“The old Act” or “The former Act” refer to the Builders Lien Act. R.S.B.C. 1996, Chapter 41.

Coulson refers to David A. Coulson, Guide to Builders Lien in British Columbia. (Carswell)

“CLE materials” refers to materials prepared to a continuing legal education seminar, Builders Liens, held in Vancouver, BC on September 19, 1997, Continuing Legal Education Society of BC.

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Introduction

About

Sources and Authorities

Chapters

Chapter 1 – An Introduction to the New Builders Lien Act

1.1 Purpose of Act
1.2 History of Act
1.3 Why a new Act?
1.4 What the Act cannot do

Chapter 2 – The Anatomy of a Construction Project

2.1 The pyramid
2.2 The truncated pyramid
2.3 “Engaged by” and “engaged under”
2.4 The flow of money and credit
2.5 Smaller projects

Chapter 3 – The Participants – a “Who’s Who”

3.1 Participants
3.2 “Contractors” and “subcontractors”
3.3 “Head contractor”
3.4 Architects and engineers
3.5 Definition of owner
3.6 Construction lender
3.7 Material supplier
3.8 “Worker”

Chapter 4 – The Lien

4.1 Liens generally
4.2 Who can claim?
4.3 Who cannot claim?
4.4 A lien for what?
4.5 “Improvement”
4.6 “Work”
4.7 “Material”
4.8 Equipment rental
4.9 “Operator”
4.10 “In relation to an improvement”
4.11 Successors in interest
4.12 What is secured?
4.13 “Price”
4.14 “Wages
4.15 Property affected
4.16 Lien on the improvement
4.17 Lien against holdback
4.18 Lien on money in court
4.19 Lien against insurance proceeds
4.20 Filing by non-contracting owner
4.21 Small claims
4.22 Terminology: “lien holder” and “lien claimant”
4.23 “Class of lien claimants”

Chapter 5 – The Holdback

5.1 Holdbacks generally
5.2 “Required holdback” – the general principle
5.3 Multiple holdback vs. single holdback
5.4 Holdback is notional
5.5 Amount of holdback
5.6 Holdback when no progress payment
5.7 “Person primarily liable”
5.8 Holdback by mortgagee
5.9 Contracts where no holdback is required
5.10 Retention period

Chapter 6 – Holdbacks by the Owner

6.1 Holdback account
6.2 Account at savings institution
6.3 Administration of account
6.4 Multiple owners
6.5 Multiple accounts
6.6 When holdback account is not required
6.7 Failure of owner to establish account
6.8 Rights in account
6.9 Conflicts over administration of account
6.10 Payment out of account
6.11 Sale during holdback period
6.12 Right to information

Chapter 7 – Holdbacks and the Limited Recovery/Liability Principle

7.1 Limited liability and recovery
7.2 Significance of “recovered under this Act”
7.3 “Amount owing”
7.4 Counterclaim
7.5 “Bad faith”
7.6 Payment after lien filed

Chapter 8 – Filing Liens

8.1 Significance of filing
8.2 When lien takes effect
8.3 Form 5
8.4 Who completes Form 5?
8.5 Identifying the claimant
8.6 Description of land
8.7 Multiple parcels
8.8 Description of work or material
8.9 Other description
8.10 Amount of claim
8.11 Failure to file
8.12 Consequences of error

Chapter 9 – Clearing Liens From the Owner’s Title

9.1 Background
9.2 Sections 23 and 24
9.3 Who clears the liens?
9.4 Use of section 24
9.5 Use of section 23
9.6 Who pays?
9.7 Amount of payment into court
9.8 When “amount owing” is to be calculated
9.9 “Amount owing” and section 34
9.10 Powers of court
9.11 Clearing further liens
9.12 Section 25

Chapter 10 – Certificates of Completion

10.1 Certificates generally
10.2 “Payment certifier”
10.3 Certification by owner and contractor
10.4 Meaning of “completed”
10.5 Form of certficate
10.6 Lien holders affected by certificate
10.7 Notice of certificate
10.8 Form of request
10.9 “Notice of certificate of completion”
10.10 Liability of certifier to lien holder
10.11 Delivery of notice to other persons
10.12 Request for certificate
10.13 Form of request for certification
10.14 Certification by court
10.15 Certificate and early release of holdback
10.16 Other holdbacks
10.17 Impact on “required holdback”

Chapter 11 – The Running of Time for the Filing of Liens and Release of Holdbacks

11.1 Time periods generally
11.2 The basic time periods
11.3 Certificate as trigger
11.4 Certificate where time has begun to run
11.5 Other triggering events
11.6 Completion
11.7 Abandonment
11.8 Terminated

Chapter 12 – Keeping Money Within the Construction Pyramid

12.1 Keeping money within the pyramid
12.2 Creation of trust
12.3 Relationship to other remedies
12.4 Exceptions
12.5 Duties of trustee
12.6 Uses authorized by the trust
12.7 Section 11(6)
12.8 Consequences of breach of trust
12.9 Bankruptcy of trustee
12.10 Garnishment generally
12.11 Disruptive effect of garnishment
12.12 Limiting the use of garnishment
12.13 “Notice to garnishee”
12.14 Section 12: appropriation of payments
12.15 Assignments

