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Identifying Commercial and Residential Works

Laws relating to security of payment claims do not apply to home owners and home buyers, as a recent case has shown.

The case involved a property bought by a family trust. The director of the trustee company lived in the property, but also stayed in a flat in Sydney where he worked during the week. The director commissioned a builder to develop a one-storey residential building on the land, but failed to pay for the work. The builder then served a payment claim against him.

Under the law, creditors can serve payment claims for works carried out under a construction contract, excluding “residential building work”.

The court found that the plans for the property comprised three bedrooms, living and dining areas, bathrooms and other rooms appropriate for a residence. It also found that the director proposed to reside in the newly constructed property – the law did not require a person to only have one residence.

Therefore, the building contract was one for residential works, and the builder was unable to enforce his payment claim.

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