Nicheliving and its directors will be banned from operating for a decade and the state government will fork out up to $40 million to finish the hundreds of incomplete homes.
Commerce Minister Sue Ellery has announced that affected Nicheliving customers will be able to access the state government-underwritten insurance scheme and appoint new builders.
The state government has waived Nicheliving's insurance liability on advice recovery rates would be low, meaning its directors won't be pursued by the insurance provider to cover the costs.
It means taxpayer funds will be used to underwrite the up to $200,000 in compensation per impacted customer. Given Nicheliving has about 200 unfinished homes, that bill could total $40 million.
Nicheliving and its directors, Ronnie Michel-Elhaj and Paul Bitdorf, and their wives, will be banned from operating or starting new registered building contractor businesses for at least 10 years.
They will also be barred from accessing home indemnity insurance over their own homes, including that of their immediate family members.
The agreement was made possible after Nicheliving agreed to drop its fight to reinstate its builder’s registration, held under Projex Management & Construction Pty Ltd, after the Building Services Board cancelled it on financial grounds in July.
It comes after it was revealed Nicheliving signed four years’ of work in a two-year period, prioritised more profitable builds and had debts totalling $76 million.
“While QBE does pursue directors, I'm advised that recovery rates are quite low, and it's likely that Nicheliving would have contested the recovery losses,” Ms Ellery said.
“Of course, we started with a finding by the Building Services Board that they did not have sufficient funds."
The state government-imposed ban on the company and its directors only applies to its operations as a building contractor, leaving its development division unscathed.
Today, Nicheliving said it had decided to focus on its core development business and pipeline of over 409 property titles to “help address the housing crisis”.
No financial penalty
Opposition leader Shane Love said while the resolution was good news, he was shocked the directors would suffer no financial penalty, with taxpayer funds on the hook.
“I note under today’s agreement, Niche directors will not be eligible to register as builders for the next ten years. More detail must be provided on just how this will be enforced and monitored,” he said.
“Customers deserve assurance these same directors won’t crop up in connection to construction adjacent businesses somewhere down the line and inflict the same pain they have suffered through.
“The practice of building companies allowing themselves to collapse and starting up again under another name must be stamped out.”
The Nicheliving group owns numerous property-related entities, including Australian Property Alliance, which it markets as its real estate business.
It means the group's real estate and development divisions can continue to trade while its residential construction arm must down tools.
When asked whether the state government intervention set a dangerous precedent in the industry, Ms Ellery was adamant the answer was no.
She said the government could have been in this position in any event when a matter goes through the courts, the directors are pursued and there's no money.
"I don't know any builder that is prepared to have their business barred for at least ten years with all of the reputational issues that go with that," Ms Ellery said.
New builders to be signed
Customers will be able to select new builders through the home indemnity insurance process with QBE. Those builders will absorb the mammoth amount work across more than 200 unfinished homes.
Nicheliving customers temporarily had access to the scheme after the Building Services Board axed Nicheliving’s registration in July over concerns they company couldn't pay its debts.
But Nicheliving lawyers successfully argued the decision and the builder was granted temporary reprieve. A final decision on its registration was due to be heard at the State Administrative Tribunal next month.
Ms Ellery said the state government's motive was to take action to get customers into their homes as quickly as possible.
She said the government was not satisfied that it was in the best interest of customers to wait for a decision in the SAT.
“[Which] could then have taken months or longer, as SATs decision could have been appealed in the Supreme Court, which is why we've been working to secure an alternate way forward that gets the homes built,” Ms Ellery said.
She said she would encourage customers who believed they had a claim to seek their own legal advice.
"If there are customers or suppliers who have other claims - or claims greater than that amount of money - they want to pursue against the companies, they can do that," Ms Ellery said.
"This does not preclude any other claims that might exist ... I don't know of them, but it does not preclude any other claims that might be made against these companies or their directors."
Industry body disappointed
Housing Industry Association executive director Michael McGowan said he was supportive of the announcement providing certainty to a group of more than 200 consumers.
But he said he was disappointed the state government asked QBE to not pursue Nicheliving's directors for the costs of completing unfinished home.
“HIA are extremely disappointed that the state government has instructed QBE not to pursue Nicheliving for the home indemnity insurance costs that will be provided to consumers for the completion of their homes," Mr McGowan said.
“Many builders have been working tirelessly through challenging conditions to do the right thing for their customers. Many have sold houses and other assets to keep their businesses afloat as they navigated the challenges of material and labour increases and pulled out all stops to get their customers into their new homes."
It marks another round of state government intervention in Western Australia’s residential building sector in recent years, after it introduced the stimulus packages amid the pandemic to aid the sector.
Those stimulus packages were eagerly taken up by customers and builders, some of which have struggled with workload capacity management.
