Builder misused my fund (100k+)

[joytn12]

I feel ashamed to say that I have given the building company so much money to buy material and labour cost and everything was going well until we have paid the final of sum for material and then everything went on a halt. They blamed the delay on the lack of resources, illness and the fact that most of the builders were Ukrainian who have left the country to go back home. But 3 months have passed since any progress and there have only been a few visits. This company came through as a recommendation from a trusted architect hence I have trusted them with my money and decided to go with them while there were other cheaper options.

They kept on promising that it will resume but have not been able to provide with me any evidence of purchased material. After so many false promises, their lies have caught up with them as they have stopped making more excuses. This is a husband and wife business and they have 2 school age children, they seemed like lovely people and now they kept on telling me that they are good people and they will try their best to finish my project. However, it became apparent that I was taken on as a client to bankroll their other projects, good people don't do this. I still don't know how much of my money they have embezzled but I heard from a source that they are selling their house to save the business. Based on the original plan, the project should finish this week but all I have are stripped walls and trenches, the place is not occupiable. I feel sickened as our dream home is turning to a nightmare and our family life is on hold, I don't know when we will be able to move back in.

I feel that legal action is the last resource as it will be a lengthy battle but I can't trust them anymore and it's a lose lose situation for me. Can they hide behind the limited company? Please let me know if you have any advice, we can't help but blaming ourselves for being so trusting and careless given they came across as nice people and the company seemed to have decent record and most of all they were recommended.

Sincerely
N

If your contract is with a limited company, the owners/directors of the business are not liable unless there has been serious misconduct. If they have continued trading when they knew, or ought to have known, that there was no reasonable prospect of saving the business and haven't done everything they could to minimise the loss to the company's creditors (including you), they may be guilty of wrongful trading. If they are, they could be held personally liable for the company's debts. However, if there is a possibility that the business could be saved and they are doing everything they can to save it (which seems to be the case if they are selling their house to raise money for the business), they are not personally liable.

Be careful using terms like "embezzle". The last thing you want is for them to sue you for libel.

Thank you. I will be more cautious with using the term. I have been quite careful in conversation with them as I'm still trying to work with them to save the situation. We suspect they must have been trouble when we signed the contract. We have been asking for evidence/list of material purchased but they have failed to do so and kept on asking for more time. If they have used the fund specifically for purchasing materials for our project for another purpose, would that be considered as Fraud? They also kept on requesting for continuous payment for labour when the project was on halt which I refused. I really hope they are trying to do all they can to save the situation but it must have been quite bad given they must be owing other clients. I spoke to another client who called up the supplier for patio doors and was told that there was no order made for theirs while the money was paid in full.

Is it a limited company? How much money have they taken and how much work is outstanding? You need to provide further detail but if you are realistically looking at losing £100k legal action should be one of the first things you look at.

It is a limited company. The total paid was 153k. The labour work that was done is roughly 30k according to the schedule.There are still 75% of the work to be done but all of the material cost have been paid. I saw some material around on site so my ballpark estimate is that 100k unaccounted for until they can show me evidence that others have been ordered and paid for. My heart breaks thinking about losing this amount and I can't live in my home. I really hope they could come back and show a smaller gap but it seems like an endless wait.

@kirinm If the builders are in trouble financially, legal action may just be throwing good money after bad.

@joytn12 If they never intended to carry out the work for which you have paid, that would be fraud. If they took your money knowing that the company could not be saved, that was wrongful trading. However, if they intended to carry out the work and believed they would be able to do so, there is unlikely to be any offence. Once you paid the company the money was theirs to do with as they saw fit unless your contract says otherwise. On the information you have posted, it is possible they are guilty of wrongful trading, but it isn't clear. It depends how bad things are and whether an injection of cash from selling their house will be enough to save the business.

They might have committed fraud depending on what they have told you and if it has been documented. Risk of criminal sanctions often make people do the right thing. Good luck.

