Does Mortgagee Possession Terminate a Queensland Superintendent's Authority to Certify?
Key Takeaways
Authority is tied to the principal: A mortgagee taking possession of a site does not automatically novate the superintendent’s consultancy agreement; your authority to act as an agent may cease upon the developer's default.
Certification exposure increases: Continuing to certify contractor payment claims without a tripartite step-in deed or a direct engagement from the incoming financier is likely to expose you to personal liability for acting beyond your scope.
Targeting BIF Act claims carefully: Under section 75 of the BIF Act, a payment claim is given to the person who, under the relevant construction contract, "is or may be liable to make the payment." In most cases that will be the original contracting principal, and serving the incoming mortgagee where it is neither liable nor potentially liable may invalidate the claim — but do not assume the mortgagee is automatically excluded, because in some circumstances it may fall within the class of persons who "is or may be liable to pay."
Unsecured debt reality: Without specific contractual protections or step-in agreements, your outstanding fees for prior contract administration often rank as unsecured debts in the developer's insolvency.
You arrive at the site compound to conduct your scheduled valuation of the contractor's monthly progress claim, only to find the gates chained, new padlocks installed, and a notice from the developer's financier pinned to the fence. The developer's financier has moved to enforce its security — whether by taking possession of the site as mortgagee, by appointing a receiver over the developer, or both. Within an hour, the head contractor's project manager emails you, aggressively demanding their progress certificate by the contractual deadline.
You are now caught between a collapsed principal and an unpaid contractor. Certifying the claim when your principal has defaulted may constitute acting without authority, but refusing to assess it could trigger a breach of your own engagement terms. This article explains how a principal's default impacts your certification authority, the risks of issuing post-possession directions, and the precise steps required to protect your outstanding consultancy fees under Queensland's statutory payment regime.
The Immediate Crisis: Assessing Your Authority to Certify When the Bank Steps In
The contractor is demanding their monthly progress certificate, but the site padlocks were changed this morning as the developer's financier moved to enforce its security. You need to know right now whether signing that certificate fulfils your contractual duty or exposes you to personal liability for acting without a principal.
Separating Your Contractual Agency From the Mortgagee's Statutory Power of Sale
To understand your position, you must separate your contractual agency from the incoming mortgagee's statutory rights. Your authority to administer the contract is derived solely from your appointment agreement with the defaulted developer. The incoming financier operates under a completely separate legal framework, meaning they step into the property rights, but they do not automatically step into the developer's contractual obligations to you.
Under Queensland law, a mortgagee's statutory power of sale over a site does not, by itself, make the existing project superintendent its agent. A distinction matters here that this article treats broadly for readability but which has real legal consequences. A mortgagee in possession, a privately appointed receiver, and a receiver and manager are separate enforcement mechanisms with different agency relationships: a mortgagee in possession takes direct control of the land, whereas a receiver is ordinarily appointed as agent of the developer company rather than of the financier. In practice a lender will usually elect one mechanism, though occasionally both operate together. Whichever applies, the point below holds — none of them makes the financier a party to your consultancy agreement.
The Property Law Act 2023 (Qld), which replaced the Property Law Act 1974 (Qld) on 1 August 2025, provides the statutory basis for a mortgagee's power of sale over a defaulting developer's site in Queensland. The mortgage and power-of-sale regime is contained in Part 7 of that Act, under which a mortgagee may exercise a power of sale over the mortgaged property following default, subject to giving the required notice of exercise of power of sale. While this grants the bank the right to take and sell the physical asset, it operates independently of your superintendent engagement terms. The two operate on different tracks: the bank is exercising a power over the land, while your certification authority relies on privity of contract with the insolvent developer.
The Novation Trap: Why a Mortgagee Does Not Automatically Inherit Your Consultancy Agreement
Warning: Assuming your role seamlessly transitions to the incoming financier can create severe contractual exposure. A mortgagee taking possession does not automatically novate your superintendent appointment agreement. Continuing to issue directions, assess EOTs, or certify payments without a formal novation deed or a direct engagement from the bank means you are acting without a valid principal. While your original agreement may contain limitation of liability clauses intended to cap your exposure, the enforceability of this clause depends entirely on the agreement remaining on foot and binding the relevant parties; such clauses offer no protection against claims from third parties like an un-novated mortgagee or a contractor alleging you breached your warranty of authority.
Halting Certification Versus Abandonment: Navigating the 48-Hour Decision Window
Expert insight: The first 48 hours following a site possession are critical for preserving your position without repudiating your own contract. The distinction that matters in practice is between telling the contractor you will not certify and telling them you cannot yet certify. The first reads as a refusal to perform and hands the contractor a repudiation argument; the second frames the pause as a consequence of a genuine question over who your principal now is. Superintendents who get into trouble here are usually the ones who go silent — the contractor's project manager keeps emailing, the deadline passes, and the absence of any response later gets characterised as abandonment.
