Canada: The Misunderstood Builders Lien

Last Updated: September 4 2015
Article by Christopher E. Hirst

The subject of Builders Liens is much discussed, but little understood. Industry participants with considerable experience often still misunderstand many of the central rights and remedies provided by the legislation.

The following is intended as a primer (or reminder) of some of the fundamental concepts of the Builders Lien Act.

What is a lien?

A lien is a simple and cost effective tool for securing the recovery of unpaid contract amounts owed to construction industry participants.

A lien is intended to give those who have assisted in the improvement of land an interest in that land or the improvement until such time as they are paid. Section 2 of the Builders Lien Act provides a lien for contractors, subcontractors, and workers for the price of the work and material to the extent that the price remains unpaid, on the owner's interest in the land, the improvement, and the material itself placed on the land. Consultants may file liens as well although a sub-consultant is not entitled to a lien.

A lien holder obtains a right to have a specific interest in the land sold and to be paid from the proceeds of such sale. In the absence of that secured claim against the land and improvement, a lien claimant would be left with nothing more than its contractual claims.

Another type of lien, peculiar to British Columbia, is the holdback lien (commonly known as a Shimco Lien) which gives the lien holder a right to be paid from the holdback funds held on the project.

What can be liened?

"Land" and "improvements" are central concepts in the Act and generally speaking any land or any interest in land (e.g. a leasehold interest) that is registered at the Land Titles Office can be liened. In addition, holdback funds can be liened.

Land and improvements that cannot be liened include federal land and federal undertakings as well as highways.

When must a lien be filed?

The key time period to keep in mind with respect to filing a land lien is 45 days. A lien must be filed prior to 45 days from the:

  1. issuance of a certificate of completion for the contract claimed under;
  2. completion, termination, or abandonment of the head contract, if there is a head contract;
  3. completion or abandonment of the improvement, if there is no head contract; or
  4. the first sale or occupancy of a strata lot.

A failure to file a land lien within the requisite 45 day period of time will result in the absolute cancellation of that lien.

There is no equivalent time period for holdback liens. However, the holdback must still be in existence for the holdback lien to have any effect. Once the holdback is paid, generally 55 days after completion, your ability to successfully claim a holdback lien will have ended.

How to file a lien

To make a claim of lien against the land a lien claimant must complete a simple document called a "Claim of Lien" which then must be filed in person at the Land Title Office. It is important to note that when completing this document you must be absolutely precise with respect to the name of the owner, the contracting parties, and the description of the title to the land that you intend to lien, or the lien may found to be invalid.

Holdback liens are brought by commencing an action in Supreme Court claiming a lien against the holdback .

So you have a lien: how do you get paid?

A lien must proved in the Supreme Court of British Columbia. Accordingly, to enforce the lien, an action must be commenced. As with the lien itself there are time limits here that a lien claimant must be aware of. A lien action must be commenced within a year of filing the lien or within 21 days of a demand being made by the Owner of the lands that a lien claimant commence its action.

To protect your claim, a lien claimant must also file a document known as a Certificate of Pending Litigation (CPL) with the Land Title Office.

A failure to commence your action within time or to file a CPL will result in the absolute cancellation of the land lien.

How to improve your chances of getting paid in the first place

Of course, it is far preferable to simply be paid for your work in the first place rather than worry about the intricacies of the Lien Act and any associated litigation costs. While sometimes you couldn't have done anything differently, you should always make sure that you have a clear written contract, that you bill regularly in accordance with that contract, and that you stay on top of your accounts receivable.

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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Authors
Christopher E. Hirst
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