What Happens If My Builder Goes Bust Mid-Project?

Your extension is half-built. The roof is open. Then you get a text — or more likely, hear nothing at all — and discover your builder's company has been dissolved. It is a nightmare scenario, but it happens. Here is what you need to know.

What happens to your money

The money you have already paid is gone — at least in the short term. If the builder is a sole trader, you can pursue them personally through the courts for any overpayment (money paid for work not completed). If they are a limited company, your claim goes to the liquidator, and unsecured creditors are typically last in line. Recovery is often minimal.

This is why stage payments matter so much. If you paid 30% deposit and 30% at first fix, and the builder goes bust halfway through second fix, you have paid 60% for roughly 60-70% of the work. That is manageable. If you paid 80% upfront, you are significantly out of pocket.

Who owns materials on site

Check your contract. A good contract includes an ownership clause stating that materials become your property once delivered to site or once paid for — whichever comes first. Without this clause, a liquidator could argue that uninstalled materials belong to the company's estate.

In practice, most liquidators will not pursue individual bags of cement or lengths of timber. But for expensive items — a £3,000 kitchen, specialist joinery, high-value fittings — it is worth having the ownership position clear.

Warranties and guarantees

Any warranty provided directly by the builder is worthless if they no longer exist. However, product warranties from manufacturers (boilers, windows, roofing materials) survive because they are with the manufacturer, not the installer. Gather all product documentation and warranty certificates so you can make claims directly if needed.

If the work was covered by an insurance-backed guarantee scheme (some trade bodies offer these), that guarantee survives the builder's insolvency. Check whether your builder was a member of a scheme that offers this protection.

Contact building control

If your project requires building control sign-off — extensions, structural alterations, electrical or gas work — contact your building control officer immediately. They need to know the situation. They can inspect the work completed so far and confirm whether it meets regulations. A new builder will want this assurance before continuing.

Finding a replacement

Getting a new builder to finish someone else's job is harder than starting from scratch. The new builder will want to inspect the existing work, may find defects that need correcting, and will price for the risk of inheriting unknown problems. Expect the completion cost to be higher per unit of work than the original price.

Get the existing work surveyed before engaging a replacement. An independent surveyor or building inspector can assess whether the work done so far is sound or needs remediation. This protects you and gives the new builder confidence.

If the builder simply stopped showing up rather than going bust, the situation is different — see our guide on what to do when a builder walks off site.

The bottom line

A proper contract with stage payments, an ownership clause, and building control involvement limits your exposure if the worst happens. You cannot prevent a builder going bust, but you can structure the arrangement so the damage is contained.

A proper contract is your first line of defence. Ask your builder to use one. Learn more about TradeContract.