Builders Liens and Construction DisputesSubcontractors, architects, labourers, material suppliers, equipment rental operators, and engineers all have an additional form of protection for their fee in case they don’t get paid in British Columbia. While they will always have a claim under the contract with whomever hired them – whether it is the project manager, general contractor, or someone else in the construction chain, you are largely an unsecured creditor with no guarantee that you will get paid. A builder’s lien provides an additional form of security and option for recovery for all those who do not get paid along in the construction chain. The downside is that it may not provide security for the entirety of your unpaid work, especially when there are a large number of lien claimants. Often it makes sense to pursue both a builder’s lien claim against the property and improvement along with a breach of contract claim against the contracting party that has failed to pay you.
The big advantage of a claim of builder’s lien is that it takes priority over judgments and draws from a construction mortgage from the date the work began or the material was supplied, Aside from unpaid GST and a few other forms of money owing, lien claimants are effectively a super creditor and jump to the front of the line. It also provides a form of security and perhaps the only way to get cash in hand, especially if the person above you in the construction chain has become insolvent.
However, the big disadvantage is that the amount of the lien is generally limited to the holdback for the project, which is 10% of the value of the contract in the person above them in the construction chain. As an example, if you supply construction materials to a plumbing company on credit for installation in a new strata construction and are owed $5,000 but the contract price between the plumbing company and the general contract is $30,000, then the holdback amount is only 10% of the $30,000 – or $3,000. The second big disadvantage is that this pool of money is shared with all other lien claimants in the same pool as you – so for instance unpaid labourers and such. Even though you are owed $5,000, you may only end up recovering 20 cents on the dollar.
For construction projects that have been poorly supervised and have been overrun with extra costs, change orders, and had trades people walk off the job and new trades have to come in, then there is a very real risk that you may not get in paid in full because the person above you will not get paid in full themselves. It’s important to do everything necessary to maintain your security.
The most important step is to ensure that you file your claim of builder’s lien in time. This requires you knowing the invoice amounts and also the legal description of the property. This is not challenging if you are working a single unit that already exists. It does become more difficult and time consuming if you are working on a new strata construction project as title will change throughout the course of the project. The original parcel of land will typically become the “remainderland” and there will be an air space parcel plan deposited with the land title office that creates the actual strata units. The worse scenario is if your lien is improperly filed against land on which you technically did no work on, nor supplied materials to – as your lien may be worthless and successfully challenged.
If you get a 21-day notice to proceed it is important that you commence your action in supreme court and also file your certificate of pending litigation (except if there’s been an order for security or a security agreement) within that time, otherwise you will forever lose your lien.
While still on the jobsite you should take numerous photographs and video walkthroughs of your work product in case there is any claim that you failed to abide by the BC Building Code or it is otherwise deficient. It is important to separate out your receipts so you know what went into each job site, as well as having proper records for all subcontractors and employees. If there are any change orders, or “extras”, it is ideal if they were recorded as separate documents, but we recognize in the construction industry that often these may be done verbally, through text, or e-mail. If that is the case it is important to save and backup those records as well.
If others were present during any verbal discussions surrounding delay, change orders, or deficiencies caused by other trades, it is important to get their contact information and ideally have them record a short statement about their recollection. Their memory will only fade more with time and you can use that recording to refresh their memory in Court.
We help contractors, material suppliers, general contractors, project managers, and home owners to advance claims of builder’s liens, minimize their exposure, and defeat claims that are placed on their properties or by those below or beside them on a construction chain so that they get the lion’s share of any holdback.
Generally our clients come to us at early stages. They may have issued the claim of lien themselves but do not know how to proceed after receiving a 21-day notice. For homeowners, we usually get clients coming to us concerned when a subtrade that they have never met has filed a lien after a renovation project has been completed. We also service small to medium sized businesses that need liens filed on a regular basis. We can assist train your in-house staff and supervise them until such point as they become comfortable doing it on their own.
We assist clients from the very start of the file, through to trial and enforcement proceedings including if the debtor commences bankruptcy proceedings. In addition to the basic lien amount, we explore other civil remedies that may be available to you to provide security for the full amount of your fee – such as pre-judgment garnishing orders, and advice on advancing additional claims in addition to those that appear on your invoice, such as loss of economic opportunity arising from delays on a jobsite and quantum meruit claims for extra work that you had to do.
Generally speaking, we look to increase the likelihood of recovery by advancing all claims simultaneously. When we defend against lien claimants, either by acting for general contractors, home owners, or by those whose subtrades assert a claim of builders lien themselves, we look at ways to provide full or partial indemnity by other parties involved in the construction chain. We also understand that disputes arise with respect to payment when there is not a meeting of the minds with respect to change orders, or there are deficiencies identified. We make sure you do not end being sandbagged by having to pay for the work twice. If there is a construction mortgage, or a need to refinance or sell the property that is liened, we can quickly apply to have it removed by posting of security or a lien bond.
