ReidBuilt Homes Financial Trouble..

[dj_rice]

A large Alberta homebuilder in financial turmoil has told contractors it doesn’t have enough money to cover unpaid bills as it works with financial advisers and lenders to shore up its business.

Richard and Eileen Sherburne moved into their new ReidBuilt home just over a month ago, on Sept. 15.

They were enjoying their new house when all of a sudden, they started finding pink lien letters in their mailbox.

“We opened that and said, ‘What?’ And then a couple of days later, four more came and we contacted a lawyer,” Richard said.

So far, 11 liens have been placed against their home, totalling more than $50,000.

https://globalnews.ca/news/3823550/l...y-contractors/

http://calgaryherald.com/business/lo...r-unpaid-bills

Tons of new builds with home owners putting deposits down, probably disappeared. Not good for them.

[rage2]

Wonder if @Kloubek got hit with liens, he posted in another thread that he had just moved into one of these homes.

[nzwasp]

Whats the process with building a new house, do you just put down your 5% deposit and pay the balance at the completion of the project? or do you have to get a builders mortgage with money given in stages. I could see loads of builders having issues if the former is true.

[realazy]

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Whats the process with building a new house, do you just put down your 5% deposit and pay the balance at the completion of the project? or do you have to get a builders mortgage with money given in stages. I could see loads of builders having issues if the former is true.

It's generally the former. We're building with Albi now and had to pay 10% deposit with the rest due at possession.

[Kloubek]

No, I'm clear as I moved in back in March and haven't had any significant work done since. (The contractors apparently can only issue a lien if they have done work less than 45 days prior) But I will make a few comments regarding this situation:

1) First and foremost, I consider this to be completely absurd. This company KNEW they were struggling and heading to this scenario, yet they continued to take deposits and hire trades to work on their homes. In my opinion, it should not be legal for a company to engage in this knowing that others will be left holding the bag shortly down the line. There should be criminal consequences for a company knowingly doing this - as it morally equates to fraud in my eyes.

2) I'm personally screwed for warranty work. Any promises made by Reidbuilt are now irrelevant and they could care less about following their built through to customer satisfaction. As a result, I'm going to be left with about a thousand bucks of stuff that needs to be done and won't likely be covered by the new home warranty for various reasons. The subcontractors who did the work are refusing to warranty any of it at this point - even though they have been paid for the work on houses finished months ago, such as my own. This in itself seems morally wrong as well - if not legally. I understand they are pissed and are out of money, but that's not the homeowner's fault. If they were paid to finish my place, it should be business as usual in my opinion.

3) Despite #2 sucking, it doesn't suck as bad as those people who put down deposits and now are in limbo. There are several houses on my street which are just sitting there partially completed, and in some cases the property wasn't even registered with Alberta New Home Warranty, which would normally cover a deposit under a case of bankruptcy or insolvency such as this. I REALLY feel for these people, and by the time they get an (expensive) law suit underway, Reidbuilt will be completely bankrupt anyway.

4) Homeowners aren't the only ones getting screwed. In some cases people are now simply out of a job and haven't even gotten paid their commissions, etc. and they owe a ton of money to their subcontractors too - so much so that a few of them may have difficulty remaining in business.

5) Reidbuilt Worldwide soldiers on, apparently completely void of responsibility to anyone who had been dealing with their Reidbuilt Homes division.

Shitty all around.

[Buster]

I dont think it should be illegal. People deal with counter-party risk all of the time. If you are in a trade, it's probably your biggest risk.

As for the liens, I'm not an expert on residential real estate law, but isn't it your lawyers responsibility to ensure you are acquiring assets that are unencumbered?

[lasimmon]

^^ For the record, your point in #1) happens in all industries when it comes to bankruptcy. It sucks.

[phreezee]

Builder liens expire automatically within 6 months of issue and clear themselves. Rarely does a contractor come after the home owner.

[rx7boi]

@Kloubek

Glad you are in the clear but it still sucks that they won't honour the warranty for work that they were paid in full for.

[Kloubek]

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I dont think it should be illegal. People deal with counter-party risk all of the time. If you are in a trade, it's probably your biggest risk.

As for the liens, I'm not an expert on residential real estate law, but isn't it your lawyers responsibility to ensure you are acquiring assets that are unencumbered?

