Developer collapsed, builder still trading: claim before more credit

The developer’s failure is not the whole answer to your invoice

A builder says it cannot pay because the developer has collapsed, then asks you to price extra work. Do not treat that explanation as cancelling an invoice against a separately contracted builder. Start with the builder’s actual payment obligations. In NSW, the security-of-payment legislation prohibits pay-when-paid provisions. That is a NSW example; check the applicable rules elsewhere rather than assuming one national procedure.

Compare the contract name and identifier with the verified collapse notice. The developer’s appointment does not establish that the builder has entered external administration. If the builder’s status is uncertain, check official records for that entity. Keep any verified appointment documents separate so advice is based on the correct business and the actual contract.

Prepare the payment claim against the right party now

Prepare and serve a valid payment claim against the builder where the applicable security-of-payment scheme permits it. Check the contracting entity, eligible work, amount, required form, service method and time limits before sending. Business.gov.au explains that the regimes differ by state and territory. Get prompt qualified help where needed; do not wait for the developer’s insolvency process to resolve your separate claim.

Keep the contract, approved variations, work records, earlier claims, receipts and service evidence together. Ask the builder for its written position on the amount and any claimed dispute. Diarise the applicable response and next-step dates after checking them. An ordinary invoice is not automatically a compliant statutory claim, and eligibility or the amount payable may need professional assessment.

Source: Official guidance

Put three amounts beside each other

Prepare three figures: unpaid completed work, the remaining cost of existing commitments and the additional outlay for the proposed variation. This is an exposure map, not a legal entitlement calculation. Record which amounts are disputed and which customer receipts remain uncertain. Do not count the new variation’s quoted price as cash available to fund it.

For a simplified example, suppose $8,000 is unpaid, existing commitments require another $3,000 of expenditure, and the proposed variation requires $2,000 more before any customer receipt. The variation adds $2,000 to the planned outlay; it does not fix the $8,000 arrears. Profit, GST and other costs are excluded from this example. Use your actual figures when deciding what needs advice.

Separate new orders from obligations already accepted

Ask an independent construction lawyer whether the request falls within existing contractual obligations or is a genuinely new commitment you can decline or renegotiate. Do not assume that calling work a variation gives you a choice to stop it. Equally, do not agree to fresh credit terms by habit before checking the request and the company’s position.

Stop accepting optional new work on credit until the payment position and agreed terms are clear. For work already contracted, obtain prompt independent advice before suspending, terminating or removing materials; rights and notice requirements depend on the contract and law. You can propose deposits or revised terms for new commitments, but a proposal is not an agreement. Do not create a separate breach dispute.

Give the site team a clear decision to work with

Record who will assess the proposed variation, what advice is required and who may communicate a decision. Give the site supervisor the current instructions so a casual conversation does not run ahead of the commercial review. Keep the original request, drawings, pricing and response together. If company-wide solvency is in question, obtain qualified insolvency advice before further commitments.

Today, assemble the payment-claim file and arrange valid service where available. Verify the builder’s status, complete the exposure map and stop accepting optional new credit work until the payment position is clear. Get advice before changing existing obligations. Call CRP today about debt recovery with the contract, account and variation file. CRP coordinates independent qualified professionals; recovery is not guaranteed.