Thank you @kirinm and @prh47bridge

@prh47bridge , that is very helpful. I think their intention was to carry out the project, they might have hoped to raise finance somehow in the process, either borrowing or finding another clients to fill in just like they did to me. The contract clearly stated how much of the money was to be used for material and how much money to be used for labour. I would have thought that I they don't use the money to purchase material as intended then that would be a misconduct and fraud?

I think your best bet at this stage is to try and work with them to get as much of the work as you can completed by them with what materials / labour they have. Ignoring the rights and wrongs of what they have done, it's a limited company so if they go busy the directors normally are not liable. Even if they're liable from what you said they are in financial difficulties themselves.

Without seeing the full contract it is impossible to say. However, it is not unusual for a contract to set out how much of the payment is for materials and how much is for labour. That doesn't make it misconduct or fraud for the business to spend the money on other things provided they believe they will have the funding to buy the materials and pay the labour for your project.

Have you spoken to your local trading standards?

That was why I asked if they were a limited company. You can look at their accounts on Companies House but ultimately, given that they appear to be in trouble, the chances of getting anything from them is slim.

If they are a sole trader - they seem to own a house, I'd consider putting a charge on it. £100k is a lot of money to lose.

Sorry OP I missed that you said they are a limited company.

I really feel for you.

Thank you for your kind words @kirinm
@Doveyouknow , yes I'm trying my best to wait and hope to get through this. Even if they can pull themselves out of the mess, I don't know how can trust that the will do a good job with the structure for my home.
@Summerhillsquare , do you know what local trading standards I can reach out to? I feel like builders are quite unregulated. I live in London.

I think you should get proper legal advice for this. What a terrible situation to be in. 🙁

Is everything well documented?

Hi @joytn12 I am so sorry to hear you are going through this. We have a similar situation with a similar amount of money involved and live in London. Do you manage to get any resolution? I am absolutely sick with worry

Hi @Dreambow , I'm sorry to hear that you are in the same situation and as outrageous as it is, This seems to happen too often with builders.

Unfortunately it has not been resolved yet. They promised to resume the work , has one or two people doing work for a week then all halted again, they kept on promising to deliver so we paid for a solicitor to prepare a legal document for them to sign so that they are personally responsible even if the company goes bankrupt. It dragged on for a month with no progress and we asked them to stop and return us the money which they agreed to but it's been a month and they still haven't confirm the amount, nor clear the site so that we can get someone else in. We can only keep pushing.

I hope you are doing OK given the situation. Hugs.

Thank you so much for getting back to me. Ours is a complete nightmare and the guy has taken all his tools off site and won’t engage with us. He has scammed us out of 60k (we gave 110k and 50k’s worth of work is done). He wants more money despite this not being agreed and when he said no he has left. We have a small baby and our house is a building site. It’s pretty horrendous. Don’t even know where to go or what to do and we keep blaming ourselves for letting this happen.

It seems so outrageous that this can happen and seems to be zero recourse. I don’t want to let this go but I don’t think we will have a choice unfortunately

@Dreambow this is awful. Is it standard to give so much money up front?

I would recommend speaking to a solicitor.

Of course there is recourse. You need to take legal action to recover your money. The only question is whether the builder has the funds to repay you. Remember, if your contract is with a company, you would be taking action against the company rather than the builder as an individual.

Hi @Dreambow , it's horrible, I don't know at which point your builder planned to scam you and why (because they can, because they want to or because they are in financial hardship). In any case, this is a large amount of money and I know how you feel, there is so much self blaming you can do but it won't do you any good.

I would suggest if you have the original contract, please cross reference the valuation. Contacting a solicitor would be a good place to start, I know it costs a lot of money but some of them will might provide some options before charging. A Quality Surveyor will provide you with a valuation of the work and that can be a proof to show your builders. Mine wasn't worth doing as they have done probably 20k of work and material delivered to the site could not be seen because they took it away without telling us..

Small court claim is also an option but it's up to 10k

Taking them to court can be costly and might not guarantee success but I think it should be last resource, he wouldn't want to be taken to court either.

Do you know if he has done this to someone else or if he is doing work in a different house?

You are very patient. I'd be outside their house causing a nuisance if I were you. A crazy one woman picket line!