What is Lock Up Stage?
By Owen Lai, Solicitor, Lovegrove Solicitors
Building contracts may appear at first an easy mechanism to build or develop a property. Builders and owners usually bring to the negotiating table their understanding of what constitutes the building contract. It is the case for builders to follow common industry practice in carrying out their building contracts and for owners to get up to speed with what these are.
However, experience has shown that these contracts which, essentially governs the ‘building relationship’ of the parties, are sometimes not straightforward as they appear and consequently a fertile ground for disputes. Even commonly used ‘HIA’ and ‘MBA’ contracts have presented a raft of difficulties over the years and a source of much grief and expense to both builders and owners alike.
An example of when there has been much confusion involved in interpreting a clause of the building contract is defining ‘Lock-up stage’. The Domestic Building Contracts Act (“DBCA”) regulates all residential building work in Victoria and defines ‘Lock-up stage’ under section 40 as “the stage when a home’s external wall cladding and roof covering is fixed, the flooring is laid and external doors and external windows are fixed (even if those doors or windows are only temporary).
As owners and builders perusing through this provision can appreciate the definition under this provision does not directly spell out whether completing a garage is required to complete Lock-up stage. Industry practice understood that it didn’t and it has been the case that garages are ignored to an extent in completing Lock-up stage prior to late 2012, at least insofar as whether the garage door needs to be installed.
The decision in Cardona & Anor v Brown & Anor  VSCA 174 (“Cardona”) in late 2012 quickly overturned this practice. What has been accepted as the norm has been turned on its head as this decision from the Supreme Court of Appeal has adopted a more expansive definition of Lock-up stage.
In that decision progress payments were agreed to be made pursuant to a standard HIA New Homes Contract upon the completion of each of the five-stages reflected in the DBCA. There were several issues raised by the owners including that the builders were not entitled to progress payments as the garage has not been completed within the scope of the Lock-up stage. The Court of Appeal agreed with this argument and overturned previous VCAT & Supreme Court decisions that provided otherwise.
This is a small win for the owners but the expanded definition of Lock-up stage means that builders are now somewhat delayed in demanding progress claims compared to what they previously enjoyed from industry practice prior to the Supreme Court of Appeal decision.
This clearly illustrates the need to involve construction lawyers at all stages of construction work to mitigate some of the confusion that may arise from building contracts. It is also prudent in avoiding unnecessary expenses and legal costs to clearly map out the rights of the parties under any building contract at the outset with the help of a construction lawyer.
A past article by a colleague Justin Cotton aptly explores the Cardona decision in the context of utilising contractual mechanisms such as notices of suspensions and notices of default. Click here (http://lclawyers.com.au/elibrary/builders-and-contract-administration/) to access the article.
By Owen Lai, Solicitor, Lovegrove Solicitors.
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© Lovegrove Solicitor’s 2014