Commercial Residential/Strata Issues

If you are an owner of an individual lot in a strata scheme, you together with the owners of the other lots from time to time in the strata scheme constitute an Owners Corporation which is a body corporate. As a body corporate, the Owners Corporation is a separate legal entity and is able to enter into contracts with builders in its own capacity.

Homeowners should be aware that an Owners Corporation in its own capacity engages a builder or a tradesperson to carry out work on the part of the building that is common property, it is likely that the security of payment legislation applies.

A builder who works on commercial property as opposed to a residential property (on which part the owner resides in or propose to reside in) is entitled under the security of payment legislation in New South Wales to claim and receive progress payment.

In Advance Earthmovers Pty Ltd v Fubew Pty Ltd [2009] NSWCA 337, the New South Wales Court of Appeal held that a corporation which contracted with a builder could not in its own capacity reside in or propose to reside in the premises for the purpose of the security of payment legislation and hence such legislation applies to contracts to do residential building work entered into by a body corporate with a builder. As mentioned above, an Owners Corporation is a body corporate (even though it does not attract the application of the Corporations Act 2001).

Hence while the legislative intent seems to be that home owners who are usually not business like people should not be subject to the strict deadlines for   providing   response to payment   claims   and

making payment under such legislation; the case law requires that an Owners Corporation managed by professional strata managers be subject to such deadlines.

Similarly if you are residing in a home owned by a company under your or your relatives' control and enter into a contract with a builder through your company, you must be aware of the implications of the security of payment legislation. We are the security of payment experts and are happy to provide homeowners and/or strata managers with our professional advice.