Issue:
Over the past few years, clients and subcontractors had lost their home deposits and program payments upon the collapse of home builders. For example, the collapse of Porter Davis had affected more than 500 families who paid their deposit. Also, when Ralan Group went into administration in July 2018 with debts of $500 million and five unfinished residential development projects, it had affected 2,300 investors who almost lost their $300 million worth of deposits.
Imagine the scenarios below when your home builder went burst or into administration:
- You are a homeowner who has paid deposit and 30% of the construction cost but found that the construction work did not progress accordingly and that only the structural work completed.
- You are a subcontractor who has completed the structural work but not fully paid for the work done.
Potential solutions:
You should consider entering into a block-chain driven smart contract with your home builder where all contractual parties could have access and track respective amount assigned to each construction task or work package, and the work progression. Each work specification and criteria of completion, and payment plan and mechanisms will be pre-programmed into computer languages and codes before their deployment in a blockchain driven smart contract. The smart contract will comprise a series and connected blockchain nodes that will operate in a simple programmed notion of “if ®when® then”.
For example, if a subcontractor has completed the proposed excavation work on the specified time, s/he will need to upload the evidence (i.e. photos or certificate) into the blockchain network for system validation before the system will automatically release the assigned payment to the subcontractor. All these submissions and transactions will be documented and tracked in respective blockchains. However, if the subcontractor did not complete the work on the specified time, s/he will not be paid accordingly. The allocated fund will be safe kept in the blockchain.
For a homeowner, s/he will have a clear overview of the work progression and payment plan and if the home builder has been using the paid deposit and construction costs accordingly.