A reader tells us that he recently engaged with a builder to construct a dwelling on a vacant piece of land that he owns.
He says he agreed with the builder that, as the building works would be funded personally and not through making use of a mortgage bond, payments would be made on an ad hoc basis based on the progress of the construction.
Some way down the line, the reader anticipated being unable to pay the full amount for the construction and agreed with the builder that the size of the dwelling would be scaled down to limit costs.
See the reader’s question here.
Towards the end of the building works, the reader failed to make one or two progress payments and agreed with the builder that the final outstanding moneys would be paid in one lump sum upon the completion of the dwelling.
Financial woes again prevented him from making the final payment upon completion and he tells us that the builder, who maintains he has rights over the dwelling until paid in full, will not relinquish it.
The reader can no longer afford to rent the dwelling in which he and his family currently reside and to pay storage fees on excess furniture.
He tells us that he has no choice but to move into his new house and feels that, as he has already paid the majority of the costs, that he should be entitled to do so.
He has made attempts to negotiate a payment plan with the builder but the builder is refusing to accept the offer and is insisting on holding the reader to the agreement whereby the lump sum is to be paid.
Based on the given facts, the builder appears to be fully entitled to hold the dwelling as security for the payment of the final fees.
This remedy falls under the ambit of a lien, and more specifically, the so-called debtor and creditor lien.
Similar liens may arise in other circumstances, for example, where improvements are effected to property and where such improvements are not paid for.
Such liens are typically based on the enrichment of the owner and the impoverishment of the party that rendered the services.
In the current instance, however, the contractual remuneration of the builder is the factor giving rise to the lien.
The validity of the builder’s lien is dependent upon him maintaining and holding possession over the dwelling in question.
The reader does not tell us how such possession is being effected by the builder but, presumably, it is sufficiently secure to deprive him of taking possession.
It is important that the builder maintains the possession of the dwelling for the lien to remain valid, as abandoning possession causes the lien to lapse. The reader thus has fairly limited remedies available to him.
The most obvious is to pay the outstanding sum due for the builder to surrender the property and thus also the lien.
The finances of the reader appear to be the major stumbling block and, accordingly, the provision of security for the payment of the fees may be a better option.
As a lien is a defensive mechanism in favour of the builder, the provision of security for the outstanding fees defeats the mechanism of the lien as the builder is provided with an alternative form of security.
The reader may consider approaching a financial institution to obtain a mortgage bond, perhaps on the structure as it stands, to be able to make the final payment.
If the reader is unable to obtain a bond, he may be able to negotiate and secure an alternative form of security, thus giving the builder peace of mind that his outstanding fees will be paid.
Stemming from this concept, the reader could take formal advice as to whether the effecting and registration of a notarial bond of security over the dwelling in favour of the builder is a possibility.
The dwelling will then be security for a form of loan between our reader and the builder subject to repayments as they may agree.
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