Does a builder enjoy a lien over state owned property?

(By Yasmeen Raffie, Joe Whittle and Emilia Pabian, Cliffe Dekker Hofmeyr)

In the construction industry it is well known that a building contractor enjoys a lien or right of retention over work which he has carried out for an employer as security for payment of any or all amounts which may be due and payable to him therefor.

However, according to Loots, Construction Law and Related Issues (1995), a contractor may not enjoy such security in regard to the execution of construction or engineering contacts for government departments, provincial administrations or similar public bodies in South Africa today.

This position is supported by several Dutch jurists including Voet, Matthaeus and Wissenbach. In particular, Matthaeus (De Auctionibus 2.10.21.) contends that the reasons for the absence of a contractor’s right of retention with regard to state owned property, are as follows:

- A right of retention over private works lies in the protection of the contractor against the breach of faith or insolvency of a private employer, but this consideration does not find application in circumstances where the employer is the state.
- A right of retention over public works could be against public policy and cause embarrassment to the state.
- A right of retention is analogous to set-off, which cannot be raised against the state.

Although the question of whether there exists a right of retention over state owned property has not been pertinently decided in South Africa, it has been raised in several early reported cases where the above views were quoted with approval, albeit obiter, namely:

In Hunter & Turpin v Standard Bank, Pietermaritzburg (1883) 4 NLR 49, the court, referencing Voet and Matthaeus, found that the builder of a new house and the repairer of an existing one enjoyed a right of retention, save for if the work was for the government which was expected to be in a position to pay for such work.

Similarly, the above position taken by Matthaeus as well as the reasons therefor were referred to with approval in The Colonial Government v Smith, Lawrence & Mould and Others (1885 – 1886) 4 SC 194 and Land Bank v Mans 1933 CPD 17.

In Provincial Administration (O.F.S.) v John Adams & Co 1929 OPD 29, where the contractor relied on an alleged improvement lien in regard to
a public road, McGregor J, again lending support to the old authorities, held that the case before him was one where:
“one should have regard to what is said by Matthaeus (Over de Opveilingen) where (bk. 2, c. 10, sec. 21) he points out that the right of retentie should not avail against “’t gemeene Land”; he points out that the protection should not be necessary --- there should be no assumption that the State cannot pay what is due; and further there might be public prejudice.”

Whether a South African court will find this exception still applicable today, is not easy to predict according to Loots, in light of the fact that a substantial amount of time has elapsed since the issue was raised in our courts. Loots states that it could very well be argued that the exception has been abrogated by disuse or desuetude and can no longer be used by an employer to defend a contractor’s claim to a right of retention over state owned property. However, it must be emphasised that the mere lapse of time from the last judicial application or recognition of a rule such as this is not, in itself, sufficient to prove that the rule is no longer valid and applicable.

Furthermore, despite the absence of the exception’s application in modern South African case law, the recognition of the exception by South African courts is clearly indicative of a judicial recognition and acceptance thereof (see the Smith and Mans cases above) and the fact that the exception may have been overlooked by our courts for some time, again, in itself, does not render it inapplicable and not a part of South African common law.

In modern times, the absence of the risk of insolvency of the state and the policy consideration that work done for the state be completed and made available to the public as soon as possible are two of the three reasons (as contended by Matthaeus above) that appear to Loots to remain valid and applicable justifications for the exception to the general rule that a contractor enjoys a lien or right of retention over the works which he has carried out as security for payment of any or all amounts which may be due and payable to him therefor.

Accordingly, an employer which is a government department, provincial administrator or similar public body should be aware that a contractor which attempts to assert a builder’s lien, may not be legally entitled to do so (absent of course, the obtaining of a formal waiver of lien from the contractor at the outset of the contract).

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us