To grain insight into your entitlements as a builder or tradesperson, it is imperative to grasp the concept of a caveat.
What is a caveat:
A caveat serves as a statutory injunction that is registered over the title to a property. A person who lodges a caveat, known as the caveator, has the authority to stop most dealings with the title to a property. For instance, a clause that prohibits the property owner from selling the property or obtaining a mortgage depicts this restriction.
When can I lodge a caveat:
A caveat can only be lodged if there is a legal or equitable interest in the property, such as:
- A mortgage;
- Being a buyer under the sales agreement;
- Being a lessee under an unregistered lease;
- An easement;
- A life estate; or
- A transfer.
Some examples of non-caveatable interests are:
- Unsecured claim for a debt or for damages;
- An agreement to share profits on resale of land;
- A builder’s mere possession of a building site; or
- Interest as a builder under a construction contract in relation to the land.
When can a builder lodge a caveat over the owner’s property:
A builder or tradesperson can only place a caveat over a property with the explicit consent of the owner. This requirement is outlined in s. 18 of the Domestic Building Contracts Act 1995, which specifies that a domestic building contract does not confer upon the builder any estate or interest in the land. Consequently, if the owner refuses to grant consent, the builder is not permitted to place a caveat under the terms of the contract and cannot secure payment in this manner. It is essential to note that a builder cannot simply place a caveat on a property solely because payment is owed, rather a caveatable interest in the property is legislatively required.
Since caveats are rarely a viable option for builders or tradespersons, avenues for resolution must be explored within the building contract itself or through relevant Security of Payment legislation.
To determine the appropriate course of action for upholding your contractual rights, legal counsel is advised.
