September 30, 2023 8:59 am

Metricon Terminates Dozens of Fixed-price Contracts, Stops Paying Some Agent Commission Fees


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Metricon Terminates Dozens of Fixed-price Contracts, Stops Paying Some Agent Commission Fees

By NSW investigative reporter Amy Greenbank and national regional affairs reporter Jane Norman

Pat and Peter McQuhae were on their way to owning a “forever home” to see out their retirement until the biggest home builder in the country gave them an ultimatum: Cough up an extra quarter of a million dollars or your build will be cancelled.

The grandparents are among dozens of Metricon customers on fixed-price contracts now forced to choose between paying painfully higher prices or losing their new homes and deposits, as the builder struggles with soaring labour and material costs.

Metricon told the McQuhaes in February it would be terminating their contract but would “still love to build” their home if they agreed to sign a new contract with more than $266,000 in extra fees — a nearly 50 per cent increase on the original agreement.

If they refused, the company said in its termination letter, it was “entitled to and would retain all monies spent from their five per cent deposit,” which was $25,000.

“It was just an incredible punch,” Mr McQuhae said.

“We’ve done everything Metricon asked, and we did it on time.”

The company accused the McQuhaes of breaching various clauses in their contract including not providing details of finance obtained from a lending body.

However, the retirees dispute that, saying they told Metricon that they would be paying in cash which meant they wouldn’t need a loan.

They also said the first they heard about this apparent breach was in the termination letter and they were not given the opportunity to rectify the issue.

The couple has taken legal action against Metricon, but negotiations have stalled.

“I don’t think we’ve got a decent night’s sleep since this debacle began, we’ve been put through the wringer,” Mr McQuahe said.

The McQuhaes also alleged the builder took 11 months to submit their development application to council.

The termination coincided with the “price hold promise”, contained in their Metricon contract, expiring after 12 months before it automatically rolled onto “unconditional”.

Neither term is included in the standard NSW Housing Industry Association building contract template, on which the contract was based.

If the build was delayed and couldn’t go “unconditional” the contract permitted the builder to issue a variation with a limited price increase.

Alternatively, the builder could end the contract, provided the customer was found to have breached their obligations and construction hadn’t begun.

While customers have been left shocked, Metricon insists it “operates within the law and according to the terms of our signed contracts”.

“A small percentage of customers have incurred delays in taking possession of their land title, construction approval, DA approval, finance approval or other interruptions impacting timelines outside of Metricon’s control, which has meant that their contract has expired before construction of their home has started,” a spokesperson said in a statement.

“In the event that Metricon enters into a new contract with these customers, their price increase from their original contract to the new contract solely reflects material and labour price rises.”

‘It’s drained me financially’

Another Metricon customer told the ABC he was asked to pay an extra $150,000, on top of the price of the original fixed price contract.

He offered to meet the builder halfway and pay $75,000, but after it was rejected he agreed to the full amount.

“I didn’t have the time to wait and go through litigation and keep fighting, I needed it built,” he said.

Frank Feyen, from the NSW Central Coast, received a termination letter in March – three weeks before construction was due to begin on the investment home he wanted to build to supplement his retirement income.

Mr Feyen said Metricon demanded an extra $53,000 and he was also accused of breaching his fixed price contract by not providing details of finance.

“It came as a huge shock,” he said.

“Only the day before they were telling me about going ahead with the build and how exciting it is … then it just bowled me over.”

He too was paying in cash, out of his retirement savings, but alleges he was not given any opportunity by Metricon to rectify the apparent contract breach.

“I had it available and ready to submit on request, but they never requested it,” Mr Feyen said.

“I just get this letter and bam, contract terminated … no exit path, no alternative options, it was just so bulldozed.”

Mr Feyen said Metricon refused to return his $24,000 deposit unless he agreed to and sign the new, more expensive contract.

When he threatened to take legal action, he said, the company eventually agreed to refund the deposit in full.

However, the retired maths teacher has still been left $60,000 out of pocket – money he spent preparing his lot for the build, which required moving plumbing and electrical services.

“It’s drained me financially, it’s drained me emotionally. No one should have to go through this,” he said.

In a statement, a Metricon spokesperson denied its customers had been blindsided.

“After several weeks of consultation, in exceptional cases where a considerable amount of time has elapsed without resolution, a select number of customers have been sent a letter requesting a decision on how they would like to proceed,” the spokesperson said.

“It’s important to note that we are flexible with this deadline and accommodate reasonable requests for extensions.

“Metricon refunds deposits minus any reasonable internal and external costs that we have incurred in progressing the contract.”

Agents’ commissions on hold

Metricon is the country’s largest residential home builder, and credits itself as ‘”Australia’s most trusted choice”.

Not only is it terminating fixed price contracts; some buyer’s agents say they’re not getting paid.

In an email dated 13 June 2023, the Melbourne-based arm of the company told agents: “All commission payments have been placed on hold for the time being” and a week later, on June 19 confirmed “all agents commission payments are currently on hold”.

No explanation was offered.