A short holding communication, sent within the contractual assessment window, tends to hold up far better than either silence or a flat refusal. It should do three things: confirm that you have received the claim; record that the principal has entered receivership and that you are seeking urgent confirmation of your instructing party; and state that assessment is suspended pending that confirmation. Keep the tone administrative rather than adversarial, avoid attributing fault to the developer or the financier, and resist any invitation from the contractor to characterise the project's status — you are recording a fact about your own authority, not adjudicating anyone's rights. Get that wording reviewed before it goes out, because it is the document that will be read back to you if a repudiation claim is later run against your consultancy.
The Payment Void: Statutory Rights Under the BIF Act When the Principal Defaults
Your primary concern rapidly shifts from the physical progress of the project to your own firm's outstanding invoices for the last two months of contract administration. Navigating the statutory payment regime during a developer insolvency requires absolute procedural precision, as directing your payment claim to the wrong entity will likely extinguish your recovery rights. This section outlines how to properly target your statutory payment claims to preserve your legal entitlements without committing fatal jurisdictional errors.
Serving Payment Claims Under Section 68 of the BIF Act Post-Default
Superintendents may hold a statutory pathway to pursue unpaid contract administration fees through Queensland's security of payment legislation, but this entitlement is not automatic and depends on the nature of the services actually engaged. The threshold question is whether your services fall within the definition of "related goods and services" in section 66 of the Building Industry Fairness (Security of Payment) Act 2017 (Qld). Section 66 lists related services as including the provision of labour; architectural, design, surveying or quantity surveying services; building, engineering, interior or exterior decoration or landscape advisory services; and soil testing services. Where your engagement encompasses services of this kind, section 68 then permits you to issue a payment claim by identifying the relevant work and stating the amount owed.
Section 68 specifies that a valid payment claim must be a written document that identifies the construction work or related goods and services to which the progress payment relates, states the amount claimed, and requests payment of that amount. Where your engagement falls within "related goods and services," section 75 of the BIF Act then permits you, as claimant, to give that payment claim to the person who, under the relevant construction contract, "is or may be liable to make the payment." The practical question is therefore not only whether your services are covered, but which person is or may be liable to pay for them, and it is prudent to obtain advice on both points before relying on the regime. Failing to adequately describe the specific services rendered or quantify the exact fee can, in any event, render the document invalid. Given the strict procedural requirements of this framework, it is worth obtaining construction law advice before dispatching any claim involving an insolvent respondent.
The Misdirected Claim: Why Serving the Incoming Financier Voids Your BIF Rights
Consider a scenario where a consultancy firm is owed $45,000 for recent certification work, and upon discovering the mortgagee has taken possession, they attempt to serve their next statutory payment claim directly on the financier. Serving the wrong party in this way is likely to invalidate the claim entirely. Under section 75 of the BIF Act, the correct respondent is the person who, under the relevant construction contract, "is or may be liable to make the payment." Where the mortgagee has not assumed the consultancy engagement, it may fall outside that class — but this is not an absolute rule. If you have in fact provided goods and services to the principal in relation to the project, there are circumstances in which the incoming mortgagee may itself be a person who is or may be liable to pay, and an adjudicator (or a court) may find, through the application of restitutionary or other equitable principles, that you should be paid for the benefit conferred. The point to take from this is not that the mortgagee can never be served, but that serving a person who is not, or may not be, liable to make the payment carries real risk.
Serving a person who is not, or may not be, liable to make the payment can create a jurisdictional problem that may void your application for adjudication. If that error consumes your strict statutory timeframes for service, you may permanently lose your right to adjudicate that specific claim. This is why identifying the person who is or may be liable to pay is the foundational step before initiating proceedings through the Queensland Building and Construction Commission. The QBCC oversees the state's security of payment framework, including the adjudication registry that superintendents must use to enforce fee recovery, making strict compliance with its jurisdictional requirements essential.
In practice, the question of who is liable to pay is rarely invisible to the adjudicator — it is apparent on the face of the papers. Adjudicators confronted with an insolvent developer will look closely at whether the entity named as respondent in the payment claim is a person who, under the relevant construction contract, is or may be liable to make the payment, and at how that entity relates to the principal named in the consultancy agreement you have annexed. Where the connection is not obvious, an adjudicator may well decline to decide in your favour unless strong submissions are put on precisely why the named respondent is, or may be, liable to make payment. It is that submission — not merely a matching of names — that carries the application.
