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Builders Payments

Builders Payments

Residential restriction on security of payment law

In a recent case a builder failed in a claim for payment from a homeowner who was not living in the property while the work was being carried out.

Initially, under building security of payment laws, the homeowner was found liable to pay the builder a progress payment of over $300,000.

However, the homeowner challenged the claim in court on the basis that he proposed to live in the seven-bedroom waterfront property he had inherited once construction work was complete. He had previously lived there for about 25 years prior to his father’s death, but in the past ten years had also had alternative residences.

The security of payment law does not apply to  “a construction contract for the carrying out of residential building work … on such part of any premises as the party for whom the work is carried out resides in or proposes to reside in”.

The courts found that the homeowner did not cease to reside at the property when he moved out to allow renovation work to proceed. According to the court “residence does not require continued physical presence”, and for the purpose of the building construction industry payments laws, a person can be resident at more than one place, the test being continuity of association.

The courts referred to a number of cases, particularly taxation and migration, in which an individual was found to be resident at a particular place while spending the majority of time away from it, or at another place where they also had a home.
The courts found that whether a homeowner proposes to live in a property after work has been completed depends on their intentions for the future use of the property. If it is their intention to return, even if provisional on a number of different factors, this is sufficient to establish residency.

The courts also rejected the builder’s argument that the homeowner’s intention to reside in the premises needed to be communicated to him.

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