The provisions and procedures of the Builders Lien Act apply equally to home construction as to any other type of construction work. However, in practice, home construction project participants often do not comply with all the applicable statutory requirements. It is important that home construction owners, builders and their advisers be aware of the practices anticipated by the Act and of the risks of not complying with the statutory requirements.
Home construction contracts are often not formalized in writing or, if they are, often take forms which are inadequate or are drafted to allocate risks unreasonably away from the party which prepared the document. This is in part due to the absence of widely accepted standard form contracts tailored to home construction. The CDDC contracts commonly used in larger projects are lengthy and require substantial revision for use in the typical home construction project in which no consultant is engaged. Further, other standards forms such as those prepared by the Canadian Home Builder’s Association of BC are not very widely used.
The dramatic variation in contractual documentation used in home construction projects can create problems of sufficiency and interpretation with respect to different legal issues, including builders lien-related matters. The following are builders lien issues which should be considered and addressed in any construction contract, including one intended for home construction:
-Designation of the payment Certifier: Under Section 7(1)(a) of the Builders Lien Act, the payment certifier is the “architect, engineer or other person” to whom the owner and the general contractor agree to delegate the function of certification of payment, and of substantial performance of the general contract work for builders liens purposes. For possibly early-completing subcontracts, the general contractor and the subcontractor should also consider designating a payment certifier.
In projects which have a prime consultant, that design professional will usually be the payment certifier. In a project without a consultant, consideration should be given to whether some other third party will be so designated.
Under Section 7(1)(b), if no payment certifier is designated, the owner acting alone will be the payment certifier in respect to amounts due to the general contractor, and the owner and the contractor acting together will be the payment certifier in respect of amounts due to any subcontractor. Relative to the Act’s final designation, the owner will usually lack professional expertise to perform properly the completion certification function, or may in any event decline or otherwise fail to perform it.
-Provision for the owner’s retention of the 10 per cent statutory holdback amount from general contract progress payments and, if applicable due to the aggregate value of the project being $100,000 or more, for the creation of a holdback account.
-Deference to the Act in the contract’s definitions of completion/substantial completion or performance in the contract. Construction contracts often seek to impose on the general contractor requirements for the recognition of substantial completion which are more stringent, and would make its achievement later, than what would otherwise be the case under the Act. There should be no inconsistency between the terms of the construction contract and the provisions of the Act with respect to the definition of the substantial completion milestone, particularly in view of the following provision of Section 42 of the Act:
“(2) An agreement that this Act is not to apply, or that the remedies provided by it are not to be available for a person’s benefit, is void.”
-Awareness of the Act’s substantial completion milestones. Most home construction projects, particularly renovation jobs, are carried out on a cost-plus basis, resulting in the necessary application of the “use or readiness of use” test of substantial completion which is provided by the Act as the alternative to the cost of the complete formula test.
-Exclusion of any other provision which is inconsistent with the requirements of the Act and therefore violated the above-quoted Section 42(2).
-Confirmation of the general contractor’s duty to have discharged from the project property title any lien filed by a subcontractor, material supplier, worker or other person for whom the general contractor is responsible.
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