The persistence of the Shimco Lien: Revisiting the dual lien theory in light of Kingdom Langley Project Ltd. Partnership v WQC Mechanical Ltd.
August 7, 2025
BY Ignacia Mendez
Introduction
A recent decision of the British Columbia Court of Appeal, Kingdom Langley Project Ltd. Partnership v WQC Mechanical Ltd. (Kingdom Langley) has reaffirmed the controversial interpretation of the holdback provisions of the Builders Lien Act (Act). The controversy emanates from the Court’s earlier ruling in Shimco Metal Erectors Ltd. v North Vancouver (District) (Shimco), which recognized a distinct and independent lien against the statutory holdback, commonly referred to as the “Shimco lien”.
This recognition of a separate holdback lien has since raised questions about the coherence of the Act’s overall structure and its implications on the construction industry. BCLI has contributed detailed commentary on the Builders Lien Act and has been a consistent critic of the Shimco lien. In its 2004 Report on Builders Liens after the Shimco Case and 2020 Report on the Builders Lien Act BCLI recommended that the Builders Lien Act be amended to abolish the Shimco lien – for reasons that remain relevant, even as Kingdom Langley affirms the persistence of this dual lien theory.
Relevant provisions & terminology
Familiarity with the Act’s remedial mechanisms for unpaid providers of work, services, or materials – the lien on land and improvements, the holdback, and the trust –, is essential to understanding why the Shimco lien has been subject to sustained legal debate.
A lien against the land and improvements
A lien grants contractors, subcontractors, material suppliers, and workers a security interest in the land and improvements to which they contributed. This lien serves as a form of collateral for unpaid work, and once registered, may prevent the land from being sold, refinanced, or otherwise conveyed without addressing the outstanding claim.
To assert this right, a claimant must file a claim of lien in the prescribed form at the land title office within the time limit set in the Act. If the lien is not filed in time, the right to claim is extinguished.
A statutory holdback
A holdback refers to the percentage of a contract price required by the Act to be retained by an owner, or mortgage lender, or contractor who has subcontracted work for a specified period following completion of the project or subcontract . This holdback is designed to ensure funds are available to meet valid lien claims that may arise within the time period following completion or abandonment of the work.
A statutory trust
The purpose of this statutory trust is to prevent the diversion of construction funds for purposes unrelated to the project, and to keep them within the construction pyramid.
A fourth remedy: The Shimco lien
While theAct expressly provides the above statutory mechanisms, a fourth remedy has emerged through judicial interpretation. In Shimco, the Court interpreted the Act as granting a second lien on the holdback that could be enforced by an independent action. The Court essentially validated a parallel enforcement pathway whereby the unpaid provider of work can claim a lien on the holdback funds themselves.
Unlike land liens, the Shimco lien is not registered in the land title office and does not attach to the improvement – it exists solely as a claim against the withheld funds, provided that the owner still holds the funds.
BCLI’s response to Shimco
The recognition of this fourth remedy has introduced considerable uncertainty within construction practices. In response, BCLI undertook a detailed review of the Shimco decision in a report issued in 2004 and revisited the subject in its comprehensive report on the Act as a whole in 2020.
BCLI’s critique of the Shimco lien notes that the Act lacks any provisions applicable to the Shimco lien corresponding to those applicable to the lien on land and the improvement. This creates confusion regarding, who can assert the lien, the enforcement of the lien, and when the holdback funds may safely be dealt with. Further, this dual lien creates unfairness among those lien claimants who comply with the Act by filing timely claims with those who did not, given that a Shimco lien can be claimed even if the claimant’s lien on land has expired for non-compliance with the filing requirements. As such, BCLI posits that the Shimco lien operates perversely to reward non-compliance by claimants who wait in the weeds.
Kingdom Langley
This disharmony between the dual lien theory and the scheme of the Act was recently subject to scrutiny in Kingdom Langley. In this case, WQC Mechanical had performed subcontracted work on a residential development and remained unpaid. WQC Mechanical then registered a lien against the land under the Act and also asserted a claim against the statutory holdback – a Shimco lien. The property owner, Kingdom Langley, along with the general contractor, Metro-Can, posted a lien bond under section 24 of the Act to cancel the lien against the land. Kingdom Langley argued that by posting security under section 24, WQC Mechanical had exhausted its lien rights, and urged the Court to reject the Shimco lien, arguing that the case was wrongfully decided and inconsistent with the Act. Kingdom Langley also sought to have the appeal heard by a five justice division which would have permitted the Court to revisit and potentially overturn Shimco.
However, the five justice division held that posting security under section 24 cancels only the lien against the land, but it does not extinguish the separate claim against the holdback. In reaffirming the validity of the Shimco lien, the Court emphasized that a claimant may pursue a holdback remedy even if the underlying land lien has been discharged. While the Court acknowledged the practical difficulties that arise from recognizing this fourth remedy, it declined to overrule Shimco, noting that any change to the framework must come from the legislature and not the Court.
BCLI’s call for reform
The Shimco decision and its reaffirmation in Kingdom Langley underscore the need for legislative clarity in BC’s builders lien regime. As emphasized in the 2004 report, and again in 2020, BCLI recommends eliminating the Shimco lien through statutory amendments. This reform would restore coherence to the Act by limiting lien rights to ones for which there is enforcement machinery set out in the Act. BCLI also recommends a thorough clarification of the holdback and trust provisions in the Act to ensure that owners, contractors, and subcontractors can more easily understand their rights and obligations. These calls for reform remain compelling today – particularly in light of the Court’s reaffirmation of the Shimco decision and call for legislative intervention.
You can read BCLI’s full reports here:
2020 Report on The Builders Lien Act (cited in Kingdom Langley)
2004 Report on The Builders Lien Act After the Shimco Case (also cited in Kingdom Langley)
