When a building company fails, it owes $2.4 million.
A Sydney family may never be able to build their dream home because their builder went bankrupt in March owing millions of dollars and the cost of building their home jumped to $1.9 million, which is a huge $800,000 more than what they were originally quoted.
A report from Mac Insolvency sent to ASIC in June showed that 45 creditors owed $2.4 million to the building company Jada Group, which had been in business for 10 years.
One family who was working with the company to build was left crying.
The Garozzos had been living in a two-bedroom apartment in Sydney with their four-year-old son and her husband’s daughter from a previous relationship.
But because they wanted to have more children, they bought a piece of land in North Kellyville three years ago so that they could build their forever home there.
They signed a contract with Jada Group to build a four-bedroom, two-story house with a swimming pool in November 2020.
The 38-year-old woman and her 41-year-old husband had spent $50,000 on an architect’s plans for their new home and were excited to build it.
The family says they have been in “limbo” for two years and don’t know if they will ever get the money back that they gave to the builder.
“Our property still doesn’t even have a slab, and our builder has gone out of business. Mrs. Garozzo told news.com.au, “We put down a $150,000 deposit, but we can’t move forward.”
“We are worried that if we build and overcapitalize, we will owe more on the property than it is worth because the price of goods has gone up so much in that time and property prices are expected to drop by about $400,000.”
Even then, the family doesn’t know if they’ll be able to build their dream home because they might not be able to pay for it because the price has gone up by a huge $800,000.
There will be no 40th birthday parties.
Mrs. Garozzo said that they had planned to move in by March 2021, in time for her husband’s 40th birthday party.
She said that by April 2021, the Garozzos were forced to put cameras on their site to keep an eye on it.
She said that disagreements with the Jada Group over not paying contractors meant that no work was done on their site from July until mid-November, when contractors came back for a short time.
But since December 20, 2021, no one has been there.
They kept calling the company to find out what was going on, and the last time they talked to someone was in February. After that, they were ignored, according to Ms. Garozzo.
Bombshell letter
Then, in March of this year, a bombshell letter came saying that Jada Group had gone bankrupt, leaving the couple shocked and “grieving” because their “savings, family home, and financial stability” had been “stolen.”
“We had ostrich syndrome and didn’t want to face what was going on… but there’s frustration, anger, sadness, and guilt… Then it caused trouble in our marriage because we couldn’t agree on what to do,” she said.
“It affected every part of our lives, it was everywhere, and we couldn’t get away from it, and it’s still going on.”
Why did the business fail?
Mac Insolvency sent a report to ASIC that said Jada Group owed $2.4 million. The Australian Taxation Office was owed $265,000, and Jada Group owed thousands to a number of tradies and material suppliers. Its business account with CBA was overdrawn by $1062.
According to the liquidator’s report, a stone supplier is owed $21,000, a roofing company is waiting for a $22,000 bill to be paid, and bricklayers are owed $17,000.
The report said that in addition to the Garozzo family’s house, another residential project in the inner west Sydney suburb of Erskineville was also affected.
“The director said that the business failed because it got complaints about the quality of the homes it built and because of the high cost of materials,” the report said.
Based on its preliminary investigation, it also found a number of director offenses that they may report to ASIC. These include failing to use care and diligence, not keeping good books and records, and taking on debts while the company was insolvent.
The report also said that, based on the books and records they had seen so far, the liquidators “believed that the company had been bankrupt since at least June 30, 2019.”
But Mrs. Garozzo hates the insolvency process, especially since the couple wanted to sue the company’s owner personally for their losses, but the administrators told them they didn’t have enough money to pay for that.
Instead, they were asked if they were willing to pay their own money to legally go after him.
“I went crazy. I was crying and telling the liquidators that he wouldn’t have gone broke if he had the money. She said, “This is a crazy system that hurts the people who owe money.
“He owes money to 45 people, but we are the biggest one, and he has no money left.”
Faced with an impossible $2.2 million mortgage
The mother of two said that they had made a claim on their home warranty insurance, but it wasn’t going to be enough to build their house.
She explained, “We are now at the mercy of the home warranty people, who have agreed to be responsible, but you can only claim 20% of the contract amount, which is about $200,000.”
“We’ve already spent $200,000, and we don’t really know why, but they’ve put the project out to bid, and now other builders are giving us quotes of $1.9 million.
“We can’t even pay to borrow money. Including what is still owed on the land, that would mean a mortgage of $2.2 million… It’s clear that it’s caused a lot of trouble. The whole process is unregulated, and the creditors are the ones who lose out.
The family still rents, and they had to move recently because their landlord sold his house. They don’t know what the future holds for them.
“We should have had a lot of equity in our home, but instead we’re in a situation where we can’t even afford to build. She said, “It’s taken away all my hopes, dreams, and aspirations.”
“Everything we’ve worked hard for and given up a lot for is gone.”
We can’t even think about having another child because of the uncertainty, the extra costs, and the fact that we don’t know what will happen. However, we are getting older. I’m getting close to 39, and I don’t want to have kids when I’m 40 or 41. We’re lucky to have other children, but our picture-perfect life is no more.”
Too many people are hurt by the building crisis.
Mrs. Garozzo wants the building industry to be better regulated and for directors to be held accountable.
“I’m in charge of a business, and I’m responsible. She said, “I will accept if something is wrong, and I can tell if the company is going downhill. If that were the case, I would never take someone’s money.”
“I work in the criminal justice system, and I have clients in jail for stealing or scamming for less money than we have lost.”
I don’t understand it. It bothers me that there aren’t many rules about it and that these people hide behind a company banner that gives them some protection, but why?”
She also said that there are “too many victims” of building collapses and that better laws need to be made after a serious review of the industry.
“If these people keep doing this, something needs to be done to stop them. I know that the government has tried to stop people from closing one business and opening another one under a different name, which is called “phoenixing.” However, this is ruining people’s lives and no one is being held responsible, she said.
“Sleepless nights, losing weight, and having more anxiety are just a few of the things that have become normal because there aren’t enough rules about holding builders accountable.”
This year, there have been a lot of collapses in Australia’s building industry, which has thrown it into a crisis.
Rising costs, broken supply chains, and occasional lockdowns have led to a boom that doesn’t make money. According to experts, many construction companies have committed to projects that are no longer financially viable because building materials have gone up in price so much.