The second thing they scrutinise is the relationship between you and the party you have served, and whether that party is a person who, under the relevant construction contract, is or may be liable to make the payment. A financier who merely holds a mortgage over the land will often not, on its face, be liable to pay — but this is not an automatic bar, and where you have conferred a benefit on the project there may be a basis, including on restitutionary or other equitable grounds, on which the mortgagee is or may be liable. Where a receiver has issued correspondence on the developer's letterhead, superintendents sometimes wrongly treat that alone as evidence the financier has assumed the obligation to pay and serve accordingly — adjudicators tend to look past the letterhead to the substance of who is or may be liable. Because a privately appointed receiver ordinarily acts as agent of the developer company rather than of the financier, that correspondence reflects the exercise of a power over the company, not the creation of a new contractual relationship between you and the lender.
Navigating Unsecured Debt Status Without a Tripartite Step-In Deed
Expert insight: Superintendents frequently assume their outstanding fees will be protected because their services added value to the secured asset, but the reality is far more precarious. The best protection is a tripartite step-in deed: rather than leaving you to argue after the event that the financier is a person who is or may be liable to pay, the deed puts that beyond doubt by binding the financier to assume the consultancy agreement and, ideally, to cure prior payment defaults. Without such a deed, your position is far weaker — unpaid fees will ordinarily rank as unsecured debts when a developer collapses, sitting behind the secured financier and any priority creditors, and any recovery from the financier will depend on persuading an adjudicator or court that the financier is or may be liable to pay. A tripartite deed is designed to grant the financier the right to step into the developer's shoes and assume the consultancy agreement, often providing a mechanism for the financier to cure prior payment defaults.
The practical difficulty is timing and leverage: the moment to raise a step-in deed is at engagement, before you have mobilised, because once you are on site and dependent on the appointment your negotiating position evaporates. On projects funded by a senior lender with a mezzanine financier behind them, the point that catches superintendents out is that a step-in right negotiated only with the senior lender may be worthless if it is the mezzanine financier who enforces first — the deed needs to bind whichever party is realistically going to take possession, which usually means insisting the financier who holds first-ranking security is a signatory. Financiers will often resist assuming historic fee arrears, so the tactically useful position is to separate the two asks: a step-in right that keeps you engaged going forward is far easier to secure than a promise to cure past defaults, and conceding the latter to preserve the former is frequently the sensible trade.
The other common failure is executing the deed with the developer and financier but not updating it when the funding is refinanced mid-project — a step-in deed with a lender who has since been repaid and discharged protects nothing, so the deed should be revisited whenever the finance structure changes. Engaging a Queensland commercial lawyer at the inception of a high-risk project can help facilitate these tripartite negotiations.
Personal Liability Risks for Post-Possession Certifications
If you mistakenly continue administering the contract after the principal defaults, the fallout is not just about unpaid fees — it is about personal and corporate liability. Certifying works or issuing directions without an authorised principal may expose you directly to claims from both the contractor and the incoming financier. This section outlines how acting beyond your authority can trigger a separate claim in tort and jeopardise your insurance standing.
Exceeding Your Scope of Services: Binding a Non-Existent Principal
Warning: Continuing to assess claims when the developer is in receivership can open up a separate way for your consultancy to be sued. A Queensland superintendent who continues to issue contractual directions after a mortgagee takes possession may face personal liability for acting beyond their authorised scope of services. If the financier has not formally assumed the contract, issuing a progress certificate effectively attempts to bind a non-existent principal. The contractor may subsequently sue your firm for breach of warranty of authority if they rely on your certificate but cannot obtain payment. Compounding the danger is a practical information gap: because you are usually not a party to the finance or security documents, you will often not be given a copy of them, and so you will have no reliable way of knowing whether the incoming financier is in fact bound, or whether it has assumed the position of the principal. Acting in that state of uncertainty is precisely what exposes you, which is why written clarification of your instructing party should be obtained before you certify anything.
While your superintendent engagement terms dictate your initial scope, those limits are designed to operate while the principal is solvent; they cannot shield you if you act without instructions. Professional bodies scrutinise these actions closely — including the Board of Professional Engineers of Queensland, whose standards are often reviewed during negligent certification allegations against registered engineers.
Contractor Claims for Negligent Certification Following Site Handover
Beyond breach of warranty of authority, continuing to administer a site post-handover can expose you to a second route to liability: a claim in tort from the contractor. The contractor may bring a claim against you for pure economic loss based on negligent certification principles. This arises where your actions — such as formally directing the builder to rectify defects or certify practical completion — cause the contractor to incur costs or keep working on a site where they will not be paid.
