If you are a builder carrying out residential building work, there may be situations when you would like to suspend the building works. Commonly this occurs when a home owner fails or refuses to pay a Progress Claim. This can cause problems for a builder who, naturally, may be reluctant to continue carrying our the building works where there may be cash flow issues or uncertainly as to whether the builder will be paid.
If the building contract is not suspended properly, however, the suspending party may itself be in breach of the contract and become liable for damages even though they were not initially the party in breach. In some cases the invalid suspension may constitute repudiation of the contract and entitle the home owner to terminate the contract. If this happens the builder may face a claim for the additional costs of a third party completing the works.
It is, therefore, important that you exercise great care to ensure that the suspension is valid and will not itself create more problems.
In most cases, a suspension will only be valid if it is carried out in accordance with the terms of the relevant building contract between the parties. Often, a building contract will provide the builder with a right of suspension where the home owner is in substantial breach of the contract and the appropriate notices have been given. We can help you with this by reviewing your building contract and providing you with advice about when and how to suspend the works.
Generally, a builder cannot suspend the building works unless there is a contractual right to do so. If your business uses “standard form” building contracts, we can help with reviewing your contracts and drafting suitable Special Conditions to ensure that they deal with suspension rights appropriately and provide you with adequate protections.
In addition to and contractual rights, in some circumstances, for example, where the owner is a development company or the home is to an investment property which is not owner-occupied, the builder may have additional rights to suspend the works under the Building & Construction Industry Security of Payment Act.
Importantly, a right to suspend the works will only arise under the “security of payment” legislation if a valid Payment Claim has been served. We can also assist with this and give you advice about the validity of any Payment Claims that you have served and your ability to suspend work validly under the security of payment laws.