Chapter 13 – Enforcing the Lien

13.1 Enforcement generally
13.2 Enforcement by action
13.3 Time limit for enforcement
13.4 Venue for proceedings
13.5 Powers of court
13.6 Evidence of filing and delivery

Chapter 14 – Distributing Proceeds to Lien Claimants

14.1 Distribution policies
14.2 Overview of distribution
14.3 Allocation of sales of proceeds
14.4 Distribution to contractor group
14.5 Distribution to subcontractor group
14.6 Residual operation of trust
14.7 Application of section 10(3)

Chapter 15 – Holdbacks by Purchasers

15.1 Liens binding on purchaser’s interest
15.2 Existing improvements
15.3 Purchaser’s holdback
15.4 Agreement as to holdback
15.5 Holdback is permissive
15.6 When purchaser’s holdback unnecessary
15.7 Sale of condominium
15.8 Holdback period
15.9 Limitation of purchaser’s liability

Chapter 16 – Deficiencies and Holdbacks

16.1 Deficiencies generally
16.2 Use of “required holdback”
16.3 Additional money retained

Chapter 17 – The Construction Lender and Builders Liens

17.1 Position of construction lenders
17.2 Information from lender
17.3 Priorities
17.4 Effect of court order

Chapter 18 – Application of the Builders Lien Act to Improvements on Unregistered Land

18.1 Registered and unregistered land
18.2 Applicability of trust
18.3 Does the lien exist?
18.4 Holdback requirement

Chapter 19 – Improvements on Mining Property

19.1 Mining property
19.2 Filing against mineral title
19.3 Other provisions

Chapter 20 – Public Bodies and the Builders Lien Act

20.1 Governmental bodies
20.2 Local governments
20.3 Provincial government
20.4 “Crown”

Chapter 21 – Rights to Information

21.1 Rights to information

Chapter 22 – Transition

22.1 Transition generally
22.2 Owner’s holdback account not required
22.3 Other holdbacks
22.4 Purchaser’s holdback
22.5 Money in court
22.6 Application to court
22.7 Regulation making power

List of Figures

Figure 1 – The pyramid structure of a large construction project
Figure 2 – A “truncated pyramid” structure with owner acting as manager
Figure 3 – Relationships within the pyramid
Figure 4 – The flow of money and credit
Figure 5 – “Classes” of lien claimants
Figure 6 – The multiple holdback scheme
Figure 7 – Limited recovery/liability – section 34
Figure 8 – The obligation to clear liens
Figure 9 – Calculating a payment into court
Figure 10 – Payment into court under section 23
Figure 11 – Clearing additional liens under section 23 decision procedure
Figure 12 – Persons affected by certificate
Figure 13 – Early release of holdback
Figure 14 – The running of time: section 20(3)
Figure 15 – The operation of the statutory trust: section 10
Figure 16 – Garnishment: four cases
Figure 17 – Crediting payments to the right project
Figure 18 – Allocation of proceeds of sale
Figure 19 – Allocation of proceeds of sale: an example
Figure 20 – Distribution to members of the contractor group
Figure 21 – The unfair result of a simple pro rata distribution
Figure 22 – Distribution to members of subcontractor group
Figure 23 – Distribution to members of subcontractor group: example
Figure 24 – Residual operation of the statutory trust example
Figure 25 – Applying section 10(3)

The post Table of Contents first appeared on British Columbia Law Institute.

Figure 1 – The pyramid structure of a large construction project

Figure 2 – A “truncated pyramid” structure with owner acting as manager

Figure 3 – Relationships within the pyramid

Figure 4 – The flow of money and credit

Figure 5 – “Classes” of lien claimants

Figure 6 – The multiple holdback scheme

Figure 7 – Limited recovery/liability – section 34

Figure 8 – The obligation to clear liens

Figure 9 – Calculating a payment into court

Figure 10 – Payment into court under section 23

Figure 11 – Clearing additional liens under section 23 decision procedure

Figure 12 – Persons affected by certificate

Figure 13 – Early release of holdback

Figure 14 – The running of time: section 20(3)

Figure 15 – The operation of the statutory trust: section 10

Figure 16 – Garnishment: four cases

Figure 17 – Crediting payments to the right project

Figure 18 – Allocation of proceeds of sale

Figure 19 – Allocation of proceeds of sale: an example

Figure 20 – Distribution to members of the contractor group

Figure 21 – The unfair result of a simple pro rata distribution

Figure 22 – Distribution to members of subcontractor group

Figure 23 – Distribution to members of subcontractor group: example

Figure 24 – Residual operation of the statutory trust example

Figure 25 – Applying section 10(3)

The post List of Figures first appeared on British Columbia Law Institute.

Commentary: this raises the issue of the transition from the old Act to the new. Guidance on transition is provided in section 48 of the Act. It describes the way that the Act applies to “transition projects.” In section 48(1), “transition project” is defined as an improvement for which the time for filing liens under the former Act has not yet expired.

