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Builders Not Paid - Can they claim your home as security? |
A builder made a number of claims for payment to an owner which were unpaid. Following further nonpayment, the contractor ceased work on the property, resuming work only after the owner agreed to give the contractor the right to register a claim over the property. |
Contractors concerned about non-payment will often tr y to protect their position by seeking agreement from the owner to officially register a document, known as a caveat, that operates to warn people about the contractors' assertion of certain rights over the property. A caveat can prevent registration of a sale or other dealings with the land while it remains in force. |
In this case a caveat was lodged over the property on which the house was being built, but the owner later attempted to have it removed from the property title, claiming it was invalid. Under the Home Building Act a contractor is prohibited from lodging a caveat over a residential property except in exceptional circumstances. The exception states that a charge, created to secure the payment of money owed by another party to the contract, can only be made if a court or tribunal has made an order or judgment that such payment be made. |
The courts found that the law's intention was to prevent contractors from abusing contract provisions by claiming interests in property on which they were working, and concluded that the right to lodge a caveat was not given by the court; rather, it was given by agreement of the parties. |
Even if the parties agree that a caveat can be lodged, the court can strike down the caveat. |
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