The High Court has upheld complaints by the Director of Consumer Affairs that unfair terms and conditions had been added to house-building contracts supplied to buyers by solicitors for building contractors.
The court was told the Government was currently drafting legislation to prohibit the practice of having stage payments in the case of speculatively built properties.
Mr Justice Kearns directed that 15 terms in building contracts were to be prohibited in future contracts because they were unfair. He also prohibited the imposition of stage payments in contracts which exceeded a schedule of such payments or which exceeded the value of works done.
The director, Ms Carmel Foley, brought her application under a Ministerial regulation giving effect to an EU Directive dealing with what she alleged were unfair terms and conditions in building contracts.
She complained that many additional conditions had been added to the standard building agreement by lawyers acting for building contractors and that these additional conditions were unfair.
The director's application was supported by the Department of the Environment and Local Government, and the Law Society.
Ms Foley also complained there was an imbalance in the building contracts in that there was no provision for any payments already made by a house-buyer to be repaid where a buyer might have paid all but one stage payment to a builder. She also said contracts limiting a purchaser to one snag list only were unfair.
A member of the Law Society's conveyancing committee informed the court that house-buyers from 1997 were told the conditions in contracts were not negotiable and they could "take it or leave it". When faced with the "option" of losing a house they wished to buy, many purchasers had no choice but to accept the unfair building agreements as housing was in short supply and becoming progressively more expensive during that period.
Ms Mary Finnegan, an assistant principal officer in the Department of the Environment, said in an affidavit that the Minister had been concerned about some developers requiring excessive stage payments or interim payments from new house purchasers.
She said the Attorney General and the Minister believed stage payments were not in the interests of purchasers and that the practice represented a transfer of the funding costs of construction and development risk to the purchasers.
The Minister is preparing new legislation - The House (Miscellaneous Provisions) Bill 2001 - which will prohibit stage payments, except in the case of one-off properties.
The Minister was primarily concerned about the demand for stage payments in excess of the protection afforded to individual purchasers under the Home Bond stage payments warranty.
In another affidavit, Mr Colm Price, a member of the Law Society's conveyancing committee, said solicitors had been complaining that additional terms and conditions were being added to the standard building contract which tilted against the purchaser.