Payment of contractor for building works

By George Coucounis

Very often, builders are employed to carry out repairs, construction or extensions in houses or other buildings, even to build them. The builder or the contractor, before undertaking the works, visits and inspects the place, prepares a list of works to be done and makes an offer according to which a fee is agreed. During the execution of the works, the owner often assigns extra works to the builder for which no fee was agreed. Another factor which is not agreed upon is the time of the execution of the works. When the builder executes the works properly and there are no defects, the owner is happy and makes the payments without any problems. However, the builder might not appear, there may be a delay, or defects and bad workmanship are observed. The same can happen when the owner omits to pay the builder and the latter has no alternative but to leave works incomplete.

Normally, the issues raised between owner and builder are: (a) what the agreement between the parties provides, (b) what work has been executed, (c) who is to be blamed for breach of the agreement, (d) what damages can be claimed, and (e) what the reasonable cost for the extra work is. In the case of minor building works, the agreement may be partly in writing and partly verbal. If the agreement is made in writing, it should be as precise and complete as possible. The builder is usually paid according to the progress of the work and he may also ask for a pre-payment to purchase materials or for preparatory works. In case the time is not defined in the agreement, there is an implied term that the agreement must be executed within reasonable time. If there is a delay, any extra works asked by the owner are taken into account to justify the time spent.

The failure of the owner to pay makes him responsible for breach of the agreement. In such a case, the builder is entitled to terminate the agreement and leave the works incomplete. On the other hand, when the builder has completed the works and there is a balance owed to him, he is entitled to claim it from the owner as well as the costs for any extra works. The compensation a builder is entitled to in the event the work is left incomplete due to the owner’s fault normally includes the cost for the works executed plus the profit the builder lost from the incomplete works. The case law provides that in the absence of an expressed agreement, the builder is entitled to a reasonable fee for work done.

In the event of faulty or incomplete works or defects, the owner is entitled to deduct their cost from the agreed amount. The builder’s claim must be precise and state in detail the work executed, whether it has been agreed or it is extra work as well as its cost. Therefore, the builder should write down the works executed daily so his account is precise and correct. Moreover, the builder should ask the owner to sign the account when the works are executed, independently of the time his fee is due and payable. By doing so, there will be no misunderstanding or dispute between the parties, who know their rights and obligations and avoid any Court proceedings. The builder should also care to be registered and have a valid license for the category of the building works so his agreement with the owner is considered legal and be able to claim the money due to him.

George Coucounis is a lawyer practicing in Larnaca and the founder of George Coucounis LLC, Advocates & Legal Consultants, [email protected]