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FAQs About B.C.'s Builders
Lien Act
by Del Elgersma
B.C.'s Builders Lien Act came into force on February 1,
1998. It updated and in some cases significantly changed the
law under the former Builders Lien Act. B.C. now has the
most modern builders lien law in Canada.
In this article we answer questions about the Act from the perspective
of a landlord, an owner building a house, a purchaser, a contractor
and a lender:
Q. I am a landlord of a commercial building. How can I protect
myself from lien claims for work done for my tenants?
A. The Act permits you to file a Notice of Interest against your
property at the Land Title Office. The notice warns that the
land cannot be liened unless the work was done at your express
request. Any trades who supply work or materials to your property
for your tenants will not be able to claim a lien against the
property, unless you authorized the work.
Q. I am having a house built for me. What is a builders lien
holdback and is it necessary?
A. The Act requires you to hold back 10% of each payment to the
contractor (the builders lien holdback) in a special account
so that there is money available for payment of liens. Without
a holdback, you could be responsible for the full amount of all
lien claims even if the contract price was already paid in full.
Q. What do I do with the holdback?
A. As the owner, you are required to pay the holdback into an
account at a savings institution. If you don't, the contractor
can stop working and sue you for damages arising from the work
stoppage. If you don't have a general contractor, a separate
holdback account is required for every contract. Withdrawals
from the holdback account will require the contractor's signature
as well as your own.
Q. Is a special holdback account always necessary?
A. Yes, with two exceptions. The first is where the value of
work and material supplied is less than $100,000 (e.g. renovations).
The second is where you have authorized the construction lender
to disburse the mortgage money on your behalf, in which case
the lender holds back 10% from each draw. However, this results
in a new area of liability for lenders that most will not be
willing to enter.
Q. I am purchasing a new home. Should I be worried about builder's
liens?
A. Yes. If you purchase 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 Act deals
with this problem by permitting purchasers 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 that your contract permits you to
hold back funds if the time for filing liens has not expired
by closing.
Q. I am a framing contractor. Do I still have until 31 days
after substantial completion of the building to file a builders
lien?
A. No. You now have until 45 days after a payment certifier issues
a certificate of completion for your contract. The payment certifier
is usually the architect or engineer, but may be the owner or
the owner and general contractor together if your contract does
not identify the payment certifier. However, regardless of when
or whether a certificate of completion is issued, you may not
file a lien after 45 days from the date of substantial completion,
abandonment or termination of the general contractor's contract
(or, if there is no general contractor, of the project).
Q. Do I still need to wait until 41 days after substantial
completion of the entire building to receive my share of the
builders lien holdback?
A. No. Under the new multiple holdback system, the general contractor
maintains a separate holdback for each subcontract, which will
be released 55 days after the payment certifier issues a certificate
of completion for that subcontract.
Q. I work for a bank. The bank is ready to advance a draw
on a construction mortgage, but there are liens filed against
the property. The draw is needed to complete the building. How
can the bank's advance have priority over the liens?
A. The general rule is that advances made by a lender after a
lien is filed do not have priority over the lien. However, it
may be possible for the bank to apply the advance to the payment
of the liens. The new Act also allows the bank to apply for a
court order that the mortgage advance will have priority over
the filed liens. The court will make the order if it is satisfied
that the advance will be applied to complete the construction
and will result in increased value to the property at least equal
to the amount of the advance.
The new Act contains several other changes. For more specific
information on how it affects you, contact us at your convenience.
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