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The Builders Lien Act allows companies and individuals
who contribute work or services on a project to file a claim of
lien directly on title, without any prior judicial approval of the
claim. The claim of lien encumbers title, and will likely stop
further advances under the construction loan until the claim of
lien is removed. This is an extraordinary remedy and can often
cause delay and expense. Owners often tell us that the lien
legislation unfairly favours the lien claimant. Our response is
that, as an owner, there are a number of steps and approaches
available to reduce the risk of liens, including:
Invest in a suitable contract. Builders lien risk
management starts with written contracts that adequately address
builders lien issues specific to British Columbia. For example, if
you are using a CCDC document, which is drafted for use throughout
Canada, have supplemental conditions drafted to ensure that British
Columbia's builders lien legislation is addressed. You might be
surprised to know that the standard form CCDC 2 2008 stipulated
price contract does not obligate the contractor to remove liens
filed by subcontractors, even where the owner is up to date on all
payments due.
Ensure accurate and complete records are kept. This
will include ensuring all contracts are signed by all parties, and
that invoices rendered relate only to the subject property, even if
the company is working on multiple projects for the same owner.
Another issue we often see is where a contractor has related
companies (i.e. ABC Construction Ltd. and ABC Formworks Ltd.), and
invoices are rendered from either company indiscriminately. It is
important to ensure that the company on the contract is the company
rendering the invoices, and receiving payments from the owner.
Monitor title as the project is under construction.
The easiest way to do so is to set up automatic electronic
monitoring through your BC Online account. If you do not have a BC
Online account, your lawyer will have one, and should be able to
set up the monitoring for you. This will alert you to all new
filings against that title, including builders liens.
Keep communications with contractors open. A lack of
communication regarding change orders or extras often leads to
misunderstandings and disputes.
Read the contract. If a dispute arises during a
project, the first step is to read the contract, including any
supplemental conditions. If the contract is a standard form, the
disputed issue will likely be addressed.
Follow dispute resolution protocol set out in the
contract. If the dispute cannot be resolved promptly, follow
the steps for dispute resolution outlined in the contract.
Typically, these will involve fairly tight timelines. If the
contract does not provide for dispute resolution, or the provisions
are unclear, ask for input or advice from your lawyer.
Issue Certificates of Completion for each contract. A
Certificate of Completion starts the time period for filing a claim
of lien. The current Act allows for a Certificate of Completion to
be issued for each contract on the project. The lien period for
claim of builders lien against title arising from work under that
contract must be filed within 45 days. Additionally, 55 days after
the issuance of a Certificate of Completion, the holdback monies on
that contract may be paid out, and, once paid out, no lien against
the holdback can be made.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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