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Script 268 gives information only, not legal advice. If you have a legal problem or need legal advice, you should speak to a lawyer. For the name of a lawyer to consult, call Lawyer Referral at 604.687.3221 in the lower mainland or 1.800.663.1919 elsewhere in British Columbia.
What is a builders lien?
A builders lien secures a claim for payment for work done on—or materials supplied to—a construction project or for repairs or renovations made to an existing structure. When a lien is registered in the Land Title Office, it becomes a charge against the title to the land or property involved.
Who can file a builders lien?
People and companies can claim a lien if they are:
- workers on a construction project.
- suppliers of materials (including renters of equipment) used on a project.
- contractors hired by the landowner to work on the project.
- subcontractors hired by the contractor or by other subcontractors to work on the project.
- engineers and architects on the project.
Why file a builders lien?
A lien claimant can file a builders lien to secure payment for work done on—or material supplied to—an improvement to land, such as a construction project. A large construction project is like a pyramid, with a developer (usually a landowner) at the top. The landowner may handle the construction personally, or hire a general contractor. The general contractor may hire several subcontractors such as a plumber, electrician, and so on. Those subcontractors may in turn hire workers and material suppliers. Somewhere in this chain of contracts, someone may not get paid.
The BC Builders Lien Act (the 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 property to secure payment of the money owed to them.
But a builders lien is not always good security. When a project fails, those who have filed liens frequently receive only a fraction of what they are owed. The right to file a builders lien is no substitute for careful credit-granting practices.
How does a lien claimant file a lien?
A claimant can file a lien personally or have a lawyer file it. The lien claimant must fill out Form 5 and file it in the Land Title Office where the land is registered. It is important to complete the form accurately. The form is in the Regulations of the Act, available at some public libraries and at www.bclaws.ca. Click on “Statutes and Regulations” and then on the letter “B” in the alphabetical list. Scroll down and click on “Builders Lien Forms Regulation.”
Filing a lien requires the legal description of the location of the project—a street address is not enough. Information on getting a legal description is available on the BC Assessment Authority website at www.bcassessment.bc.ca.
What are the time limits to file a lien?
Claimants must act quickly to file a lien. If they wait too long, they lose the right to do so. Generally, the deadline to file a lien is 45 days after the project is substantially completed, abandoned or ended. But it may be necessary to file sooner. Once a “certificate of completion” is issued for a contract or subcontract, then the deadline is 45 days from the date the certificate was issued. Condominium projects and mines and quarries have different deadlines. Because the deadlines are short and can be confusing, it’s good to file the lien well before a deadline.
What must be done after filing a lien?
It depends on the circumstances. 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 the project. This alone may encourage the landowner to take steps to “clear” the lien, which may involve paying the claim or providing other security. If this does not occur, the claimant must take the further step of suing to enforce the lien and prove the claim is valid. The lawsuit must be started in a Supreme Court Registry near the property within one year of filing the lien. The lien claimant must also file a “certificate of pending litigation” against the property in the Land Title Office. If both these things are not done within a year, the lien is no longer valid.
What happens in court?
If the landowner doesn’t pay the claim, and the court decides it is valid, the court will order the sale of the property and the use of the sale proceeds to pay the claim. But if the court decides the claim is not valid, the lien will be removed, and the claimant may have to pay the landowner’s costs resulting from the lien and the court case.
Can the landowner – or others on the project – speed things up?
Yes, the landowner, or other people involved in the 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.
How does the Act help claimants get money owed to them?
Sometimes, the landowner will pay the general contractor, but the general contractor won’t pay the subcontractors. Because it wouldn’t be fair to make the landowner pay twice, the Act uses a system called the “holdback” to protect the landowner if the general contractor or a subcontractor defaults, or does not pay what they owe.
The landowner must hold back 10% of the contract price until 55 days after the general contract is substantially completed, abandoned, or otherwise ended. If the total project exceeds $100,000, the landowner must pay the 10% holdback into a holdback account at a bank or savings institution, administered jointly by the landowner and the contractor. After the 55 days are up, if no liens have been filed, the landowner can pay out the 10% to the contractor. But if there are liens, the holdback may be used to help pay these liens.
But often, the total amount of all liens filed by all claimants is greater than the holdback. In this case, each claimant may receive only part of its claim. So whether a lien claimant gets all the money owed depends on the details of the case.
Are there other holdbacks?
BC has a “multiple” holdback system. So contractors and subcontractors must also hold back 10% from any subcontractors they hire. But no holdback can be kept from workers, material suppliers, architects, or engineers – they must be paid in full. The value of these holdbacks may limit the amount a lien claimant can recover under the Act.
How can a contractor or subcontractor speed things up?
Contractors or subcontractors who have finished their part of a project may not want to wait until the whole project is done to get the 10% held back from them. The Act allows a holdback to be released 55 days after a certificate of completion is issued for their work. If the architect issues a certificate of completion for their contract or subcontract, the person can get their holdback 55 days after the certificate is issued.
What can a landowner do to remove a lien?
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 supplied materials to a subcontractor who has not paid for them. But in either case, the landowner may not want the property tied up in a long court battle. The Act lets the landowner pay money into court – either the full amount of the lien or a smaller amount linked to the holdback kept from the person who owes the money. The lien can then be removed from the property. The money paid into court is held as security for the lien—to be paid to the claimant if the lien is eventually proven.
What about the “trust fund”?
The Act says that all money received by a contractor or subcontractor is a “trust fund”. Contractors or subcontractors must pay for everything they owe for work and materials supplied for the project before they can use the money for anything else. If they don’t, they may be personally liable.
Summary
Builders liens can be very complicated. You should get prompt legal advice if you are not sure of your position.
[updated January 2009]
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