The Builders Lien Act is a powerful piece of legislation designed to give parties that supply materials or labour to a construction project additional tools to secure and collect payment from homeowners beyond the standard rights in contract and common law.
The Builders Lien Act creates the right for some parties who have completed and supplied work to a construction project, and have been unpaid for said work, to file a claim of lien directly against the legal title of the property where the work was done. This type of lien can create issues for a property owner as, unless the lien is dealt with, the property cannot be sold nor can additional financing be advanced. This lien can also be enforced by the unpaid party by way of BC Supreme Court action against the property owner.
For example, if a drywalling contractor hired by a general contractor is unpaid for the work they provided to a construction project, they (if they comply with the Builders Lien Act) can file a claim of builders lien directly against the property owner’s land title – even if the drywalling contractor never met or had any direct dealings with the property owner. The drywalling contractor can then seek to enforce the lien against the property owner’s title, seek payment from the owner and then leave the owner to try to collect from the general contractor.
There are, however, specific rules in place for what a claimant can place liens against, and when. There are strict deadlines and rules for the following:
- When a claim of builder’s lien can be filed;
- Completing the form for claiming a builder’s lien;
- Enforcing a claim for builders lien by way of BC Supreme Court Action.
If the deadlines and rules are not met, then the right to file a claim of builder’s lien is often completely lost. Mistakes in filing a claim of builder’s lien can have substantial consequences.
The Builders Lien Act creates trust obligations for parties receiving funds in a construction context. When a contractor or subcontractor receives money on account of the price of the contract or subcontract, that money forms a trust fund for the benefit of persons engaged in connection with the improvement. Further, the contractor or subcontractor who received the money is the trustee of the fund. If the contractor or subcontractor breaches their duties as trustee, and the rules are not followed, there can be serious consequences and liability. In some cases the directors and officers can be held personally liable.
Lastly, property owners can minimize their risk for the financial consequences of claims for builder’s lien by establishing a holdback account whereby they hold back 10% of payments made during the life of the project. Then, if a lien is filed by a sub trade or supplier, this account can be used to remove the claim of lien from title. This is a wise procedure and one that is sanctioned by the Builders Lien Act. All too often, though, homeowners are not aware of the procedure or do not follow it.
If you have a question about the Act, are thinking of filing a claim of builders lien, or own a property where a lien has been filed, call us at 604-276-2765. You can also contact the firm online or by filling the form below.