Builder Gone Bust Mid-Project: What Happens to Your Money

A builder going bust is not the same as a builder vanishing. If yours has simply stopped answering the phone, start with our guide to a builder disappearing mid-project. This article covers formal insolvency: the company enters liquidation or administration, the site goes quiet, and a letter from an insolvency practitioner lands on the mat. It happens more than most homeowners realise. Construction has accounted for the largest share of company insolvencies of any industry in England and Wales in recent years, roughly one in six, according to Insolvency Service statistics.

What happens to your money when a builder goes bust

Any money you have paid for work not yet done becomes an unsecured debt owed to you by the company. The company's contract with you effectively dies with the business: the liquidator or administrator takes over the company's affairs, gathers whatever assets exist, and distributes them in a strict legal order.

You are near the back of that queue. The insolvency practitioner's own fees, secured lenders, employees' unpaid wages and certain HMRC debts all rank ahead of unsecured creditors. Whatever is left after all of them is shared between everyone in your position: you, the builders' merchant, the scaffolding firm, the plant hire company.

Why deposits are rarely recovered

Deposits are rarely recovered because unsecured creditors are typically paid pence in the pound, and often nothing at all. Your deposit was never ring-fenced. The moment it hit the builder's account it became working capital, and in a struggling firm it was almost certainly spent on an earlier job's bills, wages or materials. That is usually why the company failed: each new deposit was plugging the hole left by the last project.

The process is slow as well as thin. Liquidations commonly run for a year or more before any distribution, and many close with nothing for unsecured creditors. Plan your finances on the assumption the deposit is gone; treat anything recovered as a bonus.

Practical steps to take this week

Start by confirming the insolvency is real and formal: check the company on Companies House and look for a liquidation or administration notice in The Gazette. A builder claiming to be "going under" while asking you for a goodwill payment is a different problem entirely. Then:

• Contact the insolvency practitioner. Their details appear on the Companies House filing. Register as a creditor and submit a proof of debt for everything you have paid for undelivered work.
• Check how you paid. If any payment went on a credit card, Section 75 of the Consumer Credit Act 1974 makes the card provider jointly liable for breaches of contract on purchases over £100 and up to £30,000, even if you only paid part of the bill on the card. For debit cards, ask your bank about a chargeback, usually within 120 days of the payment or of discovering the problem.
• Dig out any protection you bought. Deposit protection or an insurance-backed guarantee may respond to insolvency. Check the policy wording carefully: we compare what these products actually cover in deposit protection insurance vs escrow.
• Secure the site and document everything. Photograph the state of the work, gather invoices and receipts, and list materials on site. Materials you have clearly paid for may be yours, but suppliers sometimes have retention of title claims, so tell the insolvency practitioner before anything is removed.
• Be wary of white knights. Anyone appearing within days offering to "take over the contract" deserves the same checks you would give a brand new firm, because that is what they are.

Finishing the work

Treat the remaining work as a new project, not a continuation. Get an independent assessment of what has actually been completed and to what standard, ideally from a surveyor, because a new builder will not warrant the old builder's work. Contact Building Control to check which inspections were passed and which stages remain open. Then tender the remaining scope properly. Expect quotes to carry a premium: picking up a half-finished job means taking on unknowns, and builders price unknowns.

Why escrow funds sit outside the insolvent estate

Money held in escrow for work not yet signed off is not the builder's money, so it never becomes part of the insolvent estate. That is the structural difference between a deposit and a funded milestone. A deposit is a payment: once made, it belongs to the company, and if the company fails you join the creditor queue. Escrowed funds are conditional: they only transfer when a milestone is completed and approved.

With milestone escrow you fund one stage at a time, so your exposure at any moment is limited to the stage in progress, and money for unstarted stages is simply returned to you rather than claimed by a liquidator. Platforms like Renopay hold milestone funds in a safeguarded account with Online Payment Platform (OPP), a payments provider authorised by the FCA, and neither side can touch the money until the work is signed off. Builders lose nothing in this arrangement either: they see the funds exist before starting, and they are paid the moment each stage is approved.

Insolvency is the risk you cannot vet for. A firm can be honest, skilled and busy right up until the week it fails. Join Renopay at renopay.co.uk and keep your renovation money out of the creditor queue.

Frequently asked questions

Can I get my deposit back if my builder goes into liquidation?

Rarely from the company itself: as an unsecured creditor you are paid only after fees, secured lenders, employees and certain HMRC debts, which usually means pence in the pound. Your realistic routes are a Section 75 claim if you paid by credit card, a debit card chargeback, or any deposit protection or insurance-backed guarantee you hold.

Who finishes the work when a builder goes bust?

You appoint a new builder; the liquidator will not complete the project. Get the finished work independently assessed first, check the Building Control record, and tender the remaining scope as a fresh job. Expect a price premium for taking over part-done work.

Are materials on site mine if I have already paid for them?

Sometimes. If you can show you paid for specific materials, you may have a claim to them, but suppliers with unpaid invoices can assert retention of title. List and photograph everything on site and notify the insolvency practitioner before removing anything.