Hotondo Homes Franchise on Verge of Collapse

The Tasmanian franchise of home builder Hotondo Homes has been placed in liquidation with 40 unfinished homes on its books.

Tasmanian Constructions, a franchisee of Hotondo Homes in Hobart, has entered liquidation with as many as 80 contractors and 40 customers left out of pocket, some to the tune of $200,000.

Hotondo Homes has been operating for more than four decades with 70 independently owned and operated builders across Australia, including Tasmanian Constructions, which was based in New Town, a suburb of Hobart.

The group has completed more than 28,000 homes since its inception, partnering with local home builders to deliver house and land packages.

Jarvis Archer, liquidator with Revive Financial, told The Urban Developer that Tasmanian Constructions director Craig Ellis had been referred to the receiver during the Christmas period.

The builder subsequently decided to close its offices in New Town at the end of December and wind up its operations in early January.

“The difficulties in obtaining building materials and the increased costs of these materials are nationwide for the construction industry,” Archer said.

“As a result, construction programs have been widely disrupted, impacting cashflow, and profitability, particularly for fixed-price contracts, has been decimated.

“Consequently, [Tasmanian Constructions] was slower to reach progress milestones and issue invoices, severely impacting cashflow and its ability to continue operating.”

Revive Financial has since made contact with all of the company’s customers to assess the status of each project that was under way when the company ceased construction.

Administrators said the amount of any return to creditors would only be known once these aspects of the liquidation have been completed in early April.

“If legal recovery claims are identified, which may be commercially worthwhile pursuing, steps may be taken to seek to recover funds to provide a return to creditors,” Archer said.

Soaring demand—boosted by the federal government’s HomeBuilder scheme that ended last year—along with fractured global supply chains and labour shortages have left many volume builders struggling.

Supply chain hold-ups caused by the pandemic have caused inflationary pressure and slowed the pace of home building by up to 30 per cent.

In May, Western Australian construction company Pindan Group collapsed, owing subcontractors and creditors $80 million.

Privium Group, one of Queensland’s busiest residential builders, was placed into voluntary administration in November with debts of more than $28 million.

BA Murphy Constructions, also based in Queensland, called in liquidators with 240 residential contracts outstanding and another 50 projects under way.

Shortly after, Melbourne-based high-rise builder ABD Group went under with outstanding debts of more than $50 million.

Hobart-based Inside Out Construction also folded in November. Master Builders Association Tasmania is currently assisting 23 of the stricken builder’s customers in order to find alternative construction options.

“We're hearing from long-term operators that they're experiencing difficulties themselves for the first time in 20 to 30 years,” Archer said.

“This surge in construction work is being called a profitless boom.

“It appears that the builders that have retained steady workflows, similar to their historical levels, are less financially exposed than those that have sought to take advantage of the rapid increase in work.

“The Christmas shut-down period can often cause cashflow difficulties for the building industry and those challenges are exacerbated by the current situation.

“As a result we expect to see more collapses in the coming months and unfortunately Tasmanian consumers are at a disadvantage compared to other states.”

Late last year, the Tasmanian government voted down a bid for a parliamentary inquiry into the state’s construction industry.

Minister for consumer affairs Elise Archer said the state government would continue to undertake a process of continual reform.

In a bid to further support home buyers, the Tasmanian government announced it would reintroduce home warranty insurance, which covers customers in the event of insolvency.

In 2008, Tasmania became an outlier in the country by removing the mandatory insurance, making it the only state without home builder warranty insurance.