed up (not just the testimonials on the website)

We’ve also published a guide on Perth builder reviews and who you can actually trust, which goes deeper into verifying reputation beyond the marketing.

Why Working with a Building Broker Reduces Builder Collapse Risk

Australia recorded over 3,000 construction-sector insolvencies in 2024, and the pattern isn’t slowing. Going direct to a builder means you carry the entire vetting burden yourself, usually without industry contacts, financial reporting access, or visibility into which builders are stretched too thin. By the time public signs of distress appear, deposits have often already been paid.

Warning: By the time public signs of a builder’s financial distress appear, deposits have often already been paid. Industry-level intelligence, not public records, is what catches this early.

A building broker carries institutional knowledge. We know which builders pay their trades on time, which have grown beyond their operational capacity, and which are stable, well-insured, and delivering. And because our service is free to the homeowner, there’s no cost penalty for getting this protection.

📞 When to Call a Specialist Immediately

You’ve received notice that your builder has entered external administration or liquidation
Your builder has stopped attending site without explanation for more than 10 business days
You cannot reach your builder and subcontractors have told you they haven’t been paid
You’ve been asked to sign a new contract or settle directly with a creditor
You’ve received a payment demand from a supplier or trade that your builder should have paid
Your HII certificate details don’t exactly match your signed building contract
You’re about to pay a progress payment and are unsure about the builder’s current status

We Often Get These Questions

What happens to my deposit if my Perth builder goes bust?

Home Indemnity Insurance covers lost deposits up to $40,000 in WA, provided your builder took out a valid HII policy in your name before accepting payment.

See → How to Avoid Perth Builder Collapse Risk

Is Home Indemnity Insurance mandatory in WA?

Yes. Under the Home Building Contracts Act 1991, HII is mandatory for all residential building work valued over $20,000. The builder must arrange the policy and provide the certificate before taking a deposit.

See → Guide to Home Building in Western Australia

What’s the difference between HII and Contract Works Insurance?

HII protects the homeowner if the builder fails. Contract Works Insurance protects the building site itself during construction, covering fire, storm damage, and theft of materials. Reputable builders carry both.

See → Questions to Ask Builders Before Signing a Contract

Protect Your Build Before You Sign

Book a free consultation with one of our building brokers. We’ll review your shortlist, verify the insurance picture, and make sure you’re working with a builder who will still be standing when your home is finished.

Serving homeowners across Perth including northern and southern suburbs, and all of Western Australia.

Book a Free Consultation

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Better Way 2 Build — Building Brokers Perth — Serving homeowners across Perth and Western Australia.

Article by Mike King

With over 30 years of experience in the building industry in Western Australia, I have developed a deep understanding of what it takes to successfully navigate the home building process, from finance to handover. My role as a building broker allows me to address the gaps in the industry by providing clients with tailored options and acting as their advocate, ensuring a smooth and fulfilling experience in achieving their dream home. Through my company, Better Way 2 Build, I am dedicated to helping individuals from all walks of life by offering expertise, empathy, and transparency throughout the home building journey.