We’ve all heard of someone having a lien placed on their house – and if you withhold funds for building works, you may be subject to one yourself. So what exactly is a builders’ lien and what does it do?
A builders’ lien (sometimes called a construction lien) is a claim for payment, usually made by a contractor or supplier, that is registered at the Land Title Office. The lien secures a claim for payment against the property. This claim for payment can be for work carried out by contractors, for supplies and materials delivered and used on site, for work carried out by subcontractors or employees hired by the contractor, and for services rendered by engineers and architects on a project.
A lien registered on title can impede a property owner’s ability to sell or transfer the property, and/or refinance or mortgage the property. In extreme circumstances, the lien allows the court to order the sale of the property enabling the claimant to recover the money owed to them.
Important Timelines for Builders' Liens
Time for filing a lien:A lien can only be filed within 45 days from when the certificate of completion is issued for a project.
Expiry of a lien:A lien is no longer valid after one year if the claimant has not started a lawsuit during this time, and filed a Certificate of Pending litigation.
Accelerated process: A property owner may force the claimant to bring an action sooner by giving them written notice. This written notice gives the claimant 21 days to begin the action, otherwise the lien is no longer valid.
Removing a Lien
Property owners have a few options when it comes to removing a builders’ lien placed on their property. Which option a property owner chooses will depend on the urgency of removing the lien from the property’s title. Prior to removing a lien, a property owner should ensure the lien is valid and therefore enforceable. If the lien was not filed in accordance with the Builders Lien Act of BC, and within the proper timelines, then legal representation should be sought to have the claimant release the lien.
Options to remove a builders lien from title:
- Pay off the lien (the money that is owed) directly to the claimant.
- Pay the lien amount into court. These funds will be held by the court and, if the lien is proven, used to pay off the lien. If the lien is not proven, the funds will be returned to the property owner.
Strata Properties: Automatic Builders' Lien Holdback
The rules for strata properties, such as condos, allow for an automatic holdback of sale proceeds upon the purchase of a brand new strata unit. The Strata Property Act requires that 7 per cent of the purchase price be held back in trust for 55 days. However, this automatic holdback only applies if the lien period has not expired. The holdback protects purchasers from any lien(s) that may be placed against the entire strata building and/or the strata unit itself. After the earlier of 55 days or the expiry of the lien period, if a lien has not been filed against the property, then the funds held in trust are released to the developer.
Purchasing a Newly Built or Renovated Home
When purchasing a new (non-strata) home or a home that has recently undergone major renovations, buyers should place a condition in the purchase contract for a 55-day holdback of 10 per cent of the value of improvements. If the lien period has already expired, the buyer’s legal representative should get the seller or the seller’s builder to sign a statutory declaration confirming the lien period has expired. The certificate of completion should accompany this statutory declaration.
Follow the Rules
Builders' liens can be very stressful for property owners, but there are rules in place to try to ensure only valid claims are enforced. If a lien is placed on your property, it is important to determine if the lien has been filed in accordance to the law, paying particular attention to dates and timelines. From there, owners can look at the options available to them to remove the lien.