The basic rule set out is that the new Builders Lien Act applies to a transition project unless all parties agree that the former Act continues to apply.

[See section 48(2)]

In practice, on a large project, the number of parties will be large and an agreement that the former Act continues to apply will be difficult to obtain. On smaller projects, such an agreement is a realistic possibility.

Other provisions of section 48 create some specific rules respecting the application of the Act to transition projects including certain exceptions to the basic transition rule.

A safety net of sorts is provided by an express provision that, on a transition project, nothing done in compliance of the former Act is invalidated by the basic transition rule.

[See section 48(6)]

22.2 | What about the owner’s holdback?
Owner’s holdback account not required

Commentary: on a transition project, the owner is not required to create or maintain a holdback account under section 5, even with respect to portions of the holdback retained after the new Act comes into force. [See section 48(3)]

22.3 | What about holdbacks by contractors and subcontractors?
Other holdbacks

Commentary: the former Act did not require that contractors or subcontractors retain holdbacks from the persons they engage. The new Act does impose that requirement where there is a possibility of further liens. The transition rules ensure that the holdback requirement is not imposed retroactively. Contractors and subcontractors are required only to retain holdbacks with respect to advances or payments made after the new Act comes into force.

[See section 48(4)]

Even though, on a transition project, holdbacks will not have been retained by contractors and subcontractors from the time work started, it is necessary for certain provisions of the Act to presume that they did. Section 23 defines the amount of money which must be paid into court to clear liens from the owner’s title. Section 34 defines the maximum aggregate amount that can be recovered by a class of lien claimants. In both of those sections, the relevant amount is calculated with reference to the “required holdback.”

Fairness to lien claimants requires that their claims should not be cleared from the title or limited with reference to the smaller amount actually held back. The Act therefore sets out a transition rule that provides that on a transition project, in a calculation under section 23 or 34, “required holdback” should be taken to mean the amount that would have been retained if the Act had applied to the transition project from the time the improvement was started. This will ensure that liens are not cleared or limited through the use of an inappropriately low figure.

[See section 48(5)]

22.4 | What about the purchaser’s holdback?
Purchaser’s holdback

Commentary: the purchaser of a transition project is entitled to retain a holdback under section 4(7) only where a binding agreement of purchase and sale had been entered into after the new Act comes into force. [See note at the beginning of chapter 15 and section 48(7)]

22.5 | What about money paid into court under the former Act?
Money in court

Commentary: the former Act provided for the clearing of liens in its section 33 by a procedure similar to that provided in section 24 of the new Act. Under that provision, money might be paid into court or to be some other form of security. [See paragraph 9.4]

Although section 33 of the former Act is analytically similar to section 24 of the new Act, functionally, it serves the same role as section 23. The transition rule set out in the Act, therefore, deems this money to have been paid into court under section 23 for the purposes of the new Act. Money paid into court under section 20(4) of the former Act is similarly characterized.

Security posted under the former Act which did not take the form of money paid into court is not affected by this transition provision.

[See section 48(8)]

22.6 | What if the parties cannot agree on the way the transition rules apply to a particular project?
Application to court

Commentary: parties to a dispute respecting a transition project may apply to the court for directions concerning the application of the transition rules to the dispute. [See section 48(9)]

22.7 | What if the transition rules do not appear to cover the circumstances of a particular case?
Regulation making power

Commentary: the Provincial government has a very broad power to make regulations in relation to transition issues. Section 47(3) provides:

47(3) The Lieutenant Governor in Council may make regulations the Lieutenant Governor in Council considers necessary or advisable for meeting or removing any difficulty arising out of the transition to this Act from the Act repealed by this Act and for preserving and giving effect to the rights of persons arising under the repealed Act except as those rights are expressly varied by this Act, and the regulations may be made to apply generally or to a particular case or class of cases.

Thus, regulations may emerge which provide further guidance on transition as experience may require.

There are also transition rules of general application that may assist the parties.

[See Interpretation Act, section 36]

The post Chapter 22: Transition first appeared on British Columbia Law Institute.

Commentary: reference has already been made to the rights of a lien holder to seek information from the owner or the construction lender.
[See paragraphs 6.12 and 17.2]

The owner is also given certain rights to information. A written request may be directed to a contractor or a subcontractor where a claim of lien has been filed for particulars of any subcontract including the identity of the parties, the price and the state of accounts.

[See section 41(2)]

Where a request is delivered by either the owner or a lien holder, the person obliged to provide the information must do so within ten days. A failure to do so may result in liability for any loss or damage caused to the person who requested the information.

[See sections 41(3) and 41(4)]

Where a request made by the owner is not complied with within the time required, the owner may withhold further payments from a contractor or instruct the contractor to withhold further payments to a subcontractor who has failed to comply.

[See section 41(5)]

The Act also provides for an application to court by an interested party for the inspection of contracts, documents and records relating to the contract or subcontract in respect of which a request has been made.

[See section 41(6)]

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