Caveats: Can a Domestic Builder Secure Payment This Way?
By Michelle Janczarski, Solicitor, Lovegrove Solicitors
What is a caveat?
A caveat is a method of preventing the registered owner of land from dealing with the property in a way that is adverse to a caveat holder’s (“caveator’s”) interests, even where these interests are unregistered or cannot be registered.
In certain situations, parties with an unregistered legal interest in a piece of land can lodge a caveat on the land by their interest at Land Victoria. A caveat note will then be placed on the Certificate of Title, which will notify any prospective purchaser of the land that the caveator may have rights over the property.
Further, Land Victoria will not allow the land to be sold while a caveat is noted on the Certificate of Title. A detailed explanation of the nature and uses of caveats is available here.
In a construction law setting, a builder might seek to lodge a caveat over the owner’s land if the relationship between the parties has broken down, and the builder wishes to ensure that they will be paid for their work. However, before this is done, you need to take robust legal advice on whether you have a “caveatable interest” that will sustain a caveat.
When can a builder lodge a caveat over the owner’s property?
Unfortunately, in domestic building a builder can only lodge a caveat over the owner’s property with the owner’s consent. If the owner is unwilling to give this consent, then according to section 18 of the Domestic Building Contracts Act, the domestic building contract itself will not entitle the builder to place a caveat on the owner’s property. Consequently, a domestic builder cannot secure payment by lodging a caveat on the owner’s land unless the owner gives consent.
While there is no express bar in the legislation with regard to commercial builders, the builder in this context cannot simply slap on a caveat on a commercial block of land. They need to be able to argue successfully that they have a “caveatable interest” due to their carrying out the work on the land. The law is not clear that this will be possible, even for commercial builders.
If a caveat can be set aside for this reason by the land owner/principal, then the builder may be up for costs.
If a caveat is not viable, the builder will need to seek a remedy through the building contract itself, or through Security of Payments legislation. Expert legal advice is important in identifying the best method of enforcing your contractual rights.
By Michelle Janczarski of Lovegrove Solicitors
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© Lovegrove Solicitor’s 2014