Home builder tells contractors it can’t cover unpaid bills

A large Alberta home builder in financial turmoil has told contractors it doesn’t have enough money to cover unpaid bills as it works with financial advisers and lenders to shore up its business.

ReidBuilt Homes said earlier this month its Calgary division is up for sale, and construction on upwards of 80 homes in the region has been halted, amid debt problems at its parent company, Reid Worldwide Corp.

In a letter obtained by Postmedia, senior executives with the company wrote contractors that “difficult economic conditions in Alberta” have forced it to consider asset sales, joint ventures and financing.

“We recognize that many, if not most of you, have unpaid invoices for work previously provided,” the letter states. “Unfortunately, the company does not currently have the funding to repay these outstanding liabilities.”

The company sent the letter in an email that did not reveal the list of recipients, but three Calgary contractors separately verified they received it.

The letter said the Reid group of companies “cannot commit today to a specific repayment schedule for past amounts.”

But it wants contractors to finish homes that are in the middle of construction, so the home builder can sell the properties and recover the most amount of money possible “for all our trade creditors.”

“We will commit (to) paying for any new work on a go-forward basis,” the letter said.

After receiving the letter, one contractor said: “They want us to work for free.”

Efforts to reach Reid Worldwide executives for comment have been unsuccessful.

Alberta home builders have emerged from a prolonged recession that lowered demand and prices, forcing companies to cut costs, including pay for employees.

While the industry hasn’t recovered to pre-recession levels, there are signs the industry is gradually improving, such as some rehiring, a stronger resale market and moderate gains in housing starts, according to the home builder group BILD Alberta.

There are lingering worries that population growth in Alberta — an important driver of new housing demand — has been sluggish after declining dramatically during the recession.

But the acute financial troubles facing ReidBuilt and Walton International Group Inc., which sought protection from its creditors along with 32 of its affiliates — appear to be isolated incidents, according to BILD Alberta.

“Prices are pretty flat, so builders in general are facing a competitive market with not a lot of opportunity for price growth,” said Richard Goatcher, economic analyst at the industry group.

ReidBuilt’s problems, Goatcher said, appear to be “a one-off kind of situation where in general the industry’s in better shape than it was, say, two years ago.”

Reid Worldwide’s request for contractors to resume work on unfinished properties appears to conflict with a statement from its Calgary division earlier this month, when marketing and sales manager Dave Abbey said all construction in the Calgary area was to stop, pending the possible sale.

Reid Worldwide is seeking letters of intent from potential buyers for the Calgary division until the end of the month.

Abbey declined to comment further.

While the company considers its options to address financial pressures, contractors who claim they have not been paid for work have registered liens on several ReidBuilt houses.

Postmedia reviewed land title records for six homes registered to a numbered company owned by Reid Investments, which has the same corporate address as ReidBuilt Homes in Edmonton.

The records show contractors have placed liens on these homes, which are in various stages of construction in Calgary, Strathmore, Chestermere and Airdrie, seeking a total of almost $757,000.

One company said the weight of unpaid bills could “spell the end for several contractors.”

Trades people aren’t the only ones worried.

Jay Fleet and his wife put up inheritance and cash they saved over several years for a more than $25,000 deposit on their “dream home” in Airdrie.

Earlier this month, Fleet said he received a call from ReidBuilt informing him construction on the home was on hold for about two months due to the pending sale, with assurances his deposit was protected by warranty.

Fleet said he called ReidBuilt’s home warranty insurance provider, which told him it had no record of warranty coverage for his home. He worries that if the financially troubled home builder closes its doors, his family will lose their precious savings.

“Unless ReidBuilt gets the money protected, there’s nothing that can be done,” Fleet said. “It will cost too much to go after them with a lawyer.”