Difference between revisions of "Builders Liens"

Occasionally, those who work or supply materials on a construction project aren’t paid for the work or materials supplied. A “'''builders lien'''” can help them collect the money they’re owed.

==Understand the legal framework==

The ''[https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec2_smooth Builders Lien Act]'' gives an individual or company a '''lien''' for money they are owed for work or materials supplied on a construction project. This law gives them a lien on the building, the owner’s interest in the building, the land involved, and the materials supplied.  

When a builders lien is '''filed''' in the Land Title Office, it becomes a charge against the title to the land which was improved by the work or materials.

A builders lien can be an effective tool for those who provided work or materials on a construction project to recover money they’re owed.  

*workers on the project

*suppliers of materials (including renters of equipment) used on the project

*contractors hired by the owner to work on the project

*subcontractors hired by the contractor or by other subcontractors to work on the project

*engineers or architects on the project

A lien claimant can file a builders lien in the Land Title Office to secure payment for work or material supplied to a construction project.  

The ''[http://canlii.ca/t/84j9 Builders Lien Act]'' helps those who have worked on a construction project or supplied material to it, but haven’t been paid. Under this law, they can file a charge against the land which was improved by the work or materials, to secure payment of the money owed to them.  

Because a builders lien is registered against the land, it can interfere with the landowner’s ability to sell the property or maintain mortgage financing for a construction project. This may encourage the landowner to take steps to “clear” the lien, which may involve paying the lien or providing other security.

That said, a landowner may not want to pay off the lien if there is a dispute about whether the claim is valid. Or the landowner may not be the person in default — for example, the lien claimant may have supplied materials to a subcontractor who has not paid for them.  

In situations like these, the landowner may not want the property tied up in a long court battle that interferes with selling or mortgaging it. The ''[https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec23_smooth Builders Lien Act]'' lets a landowner apply to court to '''pay money into court''' — either the full amount of the lien or a smaller amount linked to the amount held back from the person who owes the money (we explain the holdback scheme shortly).  

On a construction project, an owner could pay the contractor in full, only to see the contractor default on its payment to a subcontractor. Or a subcontractor might fail to pay its workers or suppliers. If all the unpaid parties filed liens, the owner would potentially have to pay twice — once to the contractor and again to the lien holders.  

To avoid this unfairness, the ''Builders Lien Act'' requires an owner to hold back 10% of each payment to the contractor in a special account so there is money available for payment of liens. This is called the '''builders lien holdback'''.

The owner must hold back 10% of the contract price until 55 days after the general contract is substantially completed, abandoned, or otherwise ended.  

To file a builders lien, the lien claimant must fill out a '''claim of lien''' (in [http://canlii.ca/t/84px Form 5]). The claimant must file this form in the Land Title Office where the land involved is registered. The form must include the legal description of the project site — a street address is not enough. You can get the legal description from [http://www.bcassessment.ca/ BC Assessment].

Generally, the deadline to file a lien is '''45 days''' after the project is substantially completed, abandoned or ended. One of the events that can start the clock running to file a lien is when a “'''certificate of completion'''” is issued for a contract or subcontract. Then the deadline is 45 days from the date the certificate was issued.

A lien claimant must sue in court to enforce the lien and prove it is valid.  

The lawsuit must be started in a Supreme Court registry near the property. The claimant must also file a “'''certificate of pending litigation'''” against the property in the Land Title Office after filing the lawsuit.

A landowner, or other people involved in the construction project, can give the lien claimant a written notice to speed up the process. If this happens, the claimant must start the lawsuit and file the certificate of pending litigation within '''21 days''', instead of the usual year. If the claimant misses this time limit, the lien is removed.  

If the lien claimant’s lawsuit reaches a court hearing, the court decides whether the lien is valid. If the court finds the lien is valid, the court may order the '''sale of the property''', and the use of the sale proceeds to pay the lien. If the court decides the lien is not valid, it will remove the lien.

Yes. If you buy the home within 45 days of its completion, there could be lien claims filed after you become the owner. You could be in the position of having to pay the liens, even though you already paid the purchase price in full. The ''[https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec4_smooth Builders Lien Act]'' has provisions that deal with this problem by permitting buyers to hold back 10% of the purchase price from the seller until the time for filing liens expired, but these provisions have '''not''' been proclaimed. As a result, you must ensure your contract permits you to hold back funds if the time for filing liens has not expired by closing.

The ''Builders Lien Act'' requires an owner to hold back 10% of each payment to a contractor for a period of time, so there is money available for payment of liens. The holdback must be placed in a special account for each contract. The requirement for a special account does '''not''' apply where the value of work and material supplied is less than $100,000. This is often the case with a home renovation. (To be clear: the requirement to hold back 10% ''does'' apply; the requirement for a special account does not apply.)

The ''Builders Lien Act'' says that money received by a contractor or subcontractor for work done constitutes a “'''trust fund'''” for the benefit of people they hire on the project. Trust funds cannot be used to the personal benefit of a contractor or subcontractor until they pay the people they hire on the project. A contractor or subcontractor who does not follow these trust rules may be personally liable for '''breach of trust'''. This is sometimes a way for lien claimants who are not fully paid using their lien rights to recover further amounts owed to them.