One agent, who said she was owed $80,000 by Metricon, claimed it was similar to what happened with Brisbane-based builder Privium, which stopped making the payments months before it collapsed in 2021.

The agent told the ABC that 18 customers’ contracts with Metricon have been cancelled in Victoria the past month — and said most were given just days to decide whether to agree to terminate or sign a new, higher contract.

One of their clients was told, in an email, to fork out an extra $21,993 for the house and land package they had purchased in Wyndham in Melbourne’s outer suburbs.

“Metricon & the entire building industry has experienced unprecedented cost increases … this necessitates a price review on your build contract.

“To extend the current contract to October 2023 – we require a price increase of $21,993.

“There is a 5-day window in place to gain finalisation around this.”

When they couldn’t secure the finance, Metricon agreed to refund their deposit but kept $2,000 in unspecified costs, according to emails seen by the ABC.

Metricon – which has 4,500 new home builds in the pipeline – again defended its actions saying: “contract changes have been made solely to accommodate material and labour price rises”.

Metricon complaints rise

Metricon is the only builder that has been named on the NSW Building Commissioner’s complaints register this year. The register lists all businesses that receive 10 or more complaints in one month.

The building behemoth has appeared on the list for the last three months, but rarely before then, with 43 complaints lodged since March.

Regulators in Queensland and Victoria, where Metricon has the highest number of jobs, have not provided the ABC with the number of complaints lodged against the builder in those states.

NSW Fair Trading said complaints about builders terminating contracts was not limited to Metricon.

“In general, NSW Fair Trading saw an increase in complaints and enquiries regarding termination of contracts since supply issues began affecting the home building sector.”

“Where any breaches of legislation have occurred, NSW Fair Trading will consider appropriate compliance action including warnings, fines, prosecution and disciplinary action against a licence.”

High profile construction lawyer, Professor Kim Lovegrove, has recommended would-be home owners to get legal advice before signing on the dotted line.

A standard industry contract, he said, typically gives buyers 10 days to rectify a breach, before a builder can terminate a contract.

“If standard terms and contracted conventions are not evident in the contract, by God lawyer up and take bespoke advice,” Professor Lovegrove said.

Owners chip in $80 million

Metricon is one of many volume home builders in the country which has been pushed to the brink, trying to deliver on a glut of fixed price contracts that were locked in before the cost of labour and materials started soaring.

Mid-last year, it found itself in deep financial trouble. The family that owns the business was forced to inject a huge amount of money into it, while the Victorian government brought forward public projects to ensure Metricon stayed afloat.

“In total the family’s put in $80 million over the last 12 months,” Metricon’s CEO Brad Duggan told Four Corners last week.

The figure is almost triple the amount previously revealed by the company.

Financial information on the building giant is sparce, but figures published by the Queensland Building and Construction Commission show Metricon Homes Qld Pty Ltd had a 50 per cent drop in revenue in the last financial year, returning to pre-pandemic levels.

The number of jobs slumped more than 70 per cent in the same period, remaining well below the 2019-2020 figure.

[Metricon data table]

Australia has endured the highest rate of construction insolvencies in a decade, with about one in three company failures in the past year in the construction industry.

Statistics from the Australian Securities Investments Commission (ASIC) reveal more than 2,000 building companies went broke last financial year, compared with a total of 1,284 the previous financial year.

The collapse of a string of high-profile builders including ProBuild, Porter Davis and PBS Building has brought at least 3,000 projects across Victoria, New South Wales, Queensland, and the ACT to a standstill and left even more customers without a home, or out of pocket.

Despite its previous financial troubles, Metricon is one of three builders which has stepped in to help some of the Porter Davis victims finish their homes.

Victoria’s building insurer, VMIA, last month said an independent assessment confirmed the builders’ “financial strength and operational capacity to complete the building works required, over and above their existing projects”.

Andrew Spring is a partner with Melbourne-based insolvency firm Jirsch Sutherland and said historically, more companies go broke in the construction sector than in other parts of the economy because margins were often tight.

But he said the industry was facing a particularly difficult and rapidly changing market right now.

“We’re still in an inflationary environment, we’re now seeing the impact of increased interest rates on demand,” Mr Sutherland said.

“So it’s certainly not getting easier for the sector and it’s likely that we’re going to continue to see insolvency numbers trend at a rate that we’ve got now.”

The Housing Industry Association’s Chief Economist, Tim Reardon, said policies like the federal government initiative, HomeBuilder, turbo-charged demand during the pandemic and many builders took on more work than they could cope with just as costs — and interest rates — began to rise rapidly.

“It’s like the snake that’s swallowed a wombat — the industry is taking time to digest the work it’s taken on,” he said.

However, the pipeline of work is expected to hollow out quickly, he said, which could spell more trouble for the sector next year.

Peter and Pat McQuhae empathise with the predicament facing builders, but don’t want other would-be home builders to be trapped in their position.

“It’s been a drain on our health, our relationship, and we’ve been married 50 years,” said grandmother Pat, choking back tears.

“We’ve always been pretty stable people… but you know… it’s taken its toll.”

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