The family had signed a contract to build a house in Ōmokoroa. Photo / Bevan Conley
A Tauranga family are devastated after losing more than half of their $55,000 house deposit when a building company franchise collapsed.
The 39-year-old father, who did not want to be named for privacy reasons, said they were “desperate” to get their money back and had hired a lawyer.
“This is a crisis situation - how are we going to get another deposit? It will take us a good few years to even be in a position to buy another house or to build a house.”
The father said he and his wife migrated from South Africa to New Zealand in 2018 to give their 4-year-old son and 6-year-old daughter “better prospects”.
After initially moving to Wellington, they moved to Tauranga with the hope of settling in time for their daughter to start school.
The father said they bought a piece of land in Ōmokoroa in 2020 and planned to build a house on it.
In December 2020, they approached the Compass Homes franchise for Western Bay of Plenty about building the house. In April 2021, they signed a building contract and paid a $55,000 deposit.
By October 2022, they still had not received building plans. The family contacted a lawyer to try to get their deposit back.
“By December, me and my wife were getting desperate.”
The father claims the franchise “scrambled” to get their building plans together, however, another building contractor reviewed them and believed the plans were missing information and would not pass council checks.
The father claims the franchise refused to give them their deposit back without deducting what he described as a “staggering” amount from the deposit for the plans. He claims initially, the company asked for $27,000.
“We [felt we] had no choice [but] to agree because they stopped responding to our lawyer, so by January 2023 we agreed to remove the amount for plans and pay us the balance of our deposit.”
After negotiations, the father said he agreed to pay $13,000 out of the deposit and the franchise would refund him the rest.
He claims the franchise paid him back $10,000 and told him he would receive the remaining balance of $32,000 within five weeks.
“And that was the last we heard.”
In April, the family’s lawyer was informed the franchise was in liquidation. The family’s lawyer filled out a creditor claim on their behalf.
The father said they were paying the mortgage on their land in Ōmokoroa but may need to consider selling it. They are currently renting in Tauranga.
He said the impact on their family had been “devastating”.
“We saved up our deposit and now it’s gone ...”
Asked what the next step was, he said: “I have no idea, honestly.”
They are awaiting the outcome of the creditor’s claim.
The first liquidator’s report for Terwen Investments Limited, trading as Compass Homes (Western BOP), estimated unsecured non-preferential creditors were owed more than $500,000.
It was not known how much would be paid to unsecured creditors.
The report showed suppliers and other creditors were owed $338,000 and shareholder and related party advances were owed $189,000, totalling $527,000.
The total assets available for unsecured preferential creditors were also not known. The report showed there was $94,216 of accounts receivable, $15,000 of franchise, $20,000 for a vehicle and $5500 for property, plant and equipment.
In the report, Grant Reynolds, of insolvency practitioners Reynolds and Associates in Auckland, said the company, Terwen Investments Limited, was placed into liquidation on April 13.
Terwen Investments was incorporated in January 2016 when it bought the Compass Homes franchise for the Western Bay of Plenty.
Its director is Terence Sharplin, who is a shareholder with Wendy Sharplin.
Reynolds cited factors for the company’s insolvency including Covid-19 and resulting impacts that “caused delays and cost overruns on projects”.
“Supply chain issues, including the lack of Gib stocks available to the industry/builders due to Covid-19 lockdowns [and] delays in Placemakers being able to deliver frames and trusses, due to Covid-19 lockdowns.
“Cost increases that had an impact on a fixed-price building contract [and] economic conditions including the impact of interest rate increases where customers have cancelled or delayed building contracts.”
The report showed secured creditors, as registered on the Personal Property Securities Register, were Sharp Corporation of NZ, Applico, Carpet Court Retailing, UDC Finance, Westpac New Zealand and Reliable Foundations.
Several businesses in the Bay of Plenty have been listed as creditors including Laser Plumbing Tauranga Central, Placemakers, Carpet Court Tauranga, The Tile Depot Tauranga, Mastercraft Bay of Plenty and Wallboard Systems Tauranga.
Inland Revenue Department and Xero were also listed as creditors.
Speaking to the Bay of Plenty Times, Reynolds said the likelihood of clients getting their money back depended on who it was and if they had a Master Build guarantee.
Master Build describes its 10-year guarantee as a warranty product that includes insolvency protection. This meant people could get financial support if their builder went out of business.
Reynolds declined to comment on individual clients’ cases but said as far as he was aware, most had a guarantee from Master Builders. “They’re corresponding with them so there is a good prospect of them getting their deposit back,” Reynolds said.
The father said he had signed a Master Build contract, however, after contacting Master Builders, he found out it was not valid.
“They told me that they cannot do anything and that I should seek legal advice.”
Master Builders chief executive David Kelly said it understood it was a “stressful and emotional time” for homeowners impacted by Compass Homes (Western BOP) entering liquidation.
“We are in contact with a number of homeowners and expect others to get in touch. Many have valid guarantees in place and Master Builders is supporting these homeowners through the process.”
Kelly said it was aware of a guarantee application made and declined by Master Builder Services in 2021.
“Master Builders notified both the builder and the homeowner that this application had been declined, and we provided detailing regarding what was required for the application to be approved.
“In these circumstances, we would expect the homeowner and builder to discuss the guarantee application, and reapply.”
If a homeowner did not have a guarantee and their builder went into liquidation, it advised them to contact the liquidator and seek legal advice.
Kelly said the homeowner should be aware they remained in a legally binding contract with their builder until the liquidator disclaimed the contract. This meant they could not enter into another contract to complete the work until this happened.
Compass Homes Group of Companies group director Garry Shuttleworth said Compass Homes Limited, the franchisor, had “no financial interest” in Terwen Investments, no directorships or direct management function or responsibilities relating to the management or financial performance of it.
“They were a completely independent financial company.”
Shuttleworth said Compass Homes provided the operating systems, platforms and processes, including but not limited to, health and safety management, construction management systems and sales and marketing initiatives, including customer retention programmes which were “typical of any franchise in the building industry”.
“Compass Homes has the ability to have oversight into the financial performance of its franchises but that is limited to project profitability and overhead cost recovery.”
Shuttleworth said the impact of the Covid pandemic, supply chain issues and “rampant” cost increases along with current economic conditions of high interest rates, bank lending being “almost impossible” to obtain, inflationary pressures and low real estate values had turned buyers away from building options “in their droves”.
“Regretfully the building industry is presently facing the perfect storm.
“We absolutely regret this position, but unfortunately it is symptomatic of the times that we presently find ourselves in.”
Terence Sharplin was approached for comment.
Megan Wilson is a health and general news reporter for the Bay of Plenty Times and Rotorua Daily Post. She has been a journalist since 2021.
Members of the public in the area are advised to follow instructions from police officers.