By Daniellé Giannico (Candidate Attorney)

What it is

A lien is the right of retention that a Contractor has over a building or part of a building on which it worked, this can mean the Contractor constructed the building from scratch or it enhanced or repaired the building by constructing a portion thereof or renovated same. Contractors are in the unique position that once they have performed their part of the agreement, they cannot physically withhold the “goods” until the Employer has paid them. This is where the Contractor’s Lien becomes relevant. The lien enables the Contractor to legally remain in or take possession of a site until the Employer pays him.

In order to enforce a Builder’s Lien, the Contractor would have to show that the Employer was enriched by the work the Contractor has done on the project and that the debt that exists is in fact due and payable. A further requirement is that the Contractor must be in possession of the site when he intends to enforce his right and he must remain in possession until such a time that the right falls away. This means more than just having the keys; the Contractor must be in physical control of the site and he must have the intention to hold and exercise his possession.

Waiver of Lien

Most of the standard form building contracts make provision for the Employer to provide a payment guarantee to the Contractor in return for which the Contractor waives his lien over any work done in terms of that contract. In Standard bank of SA v D Florentino Construction CC & Others[1] the Court held that the provision of a payment guarantee is not necessarily a legal requirement to ensure a valid waiver of lien. It is possible for a Contractor to waive his lien without the existent of a payment guarantee to replace it. Furthermore, where a Contractor voluntarily relinquishes his possession of the property, he will be deemed to have waived his right of retention over such property.

In Collen v Rietfontein Engineering Works[2] the Court held that the onus of proving that the Contractor did in fact waive his lien lies with the party alleging that such a waiver took place. The party alleging the waiver must show that the Contractor acting with full knowledge of his right acted in such a way so as to abandon it. This can take place either expressly or through conduct of the Contractor inconsistent with an intention to enforce his lien.

Spoliation

Spoliation is the legal construct describing a scenario where a possessor of a thing is unlawfully deprived of his or her peaceful and undisturbed possession.

In Van Rhyn NO and others v Fleurbaix Farm (Pty) Ltd[3] the court described the Mandament van Spolie as a robust remedy aimed at restoring the party claiming spoliation to the position they were in prior to being unlawfully dispossessed of property of which they were in peaceful and undisturbed possession of. It was furthermore said that all a party claiming spoliation must show is peaceful and undisturbed possession of the thing and the unlawful spoliation thereof; the court does not concern itself with any dispute regarding the party’s entitlement to the possession of the thing.

In order for a Contractor to assert his right of retention, he needs to have physical possession of the property; symbolic possession is not enough. In Wightman t/a JW construction v Headfour (Pty) Ltd and Another,the Employer had requested a duplicate set of keys for the property in order to inspect same, the understanding being that the Contractor would retain possession of the site. The Contractor had only delivered the duplicate set of keys on the basis of this understanding and for the limited purpose which was discussed. The Court held that construction had progressed far enough that retaining the original keys was enough to retain physical possession of the site.

On the Following Monday, the Contractor was barred entry to the estate in which the property was located, and the Employer had given access to new contractors. The court held that it was at this point that physical possession was lost by the Contractor.

Following this loss of physical possession, the Attorneys for both parties concluded an agreement wherein it was agreed that the Contractor would retain his lien over the property regardless of the fact that he had agreed to allow new contractors to complete the works.

It was clear from the actions of the Contractor that he had at no point intended to waive any of his rights. The contractor was then wrongly advised that by reason of the abovementioned agreement he had continued to retain possession of the property. The court confirmed that he had lost physical possession of the property prior to the conclusion of the agreement, and that it was not possible to revest such physical control by agreement.

However, by being dishonest in his reasons for requesting the duplicate keys, the Employer had unlawfully spoliated the Contractor and as a result the court ruled that even though the Contractor had been dispossessed for almost three and a half years, unless the Employer put up adequate security, possession was to be restored to the Contractor

In Top Assist 24 (Pty) Ltd t/a Form Work Construction (Registration No: 2006/037960/07) v Cremer and another[4] the court said, in reference to the requirement of deprivation of possession, that spoliation takes place where the applicant is deprived of control over the property by the actions of the respondent. The applicant does not need to show that the respondent used force or stealth in this deprivation. In Stocks Housing (Cape) (Pty) Ltd v Chief Director, Department of Education and Cultural Services and others[5] it was held that the element of unlawfulness that must be shown relates to the act of dispossession and not the alleged right of the spoliator to claim possession. Of the many unlawful ways that dispossession can take place, it is important to note that dispossession will always be unlawful where it takes place without the consent of the possessor.

Security

The owner of the property, being the person against whom the lien is exercised, can defeat the lien by providing the Contractor with adequate security for the outstanding debt which is owing to the Contractor. However, merely offering the Contractor security for the outstanding debt does not confer a right of possession on the owner. The owner must actually pay the security to the Court, furnish the possessor with a bank guarantee, or pay the amount for security into an Attorneys trust account, where after the attorney provides the possessor with an undertaking that the money will be retained in the trust account until such a time as it becomes due and payable.

Conclusion

As a contractor, your best protection is your builder’s lien. It is important to educate yourself on exactly what is required of you to enforce this lien and never waive it without first making sure other adequate protection is in place.

[1]              [2015] 4 All SA 236 (WCC) (28 July 2015).

[2]              1996 (4) SA 231 (C).

[3]              1948 (1) SA 413 (A) at 436.

[4]              [2013] 4 All SA 236 (WCC) (8 August 2013).

[5]              2008 (5) SA 534 (C).