This blog post will answer key questions that property owners, general contractors and sub-trades may have regarding a builder’s lien claim.

What is the purpose of a builder’s lien?

The Builders Lien Act’s purpose is to “create charges against the land in favour of those contractors, suppliers and workers who can prove their claims” (see paragraph 19 in Stuart Olson Dominion Construction Ltd. v. Structal Heavy Steel, 2015 SCC 43.)

“In favour” does not mean the legislation tilts towards protecting the liens encumbering landowner’s properties; as we will show below, there are several routes that landowners can apply to have the lien replaced with security, to have lienable amounts reduced if the amounts were exaggerated, or to have the lien cancelled altogether.

However, given the importance of the construction industry in the British Columbia economy and to protect the integrity of the financial relationships in that industry, legitimate liens are a powerful tool to ensure the work that the trades put in are promptly paid.

A builder’s lien is therefore a security to protect the work done by the workers and the material suppliers with a goal to ensure that they will get paid if their claim is proven. In JVD Installations Inc. v. Skookum Creek Power Partnership, 2022 BCCA 81 (at paragraph 42-43), the Court of Appeal for British Columbia stated the objective of the Act “is to prevent owners of the land getting the benefit of buildings erected and work done at their instance on their land without paying for them” and to ensure that “the land which receives the benefit shall bear the burden”.

To further re-enforce the financial integrity of the lien system, Sections 4-5 in the Builders Lien Act further created the mandatory 10% holdback – money held back from landowners’ payment to the general contractor, that can only be disbursed later to pay the subtrades and suppliers.

Claims against the holdback is a separate claim against a security as opposed to the builder’s lien, which many lien claimants miss.

What is lienable?

Given the above clear objective of the Builders Lien Act, the next logical question to ask, is what is lienable?

Section 1 of the Builders Lien Act provides the key definition on what is lienable:

“improvement” includes anything made, constructed, erected, built, altered, repaired or added to, in, on or under land, and attached to it or intended to become a part of it, and also includes any clearing, excavating, digging, drilling, tunnelling, filling, grading or ditching of, in, on or under land;

Ordinarily, if the improvement bears on the land against which a lien is filed, little controversy can come out of it.

It becomes less clear if the improvement is not directly on that piece of land: instead, it was on an adjacent piece of land, or sometimes, the improvement was not physically connected to the improved land.

In JVD Installations Inc. v. Skookum Creek Power Partnership, 2022 BCCA 81, the Court of Appeal confirmed the reasoning that if an optic conduits were constructed to connect data centres, the builder’s lien is not restricted only to the value of the land on which the data centre was build (at paragraphs 49-50), because “the conduits installed both inside and outside the boundaries of the Property constitute a single improvement, one that provides an extremely valuable direct and essential benefit to the Owner”.

the Court of Appeal considered that an important factor was consistent with the objective of the Builders Lien Act : the intention of the owner and the contractor (at paragraph 49) that the conduits were “directed to, or done to advance, the work project”.

In JVD Installations Inc. v. Skookum Creek Power Partnership, 2022 BCCA 81, the Court of Appeal rejected the simplistic “interdependence” approach that the trial judge acceded to (at paragraph 58):

[52]       The plaintiffs take the view that Boomars, