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The Developer’s Worst Nightmare: The Ambush Claim

28 May 2017

By Fionna C Aitchison Reid, Director
Aitchison Reid Building and Construction Lawyers.

Ambush ClaimYou have just completed a development.  Practical Completion has occurred some months ago, the final practical completion payment has been paid and you have taken possession of the units.  You may have already on sold some or all of the units.  The wild ride of developing is drawing to a close and finally you feel like you can sit back and reap the rewards.

But then out of the blue you receive another payment claim from the builder. The expiry of the defects liability period is not for another 10 months, so how could this be?  Surely it is not a valid payment claim?

Can an ambush claim be a valid payment claim?

The validity of the payment claim hinges on the wording of your contract.

If your contract allows for payment claims to be sent each month and does not limit the claim beyond practical completion, the ambush claim could be valid despite practical completion payment having been paid.

So the drafting of your contract is vital to stopping future ambush claims.

Is there anything I can do after the contract has been signed?

You can attempt to limit your liability at the practical completion stage, but this would not limit the builder’s ability to use the Building and Construction Industry Payments Act 2004 to send a valid payment claim.

It could however increase your chances of being successful against the ambush claim, if you raise the argument as a reason in a valid payment schedule and the builder applies for adjudication.

If I receive an ambush claim what should I do?

Your ability to defend the payment claim (especially if it is a standard payment claim[1]) depends on your payment schedule (which responds to the payment claim within 10 business days of receiving the payment claim or within 5 business days of receiving a section 20A notice).

The reasons that are raised in your payment schedule are extremely important because if the builder applies for adjudication, your adjudication response will be limited to only the reasons raised in your payment schedule.  In other words if you do not get it right in the payment schedule there are no second chances.[2]

The law relating to payment claims and the Building and Construction Industry Payments Act 2004 is highly technical and the time frames are extremely tight, so it is vital that you immediately engage a construction law practice on receiving an ambush claim.  If you are in need of help please see our contact details below to reach out to us.

How can I avoid an ambush claim?

The Ambush Claim is a true nightmarish situation, but it can be avoided with clever and proactive contract drafting by a skilled and experienced construction lawyer.  Believe me when I say, the cost of good upfront legal advice is nothing compared to the costs of litigation and being caught off guard in a dispute during, toward the end or after the end of your development project.

Contact Us

At Aitchison Reid, we are focussed on proactively helping and working with owners and developers to avoid the pitfalls of developing and investing.

Call our friendly team at 07 3128 0120 or contact us here.

End Notes:
[1] Being less than $750,000.  Payment claims for more than $750,000 are considered complex payment claims and more opportunity is given to the payer to raise additional reasons at adjudication.
[2] There are no second chances in relation the adjudication.  However, you could enter fresh court proceedings for the same matter.

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