The British Columbia Law Institute has been tasked with improving the province’s Builder’s Lien Act that experts say is overdue for updates.
According to the institute the Builders Lien Act, passed in 1997, is one of the major cornerstones of construction and insolvency law.
It gives contractors, material suppliers and individual workers several forms of security for payment for work done or materials supplied to a building site, most notably a lien on the land.
According to the institute, the act introduced changes that were generally seen as improvements over the previous legislation.
But over the years, the industry has changed and issues with the act have emerged.
Senior staff lawyer at the institute, Gregory Blue, said the institute was approached by the Ministry of Justice and Attorney General after the ministry was given responsibility for the legislation after responsibility for it bounced around for years.
Blue said complaints had piled up, prompting the project.
One of the major issues Blue and other construction law experts hope to tackle deals with the wording of the act, which led to a controversial 2002 court decision in Metal Erectors Ltd. v. Design Constructors Ltd.
The court held that the subcontractor could have both a lien against the property and a separate lien against the holdback fund.
The subcontractor was entitled to share the holdback pro rata with those claimants with liens validly registered against the land.
"Until then, it hadn’t been generally thought that there was a separate lien," Blue said.
"The court of appeal held that the wording of the act did create a second remedy. But, it’s an incomplete remedy because some of the machinery for its enforcement isn’t spelled out in the act."
He added that this creates a series of problems and the bar has been struggling with it ever since.
Another issue is a lot of projects take place on publicly owned lands that are not registered at the land title office, but the whole machinery for enforcement of a lien depends on that.
Or, that the act provides for lien remedies for work done in connection with hard rock mining, but not oil and gas building, or coal mining.
"It’s just an anomaly," Blue said.
"And, there really isn’t a good reason for these anomalies. They just exist."
Dirk Laudan, a construction attorney with Borden Ladner Gervais who is also working on the project, said another major issue has to do with how the act deals with holdback accounts.
"What the ’97 act brought in was the idea, the requirement that you have to have a segregated account, where you keep the owner’s holdback from the general contractor," Laudan explained.
"What we have found since then is that if you have a major infrastructure project then you can have many millions of dollars retained in the account doing nothing during the course of the project,"
He said that because these are often borrowed monies, the cost of borrowing goes up.
These costs are then passed on to the public authority and, therefore, the taxpayer.
"It’s leading to significant cost implications that weren’t anticipated, at least on infrastructure projects," he said.
There are other smaller issues that Laudan said the institute wants to address.
This includes how to make lien proceedings more practical and beneficial to the construction industry.
For example, in the posting of securities for liens the owner or general contractor will post security for the lien in court. Currently, it’s done in a way that requires 14 days or more notice to the lien claimant and then a court proceeding. If you need more urgency, you have to go and ask the court for an urgent application.
"One of the thoughts is that if you are putting 100 per cent security of the lien, what’s the downside for the lien claimant?" Laudan said.
"He’s actually better off because he’s got money he can enforce against instead of trying to sell the project lands. So, why not just be able to go without notice into court and take it off on the same day?"
The project began in April last year after the institute formed a committee, which began work in June.
According to Blue, the entire process will take a minimum of two years.
The institute is hoping to get a document to the public for consultation by the end of the year and a final report published in mid-2016.