Breaking up with my builder – when can I legally terminate a building contract with the Builder? (Part Two)

Question: My builder is refusing to return to site and continue with my works, what should I do? What are my options?

Answer: If work has stopped on your site, the builder may have suspended the works under the building contract. At the outset, it is important to distinguish between a situation where the builder is not able to carry on with the works because of a shortage of labour and materials, or, a situation involving “inclement weather”, and a situation where the builder has deliberately “walked off the job” and is refusing to return (“suspension”).

Assuming this is not a case where the builder is suffering from a labour and material shortage which is delaying the completion of the Works, the priority is to identify the reason for the suspension and then, to determine whether the suspension is justified or not.

The most common reason for a builder suspending the works and refusing to return is that the builder has issued you with a payment claim that you have not yet paid. There may be other reasons, however, an alleged failure to pay a payment claim issued by the builder is by far and away the most common reason for effecting a suspension in our experience.

A common feature in most building contracts is the right of the builder to suspend the works where the builder has issued an owner with a payment claim which has not been paid by the owner.

Once the reason for the suspension has been determined, the question then becomes whether the suspension is justified by reference to that reason.

Applying the earlier example provided above, it is necessary to determine whether the builder is justified in issuing you with the payment claim that it has issued to you. The first “port of call” in that respect, is, as always, to consult your contract.

If you are building under a lump sum building contract, your contract, in the Schedule of Particulars, will set out the staged payment claims which the builder is allowed to lawfully claim from you. If the builder has issued you with a payment claim which does not align with the list of scheduled payment claims in the building contract, the builder may have issued you with a payment claim that it was not entitled to claim, potentially rendering the suspension as unlawful.

If the builder has unlawfully suspended the works, the building contract will generally provide an express entitlement on the owner to terminate the building contract where the builder has, without reasonable cause, suspended the works. In addition to an express right, you may also be entitled to terminate the building contract on the basis of the builder’s repudiatory conduct in suspending the works in reliance on the non-payment of an invoice which the builder is not entitled to demand. (See “Part One” of this series for an explanation as to the above).

Despite sounding simple in theory, the determination of whether the builder is entitled to be paid a payment claim can become highly complicated where it is alleged that the builder has not completed the scope of works which relate to that payment claim, or, if peculiarities arise as a result of the way the contractual relationship with the builder has been conducted.

The risk of non-payment of the builder’s invoice is that, if the invoice has been properly issued, the builder will generally be entitled to terminate the building contract in the event that you fail or refuse to make payment of a legitimate invoice, additionally, you may find yourself “on the hook” for additional interest payable on the invoice which accrues between the date of due payment of the invoice and date of actual payment – which has the potential to stack up significantly.

If you believe that your builder has unlawfully suspended your works, the first thing you should do is seek proper and qualified legal advice – ideally, sufficiently before the due date for payment of that invoice so that you are fully appraised of your position in advance of any suspension of the works.