As a residential builder, obtaining payment from home owners can sometimes be a source of concern. Of, course, prompt payments can be assisted by issuing Progress Claims when you are entitled to do so and having good communication with home owners and processes in place to ensure Progress Claims are paid on time. Needless to say, prompt payments usually assist in maintaining cash flow for your business and ensures that the building works can progress smoothly. But what happens if the home owners dispute a Progress Claim?
Why a Home Owner May Dispute a Progress Claim
There may be a number of reasons why home owners may dispute a Progress Claim. For example, the home owners may disagree that you have completed the works properly, or may say that they do not agree to the amounts being charged. Naturally, you should try to resolve any disputes about Progress Claims amicably by discussion with the home owners, particularly if you are looking to preserve the ongoing working relationship in order to finish the building works and avoid expensive litigation.
We are often consulted by residential builders about what to do when home owners are failing or refusing to pay a Progress Claim.
Step One: Early Legal Advice
Early legal advice is vitally important to ensure that you know your rights and how to best resolve the dispute. We can help you with this. We recommend speaking to us first to obtain preliminary advice about your rights and obligations when there is a Progress Claim dispute, and before engaging in any communications with the home owners that may only inflame the situation or inadvertently cause you to breach or repudiate a contract.
Terms of your Building Contract
Generally the first step is to look at the terms of your building contract with the home owners to see what it says about when and how you can issue Progress Claims and the consequences if they are not paid. For example, your building contract may provide that you are entitled to issue a Notice of Breach or begin dispute resolution procedures if the homeowners fail to pay a valid Progress Claim. Often, taking one of these steps will result in the home owners thinking more carefully about the Progress Claim and whether there is actually any real reason to withhold payment.
Your building contract may also give you a contractual right to suspend work. We can also help you with this and provide you with preliminary advices as to whether it is appropriate to give a Notice of Suspension. Importantly, this may allow you to avoid keeping on working and extending further credit to the home owners where there may be issues regarding payment.
However, if you are contemplating suspending the works, it is important that you only do so when there is a clear right at suspension. This is because if your suspension of works is not valid, you may find yourself in breach of the building contract, which may lead to you becoming liable for damages even though you were not initially in breach. We can help you with this and we suggest that you speak to us before issuing a Notice of Suspension.
Terminating the Building Contract
Hopefully taking some of the above steps will be all that it takes to resolve your payment issues. However, if the home owner’s breach continues and you are not being paid, you may need to look at terminating the building contract. Again, this will depend upon the terms of the building contract and we strongly recommend that you speak to us first so that we can assist you with this and advise you about this and other options that may be available to you.
Legal arguments about the validity of a purported termination of a residential building contract are common simply because all too often the parties fail to refer back to the contract when problems arise.
If you have a situation where the home owners are disputing your Progress Claim and would like some advice and assistance to resolve your dispute as quickly as possible, please contact one of our experienced Building & Construction Layers for a confidential no obligation chat.