Why 45 days are important in the Builders Lien Act

Since we are speaking about builders liens at Buildex Vancouver, we thought we would take this opportunity to do a primer on one of the basic concepts under the act in preparation for our seminar – the time limits for filing a lien.

Legal Reinforcement | Norm Streu and Chris Hirst

The time limits for filing a lien are set out in section 20 of the B.C. Builders Lien Act, which provides for different possible starting points for the 45-day time limit, depending on whether a certificate of completion has been issued and whether a head contractor has been engaged.

To determine when your 45-day window for filing a lien starts, consider the following questions:

Question 1: Has a Certificate of Completion been issued with respect to the relevant contract or subcontract?

Yes – This is perhaps the simplest situation. Any lien claims must be filed within 45 days of the date of that Certificate of Completion.

No– If a Certificate of Completion has not been issued, potential lien claimants will need to consider whether a head contractor was engaged by the owner. Go to question 2.

Question 2: Did the owner engage a head contractor?

Yes – If no relevant certificate of completion has been issued and a head contractor was hired, potential lien claimants have 45 days from the completion, abandonment or termination of that head contract to file their lien claims.

The Builders Lien Act states that a head contract is “completed” if it is substantially performed. It is not necessary that the contract be totally completed. The act also provides a formula for determining whether a head contract has been “substantially performed”.

Substantial performance is achieved when the relevant contract is capable of completion or correction at a cost of not more than 3.0 per cent of the first $500,000 of the contract price, 2.0 per cent of the next $500,000 of the contract price and 1.0 per cent of the balance of the contract price.

The Builders Lien Act also defines “abandonment” of the head contract.

A head contract is considered to be abandoned if no work is done in connection with the contract for 30 days.

This does not include work stoppages due to strikes, lockouts, sickness, weather conditions, holidays, court orders, shortages of material or other similar causes.

“Termination” of the head contract is not defined in the Builders Lien Act, but it has been addressed in several B.C. court cases.

These cases deal with situations in which a construction contract has been formally terminated by one party according to the termination provisions of the original contract, where a termination agreement has been reached between the parties or where a contract was formally terminated by one party, following the bankruptcy of the other party.

No – If there is no head contract and no relevant Certificate of Completion, potential lien claimants have 45 days from the completion or abandonment of the improvement, or the project as a whole, to file their lien claims.

“Abandonment” of the improvement is defined the same way as abandonment of the head contract.

The improvement is considered to be abandoned if no work is done in connection with that improvement for 30 days.

However, completion of the improvement is defined differently than completion of the head contract.

According to section 1(3) of the Builders Lien Act, an improvement is to be considered completed if the improvement or a substantial part of it is ready for use or is being used for the purpose intended.

Hopefully, this primer will serve as a pointed reminder to be vigilant with respect to when the 45-day time period begins to run.

If in doubt, contact your lawyer. You don’t want to find out too late that your 45 days has slipped away.

If you want to learn more, we will see you at Buildex. Understanding Builder Liens (Session T02) is on Feb. 9 from 8:30 a.m. to 10 a.m.

Norm Streu is the president & COO of the LMS Reinforcing Steel Group and former chair of the Vancouver Regional Construction Association. Chris Hirst is a partner and the leader of the Construction & Engineering Group, Alexander Holburn Beaudin & Lang LLP.