Domestic building disputes – is a conditional occupancy permit valid?
In a notable decision, Troise v Blue Key Properties Pty Ltd (Building and Property) [2025], Senior Member Edquist addressed a recurring issue in domestic building disputes: when is a builder entitled to final payment where the contract is tied to the issuance of an occupancy permit, but the permit is conditional?
The case underscores the importance of precise drafting in construction contracts and serves as a cautionary tale for owners and builders alike.
Background
The builder, Blue Key Properties Pty Ltd, undertook residential construction for the owner, Mr Troise. The domestic building contract contained a special condition requiring the owner to pay the builder’s final claim within 14 days of the issuance of the occupancy permit.
At the practical completion stage, the builder obtained and issued a conditional occupancy permit - a standard administrative step where minor outstanding items remain.
Mr Troise refused to pay the final claim, arguing that:
- the builder had not yet completed the works in full; and
- the payment obligation was only triggered upon the issue of an unconditional occupancy permit.
The Tribunal’s decision
VCAT rejected the owner’s position. Senior Member Edquist found in favour of the builder, determining that:
- the contractual condition tied final payment to “the occupancy permit”, not a non-conditional or unqualified permit;
- the permit issued under the Building Act 1993 (Vic), though conditional, was still valid and sufficient to trigger the special condition;
- the owner's interpretation would have required a strained reading of the contract and introduced a qualification that was simply not there.
Importantly, the Tribunal held that minor outstanding works or conditions attached to the permit do not, of themselves, postpone the final payment, where the contractual trigger has otherwise occurred.
Key takeaways
1. Clear drafting is critical
This decision reinforces that contracts will be interpreted according to their plain terms. If the parties intend for final payment to hinge on an unconditional occupancy permit or full and final completion of all works, this must be clearly expressed in the contract.
2. Conditional permits are common and operative
In practice, conditional occupancy permits are frequently issued to allow possession or occupation while minor rectifications or compliance items remain. Unless expressly excluded, such permits can trigger payment and completion milestones.
3. Builders: make the milestones work for you
Builders should approach the final stages of a project not just with a toolbelt, but with a strategy. If the contract makes payment contingent on the issuance of an occupancy permit, don’t wait. Get the conditional permit issued and make the final claim promptly.
Ensure all documentation is in order and clearly communicated to the owner. In tight-margin projects, understanding the regulatory levers and timing advantages can mean the difference between smooth cashflow and prolonged dispute.
4. Owners should negotiate with precision
Owners who intend to link payment to final, unqualified completion must negotiate for specific drafting. For example, conditioning payment upon receipt of an unconditional occupancy permit and completion of all building works to the owner’s satisfaction. Absent such language, general expectations of “finished work” may not prevail.
Conclusion
Troise v Blue Key Properties is a sharp reminder that legal clarity beats assumption. The Tribunal applied the contract strictly, without importing extra requirements. For practitioners and parties alike, it demonstrates that milestone-based payment clauses, particularly those tied to regulatory steps, must be approached with forensic attention to drafting.
As disputes over practical completion, occupancy, and final payments continue to dominate residential construction litigation, this case offers timely guidance on navigating the grey zone between “nearly done” and “fully complete.”
This decision should prompt all parties in domestic building contracts to revisit how they define ‘completion’ and when payments fall due. As this case shows, getting it wrong can have costly consequences.
