What is a builders lien?

Construction, General Litigation | December 16, 2021

What is a builders lien?

Participants in the construction industry who are not paid for work done and/or materials supplied for a construction project are entitled to claim a British Columbia’s builders lien. A builders lien is a powerful compensation tool which enables unpaid construction professionals to seek compensation directly from the owner of the land to which they contributed labour or materials. In addition, unpaid construction workers may claim a lien on a building or construction project, the owner’s interest in the project, the land, and the materials supplied. A builders lien is registered as a charge against the title to the property, giving the lien claimant a form of security for payment of the money owed.

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The British Columbia Builders Lien Act (the “Act”) provides a comprehensive structure which provides security for contractors and subcontractors who work on a construction project and to limit the liability of the property owner.

Under the Act, contractors, subcontractors, workers and material suppliers are entitled to file two types of liens. The first is the builders lien or a lien against land, which refers to a lien against the land and buildings where the contractor or subcontractor provided labour and materials. The second type of lien is known as a “Shimco lien” or the “holdback lien”, which provides construction professionals with a lien against the holdback funds that should be kept by the person that is next highest in the construction pyramid. To assert a Shimco lien, one must commence a civil claim and show entitlement to the holdback.

Why should you hire a construction lawyer?

Holdback Account

The Act requires that each contractor or subcontractor involved in a construction project who is primarily liable under the contract or subcontract to retain a holdback equal to 10% of the greater of:

  1. the value of the work or material actually provided under the contract or subcontract; or
  2. the amount of any payment made on account of the contract or subcontract.

The holdback is a safety measure ensuring construction workers are paid while simultaneously limiting the liability of an owner or contractor who is required to retain a holdback.

Time Limits

Under the Act, all lien claimants have 45 days to file a lien and the lien period starts to run 45 days after the earliest of the following events occur:

  1. Completion of the head contract, or, if there is no head contract, substantial completion the project;
  2. Termination of the head contract before a certificate of completion has been issued; or
  3. Abandonment of the head contract before a certificate of completion has been issued.

It is noteworthy that the Act defines completion as “substantial completion” of the project.

The holdback period commences at the same time as the lien period, but expires 55 days after the triggering event. In the event that no lien is filed, the holdback funds must be released at the end of the holdback period. Conversely, if a lien has been filed against the property, the holdback funds cannot be released prior to the 55 day mark.

What’s the best way to resolve conflict at work?

Arguably, the safe release of holdback depends on two conditions:

  1. Passage of the 55 day time period after the issuance of the certificate of completion or completion, abandonment or termination of the head contract or improvement; and
  2. The absence of a lien or action commenced to enforce a lien against the hold back.

The Act is very specific and time limitations for filing liens must be strictly adhered to. It is important to seek legal advice and bring lien claims in a timely fashion. The construction lawyers at Linley Welwood LLP would be happy to discuss securing payment for your work though the lien claim process.

© Linley Welwood LLP. The contents of this article do not constitute legal advice. Readers should seek legal advice in relation to their own specific circumstances.

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