Legal bills mount as dispute over affordable home build spans three courts

A Nelson couple locked in a dispute with the firm that built their home say legal bills and expert reports could reach half what it cost to build the house.

Mark and Suzanne Chamberlain are now entering the fifth year of a legal wrangle that spans the District Court, High Court and Court of Appeal.

The total bill for their affordable design-build home and section has now tipped over $1 million with more to come as they prepare for the latest round of court action with LSK Builders Ltd, the company that operates the Nelson franchise of GJ Gardner Homes.

“It’s potentially going to cost us well over $300,000 on top of what we thought we’d be paying, and it’s probably going to cost more,” the Chamberlains told Open Justice.

The couple alleged a series of faults with the property – some they claim were evident on inspection and some they say had since emerged. When they withheld some of the final payment, the building firm locked the doors on the day they were to move in.

The Chamberlains responded by smashing into the home and before long the company placed a caveat on the property, meaning that although they live there, they cannot sell.

A High Court judge ruled the caveat should not remain on the property but LSK Builders Ltd, has appealed that decision.

The appeal is just another step in the process that dates back to July 2017, when the Chamberlain’s contracted LSK to build their home.

Associate Judge Kenneth Johnston’s High Court decision last August said differences arose “virtually from the outset”.

Legal action lodged by the firm against the Chamberlains in 2018, alleged they took possession illegally, and a counter-claim by the Chamberlains around the alleged faults and issues with the contract were yet to be heard in the District Court.

Mark Chamberlain said the builders’ allegation was based on his forced entry to the home on possession day, after the doors had been sealed shut because of the dispute.

The Chamberlains said they paid the full amount on the fixed price contract but on legal advice withheld additional amounts.

In a fixed price build, a builder can lock in and guarantee prime costs but provisional sums are included for work unable to be priced by the contractor when entering the contract.

According to the High Court decision, LSK claimed it was owed about $200,000.

The Chamberlains told Open Justice that the amount withheld – in a lawyer’s trust account – was just under $145,000.

The franchise was approached by email and telephone for comment, but responded only to the Chamberlains’ lawyer, warning that further action was likely if they talked publicly while the dispute was still before the court.

Judge Johnston noted in his High Court decision that litigation had reached the District Court, despite the contract containing a comprehensive dispute resolution provision.

He also said that key clauses in the contract provided protections for the contractor in the event of a dispute about costs, in the form of entitlements to lodge a caveat against and register a mortgage over the title to the property.

In October 2018 LSK placed a caveat against the title on the Chamberlains’ property. In January 2019 it registered a mortgage against it to secure the amount in dispute, pending the outcome of the proceeding in the District Court.

The Chamberlains applied to the Registrar of Land for the caveat to lapse; LSK sought an order that it remain, and the High Court eventually dismissed the firm’s application.

Judge Johnston concluded that LSK could not justify its caveat because it had no foundation for any claim to an interest in the land that was not covered by its mortgage security, therefore the basis for maintaining the caveat no longer existed.

He also noted that LSK’s claim was for a greater amount than it was when it registered the mortgage, essentially because of accumulating interest and escalating costs.

“I do not accept that that alters the position. LSK’s arguable interest in the land extends only to the debt due under the contract.”

LSK has now taken its bid to the Court of Appeal, which was scheduled to hear arguments this month.

The Chamberlains said it was imperative that people not rush into building or buying a new home without solid legal advice. They said it was also important to shop around and not feel pressured by the market.

“Get a feel for what the building industry is doing because each firm will give you a different story on what’s happening right now, with availability and costs.”

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