Building and Construction

We often see lenders (usually from interstate) trying to secure a loan by a caveat or consent caveat on Queensland property. The problem with this is that – unless court proceedings are commenced to establish the claim to a charge on the land and notice is given to the Titles Office – the caveat will lapse after three months even if it is lodged with the consent of the registered proprietor. The reason for this is the terms of the Land Titles Act, and it is a little confusing. Section 126(4) of the LTA provides that if a caveator does not want a caveat to which section 126 applies to lapse, then it has to start a court proceeding and notify the titles office, within the times set out in the section. Section 125(5) says that if this is not done, then the caveat lapses. So then we look at section 126(1), which describes when section 126 does not apply. That includes caveats where consent of the owner is lodged in the appropriate form when the caveat is lodged – i.e. a consent caveat. So one would think that includes caveats to secure sums of money? Well, actually no. Now we go back to section 122(2) which says “However a caveat may only be lodged by an equitable mortgagee if it is a caveat to which section 126 applies”. So that means that an equitable mortgagee’s caveat can never be excluded from the operation of the lapsing provisions by 126(1). Getting confused? You are not alone. So then to finish off, what is an equitable mortgagee? It is a person with a charge on the land but not a registered mortgage, usually where there is an agreement to give a mortgage or an agreement to charge the land in payment of a debt, like the charging clauses that are often buried in credit applications. To make matters worse, the caveats lapse after 3 months but people don’t realise as they tend to stay on the title until they are removed. So many lenders are blissfully unaware that they have no security on the property at all. An then let’s rub some salt into the wound. The lender cant lodge a second caveat on the same grounds without the Court giving leave. For advice on caveats and mortgages, please contact our Property and Commercial team – Peter Muller, Jessica Murray, or Megan Hanneman.

In nearly all disputes that proceed to adjudication under BCIPA a principal will attempt to use a set-off clause in the construction contract to reduce or eliminate entirely, the amount claimed by a subcontractor pursuant to a payment claim. The most common set-off made by principals are damages for alleged defective work or liquidated damages for delay. Whenever possible subcontractors should closely scrutinise any set-off clause in a construction contract prior to signing the contract. It is possible to limit the operation of a set-off clause in a construction contract.  This in turn will limit the circumstances in which a principal can try and apply a set-off under the construction contract to defeat a claim for payment by a subcontractor. Subcontractors are often met with the risk of losing their security provided under a construction contract where a principal asserts a right to have recourse to the security, on the basis that the principal is owed money by the subcontractor. Unfortunately, time and time again subcontractors are exposed to such claims because of poorly drafted construction contracts that fail to adequately protect a subcontractor’s interests. There are mechanisms available to substantially limit the circumstances in which a principal can have recourse to your security without giving a subcontractor time to take steps to stop a principal having recourse to the security.  These mechanisms include:- A provision in the construction contract which provides that a principal can only have recourse to security for a debt due and owing under the construction contract by a subcontractor as opposed to damages; A provision in the construction contract which provides that the principal must give at least 7 days written notice to the subcontractor of its intention to have recourse to the security before doing so; Section 67J of the Queensland Building Construction & Commission Act 1991 requires a principal to comply with the notice requirements of this section. A failure to do so will disentitle a party to have recourse to the security under a construction contract. If you are in dispute with a contractor/principal under a construction contract in relation to security and require legal assistance, or you need advice prior to entering into a construction contract, please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au.