In these scenarios, the contractor often argues that the superintendent owed them an independent duty of care, which was breached by issuing directions when the principal was clearly insolvent. If such a claim proceeds, your defence strategy may rely on the proportionate liability framework under the Civil Liability Act 2003 (Qld). This Act outlines proportionate liability defences which are critical when multiple parties are involved in insolvency-triggered losses. You may argue that liability should be apportioned between your firm, the developer, and potentially the incoming financier. These complex multi-party disputes frequently escalate to Queensland Courts, which possess jurisdiction over civil disputes involving professional negligence claims against contract administrators.
Professional Indemnity Insurance Coverage Gaps During Principal Insolvency
When a principal defaults, the ensuing chaos often distracts consultancies from their strict policy obligations, creating a separate route to liability through gaps in your insurance coverage.
Notify circumstances immediately: Your policy operates on a "claims made and notified" basis. If you suspect your post-possession certifications might trigger a contractor dispute, failure to execute early PI insurance notification superintendent procedures can allow the insurer to deny coverage.
Check contractual liability exclusions: Many PI policies exclude claims that arise solely because you assumed liabilities outside your professional negligence baseline. If you are sued for acting without authority, the insurer might argue this is a contractual breach rather than a professional error.
Involve external counsel early: Having a qualified legal practitioner draft your notification can help ensure the circumstance is described in a way that triggers coverage without admitting liability.
Conclusion
When the padlocks change and a financier assumes control of a development site, a superintendent’s position shifts instantly from contract administrator to exposed creditor. The immediate instinct to continue assessing the contractor’s claims to maintain project momentum is dangerous; without an explicit tripartite step-in deed or direct novation, you are likely operating without a valid principal.
You now understand that a mortgagee's statutory power of sale under Queensland property law does not automatically preserve your consultancy agreement. Continuing to issue directions without clarified authority invites personal liability claims for breach of warranty of authority, while misdirecting your statutory payment claims to the incoming financier can void your BIF Act recovery rights entirely.
The window to protect your position is narrow. Do not issue another certificate or site direction until you have formally clarified your agency status in writing. Your immediate next step must be to review your consultancy agreement for termination triggers relating to principal insolvency and draft a formal suspension of certification notice to the contractor before they rely on your continued administration to their detriment.
FAQs
Can I continue certifying progress claims if the mortgagee has taken possession of the site?
No, unless you have received formal confirmation that your consultancy agreement has been novated or you are a party to an existing tripartite step-in deed. A mortgagee's statutory power of sale over a site does not inherently confer an agency relationship upon the existing project superintendent. Continuing to certify without an authorised principal may expose you to personal liability for acting beyond your scope.
Can I use the BIF Act to recover my outstanding fees after the developer defaults?
Possibly, but it is not automatic. The threshold question is whether your services fall within the definition of "related goods and services" in section 66 of the BIF Act, which turns on the actual scope of your engagement. Where they do, section 68 allows you to issue a payment claim by identifying the work and stating the amount owed. Critically, you must serve this claim on the original principal who engaged you, as they remain the entity contractually liable for the debt. Because coverage is fact-dependent and has not been definitively settled for pure contract administration, obtain construction law advice before relying on the regime.
What happens if I serve my BIF Act payment claim directly on the incoming mortgagee?
Serving the incoming financier instead of the insolvent developer may invalidate your statutory payment claim. Because the mortgagee may not be a person who is or maybe liable to make payment, they may not be the correct respondent under the BIF Act. This misdirection can cause you to miss strict statutory deadlines, potentially extinguishing your right to adjudicate the claim.
Will my professional indemnity insurance cover me if the contractor sues me for certifying without authority?
Coverage may depend heavily on the specific wording of your policy's contractual liability exclusion. If a court determines that your liability arose solely because you breached a warranty of authority rather than committing a professional error in your assessment methodology, your insurer might deny the claim. You should notify your insurer of the circumstance immediately upon learning of the developer's default.
Does my limitation of liability clause protect me against claims from the incoming mortgagee?
Generally, it does not. The protective effect of a limitation of liability clause within your superintendent appointment agreement is conditional upon that agreement remaining binding between the parties. Because the mortgagee is a third party who has not inherited the contract, they are not bound by its liability caps.
How do I prevent my consultancy fees from becoming an unsecured debt in future projects?
The most effective mechanism is negotiating a tripartite step-in deed with the developer and their financier before project commencement. This deed is designed to grant the financier the right to step into the developer's shoes and assume the consultancy agreement if default occurs. Its protective effectiveness depends strictly on it being executed by all parties prior to any insolvency event.
This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law
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