Construction company Stroud Homes threatens legal action for bad reviews

An Australian building company that wanted up to $70,000 extra to complete customers’ homes has threatened legal action against people who have posted bad reviews.

Stroud Homes blamed the huge jump in construction costs on “extreme price rises” in the industry, and more than 100 clients from its South Brisbane and Wide Bay franchises were sent a letter requesting a contract variation worth $70,000 last year.

But with the company under fire from unhappy customers, Stroud has now threatened legal action against clients if they don’t remove what it considers defamatory material posted to social media or review sites.

One customer posted about his experience with Stroud Homes on Facebook and later received a letter from the construction firm’s lawyers asking that the post be removed immediately, that he pay $1500 in legal costs and issue a written apology, reported The Courier-Mail.

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Another customer who posted about their negative experience on productreview.com.au reportedly received a similar letter from lawyers.

One was sent a pre-written apology letter from lawyers acting for Stroud’s Sunshine Coast franchise, which they were asked to sign and return.

The letter said: “I would like to retract the statements I made in the review posted on productreview.com.au on 19 December 2021. The statements were untrue at the time they were published and remain untrue.

“We completely retract the statements and their imputations and offer our unreserved apology for any loss or damage caused.”

The customer refused to sign the pre-written letter and maintained their review was factual.

James Stroud, a carpenter who launched Stroud Homes in 2011 who is the company’s CEO, said 3000 happy customers over the past 11 years “will speak to the high quality of our work, ethics, and good standing in the community”.

“We’ve experienced less than a handful of opportunists unfairly threatening to leave reviews that are blatantly and factually incorrect,” he told news.com.au.

“We hold ourselves to the highest standard, and if there’s a legitimate issue we’ll fix the problem, and we encourage customers to post honest reviews on their experience with us.

“One of the issues we, and many builders face, is extortive behaviour from a small minority of people, who haven’t paid their bills and try to get out of paying by threatening to leave false and malicious reviews.”

Stroud has asked customers to fork out tens of thousands of dollars to cover price rises forcing one person to live in a caravan on their empty block of land and others to change their plans when it comes to building.

The company, which is based in Queensland, New South Wales and Victoria, told its South Brisbane customers that they recognised the situation was “upsetting and disappointing” but said “extreme price rises without any notice from suppliers have rendered the contract price insufficient to cover the expense of the contract”.

Mr Stroud said building material costs had sky-rocketed at their fastest rate in nearly half a century, and the company was working with customers to find fair and reasonable solutions.

“Most of our customers understand and work with us to find workable options and the building industry associations recommend our approach,” he said.

“The legal contracts stipulate our right to undertake a tougher stance on prices rises, but Stroud Homes is underpinned by the principle of fairness, and we do everything we can to ensure the best results for our customers.”

A stark warning has been issued that half of Australia’s building companies are on the brink of collapse, and it could see thousands of people’s homes impacted in the coming months, according to Russ Stephens, co-founder of the Association of Professional Builders.

He said the average cost of building an Australian home had blown out by between $40,000 and $150,000 and warned fixed price contracts had to go.

He has cautioned that customers should stump up the money for a price increase or risk their builder going under and it costing a lot more to get their home complete.

Mr Stroud told The Courier-Mail that his business is solvent and was in a strong position financially.

But like other builders, he said Stroud had faced astronomical price rises during the pandemic.

“We are being unfairly pilloried. We’re trying to build houses and keep people employed,” he said.

The construction industry has been hit by a number of high profile collapses this year, sending shockwaves through the industry.

Two major Australian construction companies including Gold Coast-based Condev and industry giant Probuild have already gone into liquidation blaming Covid-19 restrictions and ballooning material costs, impacting millions of dollars worth of projects.

Smaller operators haven’t been immune either with the likes of Hotondo Homes Hobart and Western Australian outfits Home Innovation Builders and New Sensation Homes also going under.

A building insider, who works for one of the largest construction companies in NSW, has warned the situation in the industry is only “going to get worse” after a string of collapses in the sector, as the price of building homes blows out between $40,000 and $100,000.

He said it was insulting that manufacturers and suppliers are “publicly bragging about profits” and it “hurts” when building companies are “begging” for support and prices to be fixed but instead are hit with “big increases”.

Construction insolvencies were 28 per cent higher in March compared to last year in Australia, while the first quarter of 2022 has seen 270 construction companies falling into liquidation, according to credit reporting agency Equifax.

A healthy construction industry is vital to a strong economy and ongoing growth, with the sector accounting for the employment of almost 9 per cent of Australian workers and 7.5 per cent of Australia’s GDP, according to reporting bureau CreditorWatch.

“A crisis in the construction industry has the potential to flow through to wider industries,” said CreditorWatch chief economist Anneke Thompson.

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“The importance of the sector to the economy cannot be limited to the physical build itself, but the ongoing financial benefit the end product provides.

“Failure to build enough hospitals, schools, roads and houses now because the industry is in crisis, will damage employment and economic growth years into the future.”

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