The British Columbia Builders Lien Act provides a lien for monies owed to an individual or a company who, supply labour and/or materials to a construction project on most lands in British Columbia. A builders lien places limited responsibility on owners to protect not only their contractors but also subcontractors, workers, material suppliers and others, who do not contract directly with the owner.
A multiple holdback system
Persons who make payments under a contract or subcontract are required to retain a holdback. The holdback amount is the greater, of 10% of the value of the work or material provided or 10% of any payment made on account. An exception is that an owner or contractor cannot holdback monies owed to material suppliers or workers.
The holdback retained under the multiple holdback system has two aspects. First, it provides security for payments to persons hired by a contractor or subcontractor from whom the holdback was retained. Secondly, it determines the maximum liability of the person who retains the holdback if it becomes necessary to clear Liens filed against property.
The holdback account
The Act requires an owner to set up an actual holdback account with a savings institution in an amount equal to 10% of the contract amount. The holdback account is usually administered by the owner and general contractor.
Monies in a holdback account are impressed with a trust for the benefit of lien claimants. In some cases, parties who have failed to file a lien are entitled to claim against the lien holdback account.
Problems have arisen in recent years where owners or developers have not set up a holdback account. One of the first questions a contractor should confirm is that there is a holdback account that is being funded as a project progresses.
Time limitations for filing a Claim of Builders Lien (“CBL”)
There are two important filing deadlines. The first is the time limit for the filing of a CBL. The second is the time for the retention of holdbacks.
The general time limit for filing a CBL is no later than 45 days after the date on which a “certificate of completion” has been issued. If there is no certificate of completion, a CBL must be filed within 45 days after the head contract has been completed, abandoned or terminated if the owner hired the head contractor. If there was no head contract and no certificate of completion, then the CBL must be filed within 45 days after the improvement has be completed or abandoned.
The time for the retention of the holdback is 55 days after the date from the last date which the CBL was to be filed.
The same rules apply to material suppliers.
Holdbacks by purchasers
The purchaser of a new home, are entitled to holdback 10% from the purchase price. Where the home is on a strata lot the holdback will be 7%. The holdback period is 55 days from closing of the purchase.
Who can file a lien?
A worker, material supplier, contractor, subcontractor or equipment rental companies who does work or supplies material or does both supply work and material for an improvement is entitled to file a CBL. Consultants, including architects or engineers who have provided design services may be entitled to file a CBL, even when no site supervision is provided during actual construction.
How to file a lien
The Provincial Legislation includes standard builders lien documents. These forms are available at: http://www.bclaws.ca
The CBL is “Form 5” on that list. The CBL form is a one-page form that can be completed by the person who is actually entitled to claim the lien or an authorized representative of that person/company, including a lawyer or notary public. The CBL must be resisted in the Land Title Office.
An action must be commenced to prove the CBL within one year of the date of the filing of the lien or within 21 days, if a Form 6 – Notice to Commence an Action had been delivered to a lien claimant at the address for service noted on the CBL.
Discharge of lien where claim disputed
There are provisions in the Builders Lien Act to have a CBL discharged upon paying the lien claim or posting security for the lien claim where the lien is disputed.
Summary
A CBL does not establish an entitlement to payment. The CBL flags the title at the Land Title Office which typically prevents an owner from further financial dealing with the property. For example, once the CBL is filed, it is difficult for an owner to get construction mortgage draws, to refinance, or to sell the property. In order to prove a lien, an action must be commenced in British Columbia Supreme Court and failure to commence that action within the required time limit may result in a loss of the lien security.
For further information on builders lien claims or construction disputes, please contact anyone of our members of the Construction Law Group at Pushor Mitchell.
This article was prepared by Allan R. Elliott of Pushor Mitchell LLP, Lawyers of Kelowna B.C. This article is not to be taken as legal advice and readers with any particular requirements should see legal advice from a lawyer with experience in the area of Builder’s Liens.
Allan Elliott is a lawyer and partner at Pushor Mitchell, LLP having a civil litigation practice in Kelowna, British Columbia. Mr. Elliott has 30 years of experience in civil litigation matters including construction and builders lien disputes. He can be reached either by telephone at (250)869-1105 or by email at [email protected]