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A Primer on Liens under the BC Builders Lien Act

Introduction

A claim of lien under British Columbia’s Builders Lien Act (“BLA”)[1] provides protection to contractors, subcontractors and workers who provide work or materials to a construction project. The BLA allows these people to file a claim of builders lien against the property to which they contributed. This statutory lien is a powerful tool which can have serious consequences for the property owner and create significant barriers for further project development. This article reviews the central principles of BLA liens, including how they can be registered against title and some of the ways they can be removed.

The lien against land is only one aspect of the BLA. The builders lien holdback and trust (and the holdback lien) are important parts of the scheme created by the BLA. Keep an eye out for future posts on these topics in our Lay of the Land Blog and the Canadian Construction Law Blog.

What is a builders lien and when is it used?

The builders lien is a charge registered against title to a property to secure payment for work performed or material supplied in relation to an “improvement”, a broadly defined term that encompasses most construction projects. To file a lien, a person must be a “contractor”, “subcontractor” or “worker” as defined in the BLA, and file the claim of lien at the land title office for the district in which the improved land is located. The claim of lien is registered against the land in, on or under which the “improvement” is located.

The amount that can be claimed is the contract price for the work or material that has been supplied but remains unpaid, which includes applicable taxes. Claims for profit, overhead or administrative costs that are directly connected to the work performed can sometimes be included in the lien amount, such as where the contract does not specify an exact price or provides for extra compensation (for example, a ‘cost-plus’ contract). The amount claimed should never be speculative, as the claimant will ultimately need to demonstrate entitlement to the amount claimed. It is an offence to make knowingly a false statement in a claim of lien.

A claim of lien is often filed at or near the completion of a subcontract or the project itself, since this is when disagreements over payment often arise. However, a claim of lien can be registered at any time during construction up until the end of the statutory deadline for filing. The BLA imposes a deadline of 45 days after either issuance of a certificate of completion, completion, abandonment of termination of the head contract, or abandonment of the project itself. Additionally, section 88 of the Strata Property Act[2] sets a deadline for filing a builders lien against a newly built strata lot: 45 days after conveyance of the lot.

The claim of lien creates an incentive for the property owner to pay contractors, or help address disputes among contractors and subcontractors about alleged unpaid amounts, because property typically cannot be sold or transferred until any liens are removed. A claim of lien filed by an unpaid subcontractor also incentivizes contractors to address disputes, including because many construction contracts impose a condition requiring the contractor to remove liens filed by its subcontractors.

Registering a claim of lien

The right to file a claim of lien arises under section 2 of the BLA when the price for work or material provided by contractors, subcontractors or workers remains unpaid. However, while that section says these persons “have a lien”, additional steps are required for the right to a lien to crystallize.

First, the lien claimant must file a claim of lien in the prescribed form, as set out in BLA section 15. When the claim of lien is filed with the land title office it becomes a registered encumbrance on title. As noted above, filing must occur within 45 days of a triggering event: issuance of a certificate of completion, completion, abandonment of termination of the head contract, abandonment of the project, or conveyance of a strata lot.

Second, the lien claimant must “perfect” their claim of lien by commencing a lawsuit that seeks enforcement of the lien. If this is not done within one year of filing, the lien is extinguished under BLA subsection 33(5). However, the owner of the property subject to the builders lien may reduce the one-year time limit to 21 days by serving a notice to commence an action under BLA section 33(2). Taking this step forces the lien claimant to begin their lawsuit to enforce the lien within 21 days of receiving the owner’s notice. These deadlines force the lien claimant to move litigation forward and resolve disputes over unpaid amounts, and help prevent property owners and construction participants from becoming deadlocked.

Removing a builders lien

As a counterbalance to the powerful lien tool, the BLA provides owners and others with several ways to remove liens from title. We discuss a few of the options below.

Section 24 of the BLA provides a quick way to remove a builders lien from a property. The property owner—or a contractor, subcontractor or any other person liable on a contract in connection with the improvement—may apply to the court to post money as security for the lien claim. The court generally also accepts certain other forms of security such as lien bonds or letters of credit. The claim of lien is then removed from the legal title to the land, but the dispute can continue over the claimant’s entitlement to the lien and the proper amount of the security. The process under section 24 can be further expedited where the lien claimant consents to the replacement security.

The purpose of section 24 is to allow the owner to dispose of the land and deal with it as normal while preserving the contractor, subcontractor or worker’s security. Since property owners are often required to maintain their title free of all liens in order to transfer the property or obtain project financing, they are incentivized to clear the title to land as quickly as possible. Posting security for the disputed amount under section 24 allows the payment dispute to continue separately while the construction project or conveyance moves ahead.

A claim of lien can also be removed by way of a court application under BLA section 25. Subsection 25(1) allows applications to remove a claim of lien where one of the following applies:

  • the lien claimant failed to comply with the deadlines for filing either the claim of lien or the lien enforcement action, described above;
  • the lien claimant’s action to enforce the lien has been dismissed or discontinued; or
  • the debt has been paid.

Subsection 25(2) allows applications to cancel claims of lien that do not relate to the correct parcel of land or that it are vexatious, frivolous or an abuse of process. However, it can be difficult to establish that a lien is vexatious, frivolous or an abuse of process, even where the amount claimed is demonstrably inflated. However in one such case, Darwin Construction (BC) Ltd. v. PC Urban Glenaire Holdings Ltd.,[3] McCarthy Tétrault obtained an order from the Court of Appeal cancelling a claim of lien for over $3 million as an abuse of process because the lien claimant had no arguable case to support the amount of its claim, despite being asked repeatedly for an explanation as to the claim amount. Read our blog post on that decision here.

We can help

This article touches on only some of the complexities that can arise under the BLA. McCarthy Tétrault’s BC Real Estate Litigation Group comprises a team of industry-leading BC lawyers with deep experience navigating complex BC real estate disputes. Our lawyers provide a full suite of litigation services across a broad range of disputes, including construction, development, environmental, purchase and sale, tenancy and leasing, land use and bylaw, bankruptcy and insolvency, tax and assessment, and other disputes.

[1]Builders Lien Act, SBC 1997, c 45.

[2]Strata Property Act, SBC 1998, c 43.

[3]Darwin Construction (BC) Ltd. v. PC Urban Glenaire Holdings Ltd., 2023 BCCA 436.

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