The only authority to issue a builder’s lien and enforce it is under the Builder’s Lien Act, and the Courts have consistently required strict compliance with their provisions. Generally, a builder’s lien file has three important steps before you get any money in your own hands: 1) filing a claim of lien; 2) the posting of security for the claim of lien; and 3) enforcement of the claim of lien through a court proceeding.
The filing of a claim of lien must be done within the statutory time limit, which is generally 45 days from when there is a certificate of completion issued, the head contract has been completed, abandoned, or terminated. When a project is complete, or if there has been abandonment is not as cut and dry and has resulted in a lot of litigation.
Often after a lien is filed, particularly for new construction projects, there will either be a consent order executed or an application made for security to be posted for the claim of lien to be removed. Security is usually in the form of cash that is deposited either with the Court, or in a lawyer’s trust account on undertakings. On other occasions there will be a lien bond deposited, which is essentially a form of guarantee by a third party that they will pay the amount of lien if the responsible party does not after a trial. Lien bonds are generally used by parties that are experiencing a cash flow problem – such as new construction projects that are at the final stages of completion but do not yet access to the funds from pre-sales.
The last step is the actual enforcement of the claim of lien. It is only after proceeding through trial that a Supreme Court Judge can declare that you have a builder’s lien – everything prior is just a claim of lien. There are numerous defences available to contractors and homeowners to defeat builder’s liens, such as late filing, incomplete or incorrect filings on the claim of builder’s lien, that the incorrect legal description of the property was used, and so forth.
Often general contractors will attempt to increase your exposure and put pressure on you to settle by commencing a counterclaim against yourself, usually arguing that you caused loss and damage through neglect, delay, and improper installation.
The ideal case however is that after filing your lien that you are able to get paid in full before you need to actually file anything in Supreme Court. You have to file your claim in Supreme Court within one year after you lodge your claim of builder’s lien for registration with the land title office (unless you have been issued a 21-day notice to proceed). During that one year, you may find that the property owners need to refinance, sell their property, or their mortgage becomes due. At that point it is relatively common for the lien to be paid off in full as the cost of disputing it on an urgent basis are simply too high. This is more likely to happen with lien amounts that are relatively small (i.e. up to $15,000) and that are not part of a large construction project.
Some aspects of a builders lien and construction dispute file are very transactional in nature and are done on a flat fee basis. Some examples of this include:
- The registration of a claim of builder’s lien – for simple cases with one parcel identifier (i.e. either a detached house, or just one strata unit) then we charge $200 inclusive of taxes and disbursements. For the registration of builders liens involving more than one PID – such as remediation work on townhouses or construction of a condominium, then we charge an additional $40 inclusive of taxes and disbursements for each additional PID for up to 4 PIDs we have to attach. A large portion of this (over half) goes towards the statutory fee charged by the Land Title Office to pull the PID and legal description of each strata unit. For instance, if you wish to file a builders lien against a 5 unit townhouse complex, the fee would be $200 + $40 x 4 more units = $360 inclusive of taxes and disbursements. For files involving more than 5 PIDs the work is only offered on an hourly basis.
- If you have filed your own claim of builder’s lien then as part of any deal you reach to resolve your claim you may be required to remove it from title. This is a very straightforward process regardless of the number of units your claim of builder’s lien attaches to. We charge $200 inclusive of taxes and disbursements.
- For homeowners and others looking to defend against claims of liens, you may be able to have the lien defeated if the lien claimant does not file their claim of lien within the required 1 year limitation period, or if they do not file it earlier if you give them a 21-day notice to proceed. To remove a claim of builder’s lien from title if no proceedings have been started within a year of the registration we charge $200 plus taxes and disbursements for each lien on title. If the lien claimant has not failed in time after you have sent a 21-day notice to proceed, we charge $2,500 plus taxes and disbursement as this involves an application in Supreme Court.
For lien claimants, and those that are owed money in a construction dispute, we usually offer our services on either an hourly basis, a mix of a reduced hourly rate and partial contingency, or on a contingency basis. For larger projects and amounts owing it usually makes sense for the client to proceed with an hourly rate, and for smaller claims to have us do it on a contingency basis.
Because builders liens can only be enforced in Supreme Court, even if your claim is within the monetary limit of Small Claims Court, you are generally entitled to an award of costs if you prove your case, which will help offset a healthy portion of your legal fees. In exceptional circumstances, the award of costs may actually exceed our fee. Even when cases get resolved outside of Court it is relatively common for one side to agree to pay a portion of the other’s legal fees.
Contact us either at (604) 259-6200 or using the form below for assistance with Builders Liens and Construction Disputes
The foregoing provides legal information and does not constitute legal advice. As an analogy, legal information are equivalent to learning the rules of chess, and legal advice is the tactics and strategy that goes into winning a game. Lawyers are trained to give valuable advice that is specific to you after learning about the details of your case. Readers are cautioned that they will rarely achieve the best outcome for their case without actual advice. A consultation is often the best next step to take.