It is not uncommon for property owners, tenants, engaged in residential or commercial construction or renovation, to have issues with contractors and sub-contractors that, for whatever reason, result in non-payment. This article discusses the basic concepts that arise from the Builders Lien Act (British Columbia) (the “Act”) and how they can impact the rights and liabilities of parties involved in construction projects.
Who May File a Builders Lien
Under Section 2 of the Act, with some exceptions, a Contractor, Subcontractor or Worker (as defined in the Act) who performs work and / or supplies material, may file a lien against the property for the amount left owning; however, a lien may not be filed, if the total amount claimed is under $200 (Section 17).
When a Builders Lien Can be filed
Section 20 of the Act covers timing issues related to filing and once a certificate of completion has been issued a builders lien must be filed by a contractor or Subcontractor within 45 days. The lien takes effect from the time the work began (Section 21).
The Impact of a Builders Lien
A registered builders lien can cause problems once the owner goes to sell the property, as while it remains registered, the vendor cannot give clear title to the purchaser. Furthermore, the lien holder may file an action to go to court to retrieve the money left owning (Section 26) and the court has the power to force a sale of the property (Section 31).
Under Section 4 of the Act, the “person primarily liable on each contract and each subcontract, under which a lien may arise” (which in many instances would include the owner) must retain 10% of the value of the material and work provided, or the amount of the payment made to the relevant party.
For projects with a labour and material budget over $100,000, the owner must establish a special “holdback account” in accordance with Section 5 and remain in possession of the holdback funds for the period set out in Section 8 of the Act. Importantly, a lien can also be filed against the holdback funds (Section 4(9)).
Although collecting holdbacks can limit a owners liability, not holding back the proscribed amount of funds may also create further liability, as it provides the contractor with an excuse to suspend their operations providing they give 10 days’ prior notice (Section 5(7)). Notably, under Section 41 of the Act, a lien holder may, in writing, seek information from the owner with in relation to the holdback account.
If the contract related to the lien has been performed, reaching a settlement may be advisable and is one option to clear the property’s title. Another way for an owner to clear their property’s title, without settling, is by applying to the Court to put up a security in its place. (Section 24(1)). It is also important to note that anyone who files a false statement to obtain a lien commits an offence (Section 45(1)).
The above offers basic information in relation to builders liens in British Columbia and should not be construed as definitive legal advice. Prior to involving yourself in a construction project, a full review of the Act and all of its defined terms is required when considering your rights and responsibilities in relation to each party.
If you require assistance in this area, please contact Paul Barbeau.