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What Builders should do when Faced with a Dispute with a Difficult Homeowner
On 20 June 2023 our Director and Accredited Specialist in Commercial Litigation, Sam Roberts and Principal Solicitor and Accredited Adjudicator, Ned Mortensen hosted a live LinkedIn Q&A answering What Builders should do when Faced with a Dispute with a Difficult Homeowner.
What are the most common types of home building disputes?
- Increases in time,
- Variations, or
Can I recover increased costs of materials or delays?
- It depends on type of contract:
- Costs plus contract allows you to recoup the money.
- Fixed price contracts (including MBA & HIA contracts) are more difficult and a Building & Construction Lawyer should be consulted about your options.
- For new project, speak to a Building & Construction Lawyer about including special conditions in your contracts.
What can I do if a Homeowner is refusing access to the property for rectification work?
- If works are still on foot and practical completion has not been reached – suspension may be an option.
- After practical completion – there is little utility though depending on circumstances may be warranted.
What to do if a homeowner purports to terminate a residential building contract?
- Important to get legal advice quickly – there are several rights that arise for Builders where Homeowners do not get termination correct, including the right to sue for your loss of profit, consultation with an experience Building & Construction Lawyer is essential in capitalising on these situations.
What is the best way to recover payment if a homeowner is holding back a progress payment?
The Building and Construction Industry Security of Payment Act 1999
- If your payment claim is in accordance with the contract and is fair and reasonable you will have no trouble in recovering payment quickly by following the steps in the Act.
When should a builder consider formally suspending work or terminating a residential building contract?
- Whenever there is a substantial breach of the contract by the Homeowner, most frequently, when the Builder hasn’t been paid.
- However, legal advice is essential as if you get the suspension process wrong or do not have reasonable grounds for suspension the Builder will be liable to the Homeowner for damages.
Can a builder still use Security of Payment Laws to obtain and enforce rights to progress payments if NCAT Proceedings have already commenced?
- Yes – they can and should.
- Any money recouped by the Builder using Security of Payments Laws reduces the “fighting fund” of the Homeowner in the NCAT Proceedings and increases the funds of the Builder to defend their case in NCAT.
What should I do if I receive a Home Building Application from NCAT?
- A Home Building Application is made by a Homeowner to NCAT in order to resolve a building dispute.
- NCAT will send a Notice of Directions Hearing to the Builder, this is a notice of the first time both parties will appear at NCAT.
- The Notice of Directions Hearing will include a copy of the Homeowners application outlining, what the dispute is about, how much money they are trying to recover and why they think they are owned that money.
- Engage a Building & Construction Lawyer ASAP to get advice about:
- The veracity of the Homeowners claim,
- Your rights and strengths and weaknesses of your case ahead of the negotiation at the Directions Hearing, and
- If there is an immediate opportunity for you to Cross Claim or recover money under the Security of Payments Act.
Do I need a Lawyer to defend me in NCAT Proceedings?
Yes – Only if you are being sued for an amount you are prepared to loose will you not need a Lawyer.
- For cases < $30,000 there is no right for legal representation.
- For matters > $30,000, it is always recommended and generally the unsuccessful party will be required to pay a significant portion of the successful parties’ legal costs.
When should I bring a Cross-Claim in NCAT?
- When you are owed money under the contract.
- Often in building defects dispute towards the end of a build, the Homeowner will withhold the last progress payment, and in that situation a Cross Claim should be made immediately.
What should Builders do in order to position themselves to utilise the Security of Payment Laws, if and when they need to?
Learn more about how Security of Payment Laws work and use them to your advantage, including:
- Prepare valid payment claims, and
- Serve them on or from the last day of each month that work occurs.
How have you observed Home Builders using Security of Payment Laws following their application to owner-occupier residential premises from 1 March 2021?
- The purpose is to ensure Builders, including residential Builders get paid.
- Just like Builders, homeowners need to be aware of the Act.
What is the first thing a Builder should do when they have a difficult Homeowner?
- Contact a Building & Construction Lawyer early.
- Your Lawyer can evaluate the circumstances and in most cases contact the Homeowner outlining your rights as the Builder and encourage a resolution.
- Your Lawyer will then be able to recommend the most appropriate course of action thereafter.
Building and Construction Lawyers for Sydney and Newcastle
Ned Mortensen is a Principal lawyer with dual qualifications in both law and construction and an adjudicator appointed by Adjudicate Today and ABC Dispute Resolution Service for adjudication applications made pursuant to the Building and Construction Industry Security of Payment Act 1999.
The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.