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Difference between revisions of "Builders Liens"
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{{REVIEWEDPLS | reviewer = [https://www.ganapathico.com/our-team/anna-kurt/ Anna Kurt], Garapathi Law group|date= July 2018}} {{Dial-A-Law TOC|expanded = home}} | {{REVIEWEDPLS | reviewer = [https://www.ganapathico.com/our-team/anna-kurt/ Anna Kurt], Garapathi Law group|date= July 2018}} {{Dial-A-Law TOC|expanded = home}} | ||
Occasionally, those who work or supply materials on a construction project aren’t paid for the work or materials supplied. A | Occasionally, those who work or supply materials on a construction project aren’t paid for the work or materials supplied. A builders lien can help them collect the money they’re owed. | ||
==What you should know== | ==What you should know== | ||
===A builders lien can help someone get paid for work or materials provided to a construction project=== | ===A builders lien can help someone get paid for work or materials provided to a construction project=== | ||
[https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec2_smooth The ''Builders Lien Act'' | [https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec2_smooth The ''Builders Lien Act]'' gives an individual or company a '''lien''' for money they are owed for work or materials supplied on a construction project. This law gives them a lien on the building, the owner’s interest in the building, the land involved, and the materials supplied. | ||
When a builders lien is '''filed''' in the land title office, it becomes a charge against the title to the land which was improved by the work or materials. | When a builders lien is '''filed''' in the land title office, it becomes a charge against the title to the land which was improved by the work or materials. | ||
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A large construction project is like a pyramid. The owner or developer is at the top. They may hire a general contractor. The general contractor may hire several subcontractors to handle specific parts of the job, such as concrete work, plumbing, electrical work, and so on. Those subcontractors may in turn hire workers and material suppliers. Somewhere in this chain of contracts, someone may not get paid. | A large construction project is like a pyramid. The owner or developer is at the top. They may hire a general contractor. The general contractor may hire several subcontractors to handle specific parts of the job, such as concrete work, plumbing, electrical work, and so on. Those subcontractors may in turn hire workers and material suppliers. Somewhere in this chain of contracts, someone may not get paid. | ||
[https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html The ''Builders Lien Act'' | [https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html The ''Builders Lien 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 land which was improved by the work or materials, to secure payment of the money owed to them. | ||
A lien claimant 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. We explain the process to file and enforce a builders lien shortly. | A lien claimant 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. We explain the process to file and enforce a builders lien shortly. | ||
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That said, 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 may have supplied materials to a subcontractor who has not paid for them. | That said, 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 may have supplied materials to a subcontractor who has not paid for them. | ||
In situations like these, the landowner may not want the property tied up in a long court battle that interferes with selling or mortgaging it. [https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec23_smooth Under the ''Builders Lien Act'' | In situations like these, the landowner may not want the property tied up in a long court battle that interferes with selling or mortgaging it. [https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec23_smooth Under the ''Builders Lien Act]'', a landowner can apply to '''pay money into court''' — either the full amount of the lien or a smaller amount linked to the amount held back from the person who owes the money (we explain the holdback scheme shortly). | ||
The court can then order the lien to be removed from the title of the property. Then the lien has no further effect on 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. | The court can then order the lien to be removed from the title of the property. Then the lien has no further effect on 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. | ||
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===The owner must hold back 10% of the contract price, in case there are liens=== | ===The owner must hold back 10% of the contract price, in case there are liens=== | ||
On a construction project, an owner could pay the contractor in full, only to see the contractor default on its payment to a subcontractor. Or a subcontractor might fail to pay its workers or suppliers. If all the unpaid parties filed liens, the owner would potentially have to pay twice — once to the contractor and again to the lien holders. | On a construction project, an owner could pay the contractor in full, only to see the contractor default on its payment to a subcontractor. Or a subcontractor might fail to pay its workers or suppliers. If all the unpaid parties filed liens, the owner would potentially have to pay twice — once to the contractor and again to the lien holders. | ||
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After the 55 days are up, if no liens have been filed within the 45-day limit (and no lawsuit making a lien claim has been started), the owner can pay out the 10% holdback to the contractor. But if any liens have been filed, the holdback may be used to help pay these liens. | After the 55 days are up, if no liens have been filed within the 45-day limit (and no lawsuit making a lien claim has been started), the owner can pay out the 10% holdback to the contractor. But if any liens have been filed, the holdback may be used to help pay these liens. | ||
Often, the total of all liens filed by all claimants is greater than the holdback. The owner does not have to pay lien claimants more than the holdback amount. So claimants may receive only part of their lien — it depends on the details of the | Often, the total of all liens filed by all claimants is greater than the holdback. The owner does not have to pay lien claimants more than the holdback amount. So claimants may receive only part of their lien — it depends on the details of the situation. The Act sets out how claimants share the holdback. | ||
===Contractors must hold back 10% from any subcontractors they hire=== | ===Contractors must hold back 10% from any subcontractors they hire=== | ||
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 ''Builders Lien Act''. | 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 ''Builders Lien Act''. | ||
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==The steps to enforce a builders lien== | ==The steps to enforce a builders lien== | ||
===Step 1. A lien claimant files a builders lien=== | ===Step 1. A lien claimant files a builders lien=== | ||
To file a builders lien, the lien claimant must fill out a '''claim of lien''' | To file a builders lien, the lien claimant must fill out a '''claim of lien''' and file it with the land title office. The land title office has [https://ltsa.ca/professionals/property-professionals/file-claim-of-builders-lien/ an online application] that can be used to complete and file the form. Note the form must include the legal description of the project site — a street address is not enough. The legal description can be obtained from [https://www.bcassessment.ca/ BC Assessment]. | ||
Generally, the deadline to file a lien is '''45 days''' after the project is substantially completed, abandoned or ended. One of the events that can start the clock running to file a lien is when a '''certificate of completion''' is issued for a contract or subcontract. Then the deadline is 45 days from the date the certificate was issued. | Generally, the deadline to file a lien is '''45 days''' after the project is substantially completed, abandoned or ended. One of the events that can start the clock running to file a lien is when a '''certificate of completion''' is issued for a contract or subcontract. Then the deadline is 45 days from the date the certificate was issued. | ||
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{| class="wikitable" | {| class="wikitable" | ||
|align="left"|'''Tip''' | |align="left"|'''Tip''' | ||
Even if a claimant has not filed a lien within the time limit, they may be able to sue in court for a portion of any holdback funds that have not yet been distributed. As builders liens involve legal complexities, tight filing timelines, and detailed paperwork, it’s wise to get legal advice. | Even if a claimant has not filed a lien within the time limit, they may be able to sue in court for a portion of any holdback funds that have not yet been distributed. As builders liens involve legal complexities, tight filing timelines, and detailed paperwork, it’s wise to get legal advice.|} | ||
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===Step 2. The lien claimant sues to prove the builders lien=== | ===Step 2. The lien claimant sues to prove the builders lien=== | ||
A lien claimant must sue in court to enforce the lien and prove it is valid. | A lien claimant must sue in court to enforce the lien and prove it is valid. | ||
The lawsuit must be started in a Supreme Court registry near the property. The claimant must also file ''' | The lawsuit must be started in a Supreme Court registry near the property. The claimant must also file a '''certificate of pending litigation''' against the property in the land title office after filing the lawsuit. | ||
A claimant must do both these things (sue in court and file the certificate of pending litigation) within '''one year''' of filing the builders lien. If they don’t, the lien is no longer valid. | A claimant must do both these things (sue in court and file the certificate of pending litigation) within '''one year''' of filing the builders lien. If they don’t, the lien is no longer valid. | ||
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A landowner, or other people involved in the construction 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. | A landowner, or other people involved in the construction 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. | ||
===Step 3. The court decides on the lien’s validity=== | ===Step 3. The court decides on the lien’s validity=== | ||
If the lien claimant’s lawsuit reaches a court hearing, the court decides whether the lien is valid. If the court finds the lien is valid, the court may order the '''sale of the property''', and the use of the sale proceeds to pay the lien. If the court decides the lien is not valid, it will remove the lien. | If the lien claimant’s lawsuit reaches a court hearing, the court decides whether the lien is valid. If the court finds the lien is valid, the court may order the '''sale of the property''', and the use of the sale proceeds to pay the lien. If the court decides the lien is not valid, it will remove the lien. | ||
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==Common questions== | ==Common questions== | ||
===I am buying a new home. Should I be worried about builders liens?=== | ===I am buying a new home. Should I be worried about builders liens?=== | ||
Yes. If you buy 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. [https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec4_smooth The ''Builders Lien Act'' has provisions that deal with this problem]. These permit buyers 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 your contract permits you to hold back funds if the time for filing liens has not expired by closing. | Yes. If you buy 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. [https://www.canlii.org/en/bc/laws/stat/sbc-1997-c-45/latest/sbc-1997-c-45.html#sec4_smooth The ''Builders Lien Act'' has provisions that deal with this problem]. These permit buyers 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 your contract permits you to hold back funds if the time for filing liens has not expired by closing. | ||
===I’m doing a home renovation. Do I need to arrange for a special holdback account?=== | ===I’m doing a home renovation. Do I need to arrange for a special holdback account?=== | ||