I understand and appreciate this is how the laws are currently in place. However, does nobody see anything morally wrong with a company taking money (deposits) and hiring companies when they know full well that they are going to be saddling these private individuals and contractors with the debt? I believe there should be a law in place holding the owner(s) personally accountable if they knowingly defraud people out of money. In my opinion, the laws were written to ensure that nobody is held personally liable should an incorporated company fail, and I have no problem with that - but there should be a caveat in there somewhere that dictates that once they know they are going to have to close up shop that covering it up and acting like everything is fine becomes a criminal act. Essentially, they are getting away with legalized fraud and even if I wasn't involved personally in the situation, that just doesn't seem right.

As far as your comment on the lawyer's responsibility, I'm not sure what that has to do with anything. First, a lawyer is typically not involved until the actual transfer of ownership occurs. Second, even if they were involved from the beginning, the process starts with a deposit on the house regardless. And since Reidbuilt did not indicate anything was amiss, people put these deposits down believing Reidbuilt was accepting them in good faith. Finally, if the transfer was not made yet technically speaking the properly still belongs to Reidbuilt so any liens placed would be against their property and not that of the expectant homeowner. If the transfer HAS gone through, then presumably no lien had been issued yet at that time so if one is applied inside that 45 day window then I guess the homeowner is SOL. And if the house is basically completed and the purchase has NOT gone through yet, I imagine the expectant owner would have grounds to cancel the contract and ask for their money back. However, since Reidbuilt isn't allowing *anything* to happen, no matter what stage the customer is in, they are not getting any kind of resolution from the homebuilder - that's for certain.

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@Kloubek

Glad you are in the clear but it still sucks that they won't honour the warranty for work that they were paid in full for.

Well I guess from a legal perspective, their offer for warranty was probably made to Reidbuilt themselves. And since Reidbuilt isn't dealing with their customer any longer plus owes the contractors a shit ton of cash, the contractors don't feel the need to warranty their product any longer. I can understand it from their perspective as a business decision, but from a moral standpoint it is a very heavy-handed position to take. Should the issues be severe enough to be covered by the ANHW, the expenses will need to be absorbed by the programme, and in turn probably result in higher costs for the insurance purchase, which is then in turn passed onto the remaining builders and ultimately their customer.

[Rocket1k78]

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1) First and foremost, I consider this to be completely absurd. This company KNEW they were struggling and heading to this scenario, yet they continued to take deposits and hire trades to work on their homes. In my opinion, it should not be legal for a company to engage in this knowing that others will be left holding the bag shortly down the line. There should be criminal consequences for a company knowingly doing this - as it morally equates to fraud in my eyes.

I totally agree that there needs to be stiffer penalties for companies that take orders/deposits within weeks/months of shutting down. Even in a small mom and pop shop this stuff doesnt happen over night. Look at that re modeller guy, i think he took a $300k deposit from 1 customer 2 weeks before physically locking his doors. Im not sure whats happening with him now but i can guarantee you there will be minimal jail time and hell be back up and at it again in the future.

[phreezee]

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As for the liens, I'm not an expert on residential real estate law, but isn't it your lawyers responsibility to ensure you are acquiring assets that are unencumbered?

This only covers contractors who work on an assignment on title. When the lawyer disperses the mortgage proceeds on closing the sale, they holdback to pay off any assignments on the title. If a contractor just accepted and completed work and then invoiced the builder, their only recourse is to slap a builder's lien on the property. Within 6 months, they have the right to file a lawsuit and can name the builder and/or the home owner as defendants. Generally, they will state that if they cannot recoup their losses from the main defendant (the builder), they may demand payment from the home owner as they are the beneficiary of the work.

[ExtraSlow]

Weirdly it's actually illegal for them not to engage in these shady practices of they are a publicly traded company because the law requires them to protect shareholders interests above that of customers and suppliers.

[KPHMPH]

Your warranty should be provided from a 3rd party company.


Just saying.

