What happens when a Builder makes a demand for payment before the required work is completed?
A common dispute between Owners and Builders occurs when an Owner receives an invoice for a stage of work which they dispute has been reached.
Most standard form contracts will contain wording to the effect that "...the Builder is entitled to be paid a progress claim for a stage of work upon completion of the work as described under that stage...".
From this quick example, one can see that this statement includes a number of inherent questions as follows:
Does the Contract define the work required to reach a "stage"?
Has this work actually been completed?
Has the Builder submitted a progress claim which reflects these grounds in the correct amount?
One of the clearest examples which can be provided to illustrate these questions is Frame Stage.
Under the Domestic Building Contracts Act 1995 (Vic) ("DBC Act"), Frame Stage is defined to be "the stage when a home's frame is completed and approved by a building surveyor".
A substantially similar definition is often found in standard form Contracts (Such as MBA or HIA Contracts).
With this example, the frame of the house would need to be erected by the Builder and assessed as approved by a Building Surveyor. If the Building Surveyor has not yet issued a Frame Stage Certificate, or the work is not complete, the Builder should not have issued a progress claim to an Owner.
We appreciate that Building Contracts can often include a number of complex technical requirements. This can often mean that an Owner, who is not familiar with the Building Industry, is simply not able to answer the above questions. If this is the case, it may be possible to obtain the written opinion of an Expert Building Consultant to determine if the required work has in fact occurred. Perry Thomas Lawyers can assist Owners through this process.
If a Builder makes a demand for payment of a Stage prior to completion of the stage being reached, it may amount to a breach of Contract and breach of the DBC Act. A careful assessment of what has occurred is then required as it may lead to:
- A notice of suspension;
- A notice of intention to terminate a contract;
- A letter of demand; or
- other options depending on the form of Contract you have entered into.
If you believe that a Builder has claimed a progress claim in advance of stage and wish to discuss your options, please do not hesitate to contact Perry Thomas Lawyers on (03) 8375 9638.