Q. I have engaged a builder to construct a residential investment property. It is nearing completion and disputes are starting to arise over extras. The builder says if I don't pay his claims he will caveat my land title. Can he do this?
A. Obviously you appreciate what a caveat is, namely a notice lodged against your land title. It will prevent any documents being registered after the caveat (such as a mortgage or transfer of title). A caveat can be registered only by someone with a registerable interest in the land.
Normally, a builder has no legitimate right to lodge a caveat against the title.
The mere contract for constructing a structure does not constitute an interest in the land, so there is no caveatable right.
If the contract provided that the builder was to have a charge (such as a mortgage) over the land, then the situation would be different (ie. the builder will have a caveatable interest).
The Construction Contracts Act (which applies to construction contracts entered into after April 1, 2003) allows an adjudicator to approve charging orders (which have a similar effect to a caveat) against land where the landowner is liable to pay for construction work on the land. However, that part of the Construction Contracts Act does not apply to residential construction contracts and if you are intending to occupy the property yourself (ie. personally as a dwelling house), a charging order cannot be sought.
If you are not, the builder will be able to apply for a charging order, but he will have to bring a successful adjudication to achieve that.
A wrongful caveat registered against your title by the builder will not assist the builder unless you are about to sell or deal with the property. Even then, the court can order its removal or the Land Transfer Office can direct that the caveat lapses, unless the builder applies to the High Court. Court costs can be ordered against the builder.
* * *
Q. Our builder has gone bust just before finishing additions to our factory. We've paid all accounts up to date. Now the builder's joinery subcontractor/supplier (who has not had his share of the payments we have made passed on by the builder) is claiming he still owns the joinery in our factory and is threatening to remove it unless we pay him his outstanding money. Can he do that?
A. Once the joinery (or any other items) have been permanently installed in your factory and cannot be easily removed without causing damage, they have become fixtures in relation to the land.
Ownership passes to you if the joinery has been permanently installed whether it has been paid for or not. As a result, they become owned by the landowner even if the supplier had a retention of title clause (a clause saying ownership of the goods does not pass until payment in full has been made).
It is unlikely that any retention of title clause in the joiner's terms of supply can be enforced against you, unless you have agreed to and been party to those terms of supply. More than likely, the joiner's terms of supply appear only in the contract between the builder and the joiner, so are not part of your contract and therefore not enforceable on you.
As a result of the builder going bust, it is unlikely that his joinery subcontractor has any ongoing legitimate right to enter your land. If you are concerned that might still occur in an attempt by him to remove any joinery, a trespass notice could be given to the joiner and copied to the police.
The joiner's only remedy is against the builder. If you still need the joiner to do some work, that is a new contract between you and the joiner.
* * *
Q. I heard that the new Building Act will set up Licence Building Practitioners (LBPs) and that all construction work has to be carried out by or under the supervision of an LBP. Does this mean I can no longer do my own home renovations without an LBP?
A. This is a very good point which is regrettably not totally clear in the draft Building Bill. The bill proposes that all building work under a building consent of a specified value will require the involvement of an LBP. The threshold amount has not as yet been set, but there is a suggestion that it will be $10,000.
Submissions on the draft bill have closed and the next draft will hopefully provide some clarity. The bill will have a transition period and not apply on this aspect until about 2009, so don't put off your renovations.
* Send us a commercial property question