[rx7boi]

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Well I guess from a legal perspective, their offer for warranty was probably made to Reidbuilt themselves. And since Reidbuilt isn't dealing with their customer any longer plus owes the contractors a shit ton of cash, the contractors don't feel the need to warranty their product any longer. I can understand it from their perspective as a business decision, but from a moral standpoint it is a very heavy-handed position to take. Should the issues be severe enough to be covered by the ANHW, the expenses will need to be absorbed by the programme, and in turn probably result in higher costs for the insurance purchase, which is then in turn passed onto the remaining builders and ultimately their customer.

That could be it for sure. At the same time I imagine from a contractor perspective that it'd be hard to focus on any additional work (continuing builds or warranty support) and facing financial troubles themselves.

I can't imagine how some homeowners are feeling right now. The article even said that there's a lien on a home and those folks had fully paid for their house in cash.

Just because a lien is placed on something, doesn't mean that there's weight to it right?

[Kloubek]

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Your warranty should be provided from a 3rd party company.


Just saying.

Sorry - which warranty? ANHW provides theirs - though it requires specific criteria to be met and needs to be done via the claims process. Then Reidbuilt provides theirs as well, but that was likely a direct relationship with the subcontractor, so that's all gone to shit.

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That could be it for sure. At the same time I imagine from a contractor perspective that it'd be hard to focus on any additional work (continuing builds or warranty support) and facing financial troubles themselves.

I can't imagine how some homeowners are feeling right now. The article even said that there's a lien on a home and those folks had fully paid for their house in cash.

Well that's why building has stopped - no contractor in their right mind would continue working on something when they know they aren't going to be paid. I'm not sure what kind of position this puts all the subcontractors in, but suffice it to say it's gonna hurt really bad for some of them.

And yeah - while my situation sucks, I still have some recourse through the ANHW. My worst issue is 16ft of fence they never put back properly and I'm going to have to do it myself now. But for other prospective owners, they are likely out tens of thousands and not much they can do. So really, my issues are pretty tame in comparison which is why I'm not bitching too much about my own woes.

[HiTempguy1]

It would be VERY tough to prove fraud.

Unfortunately, until the doors are locked, how can you know a business is going out of business? You don't.

Without those rules in place, it would seriously stifle business. You need to do your due diligence when trusting a builder.

Its an unfortunate aspect of the way the law governing our economy and business works, but that is the way it is done.

I'm not saying it is right. Its just the way it is.

[AndyL]

Wait for reidbuilt homes (2017) Ltd to form and go after them... sadly it happens all too often. They go bankrupt, magically form the next day with a new year behind their name - and start with the same crap house of cards game allover again.

Our favorite tile guy can probably chime in...

Partly why I never pursued builder work, just wasn't worth the risk.

[Kloubek]

Well WE don't know they are going out of business, but THEY knew. Guarantee they had people on their books and someone leading the company, and they were fully aware they were heading here. Yet, they continued to take money and ask for work to be done. Then, considering the amount of outstanding debt, they clearly stopped paying even before it was made known publicly they were in trouble. Basically, they kept acting like everything was fine until they were called out and simply couldn't do so anymore.

It would be tough to prove fraud, because I guess this doesn't constitute fraud. It seems like one is free to do things in ill faith that badly affect others, and then hide behind the "LTD" sign with a smile - all the while knowing there is nothing anyone can do to touch you.

I am not suggesting that we eliminate the protection having a limited company provides. (Which is what I am guessing you mean by stifling business). I'm just saying that despite that protection, companies should not be allowed to do things in ill faith that would otherwise be considered fraud if they were not a limited company.

As far as due dilligence and trusting a builder, these guys have been around since the early 80's. By all accounts, they were a reputable company. Next to pouring over their financial records I don't see how anyone could have figured out this was coming. Heck - most of their own employees had no idea it was coming to this.

[Buster]

Assessing counter-party risk is one of the most important things anyone - an individual, or a large corporation - can do. It's fundamental.

Where you say people "shouldn't be allowed", you are saying that we should replace people doing their own risk assessment entering into a contract with a legal/criminal remedy after the fact. In no world is that a superior system. Besides, it means that we are making debt and insolvency a criminal matter. Do we want to start throwing people jail because they took on debt that they could not handle? We got rid of debtor's prisons centuries ago.

If you are extending credit to someone it is YOUR responsibility to make sure you are lending to someone with good Credit. (or more likely build into your pricing the ability to absorb a big fat hit).