The most challenging job in construction doesn’t involve cranes or welds or precision cuts—it’s getting paid on time. Clients often don’t meet their obligations, and when accounts run delinquent, contractors and subcontractors can be left high and dry.
For legal purposes, there are three different types of construction projects in Canada—private, provincial Crown works, and federal Crown works. On private projects, construction businesses can enforce their rights by filing builders liens on the property at issue. Provincial and federal projects are generally not subject to builders liens, as they protect construction businesses with Labour & Material Bonds.
It isn’t always simple to tell how builders liens work or how a business can get them to pay. Each province has its own laws, deadlines and requirements. Our Vancouver lawyers work with BC businesses every day to put their clients on notice and get the wheels turning for full payment as quickly as possible.
The Builders Lien Act in British Columbia
Under BC law, a contractor, subcontractor or worker who is owed at least $200 has a builders lien against the property for the price of their unpaid work and material. Builders Lien Act, SBC 1997, c 45, s 2. A subcontractor can have a valid lien even if their head contractor abandoned the contract under which they were hired. See s 40. The Act does not, however, apply to those working for architects, engineers, or material suppliers.
Deadlines
In order to enforce their lien, the lien holder has to file a claim of lien against the property in the land title office. They must do so no later than 45 days after a certificate of completion has been issued for the contract; otherwise, it will expire. If there was no such certificate for their contract, then they must do so no later than 45 days after:
(a) the head contract has been completed, abandoned or terminated, if the owner engaged a head contractor, or
(b) the improvement has been completed or abandoned, if paragraph (a) does not apply.
See c 45, s 20. Note that it is a contract—not a project—that is certified complete. The contractor or subcontractor must request this certification.
A contract for a strata lot is completed—or the contract is considered “substantially performed”—by the date it is first occupied. The Act defines “substantial performance” of a contract by the cost of the work remaining to be done. See s 1(2), (4).
Once the claim of lien has been filed, the lien holder has one year to file a lawsuit to enforce it. They must also register a certificate of pending litigation at the land title office within that year, or else the lien will expire. See s 33(1), (5). Nonetheless, the owner or another lien holder can force the claimant to file a lawsuit sooner by serving a notice to commence action within 21 days. If they do not do so, the lien will expire.
Unlike other encumbrances on property, builders liens take priority by law, not by date of filing. They are secondary to mortgages, but among each class of claimant—contractors, subcontractors, or sub-subcontractors—the lien holders claim pro rata under a schedule determined by law. See s 37, 38.
Holdback Requirements
BC law requires anyone liable on a construction contract—an owner, contractor or subcontractor—to hold back 10% of any payment due, or else 10% of the value of work done. See s 4.
The holdback amount is intended to protect everyone involved from unexpected defaults by other parties. The owner or contractor who has retained the required holdback cannot be held liable for more than they owe for the work—only for the holdback amount, if that is greater. See s 34.
On contracts for improvements worth over $100,000, owners must create separate bank accounts to retain holdback funds for each contract. See s 5. The contractor must be a co-administrator of the account, but the funds are held in trust for the contractor. If the owner does not comply with holdback law, the contractor can consider them in default on the contract.
Holdback funds may be released no sooner than 55 days after:
- A certificate of completion is issued for a contract or subcontract
- The head contract is completed, abandoned or terminated; or
- The improvement is completed or abandoned
See s 8. However, the holdback funds cannot be released if a lien holder files a claim of lien before those 55 days pass.
Staking Your Claim
Construction law is complex, as is debt collection law. Unfortunately, it can be easy to accidentally miss deadlines that are crucial to your business’s recovery—or even break the law in pursuing a claim.
Let the experienced Vancouver lawyers at Lam Legal take care of these matters for you. We speak Chinese and English, and we can handle debt collection, negotiate contract issues and plan your future dealings with clients—so you can spend more time doing what you do best. Call us today at 604-800-0774 to schedule your free initial consultation.
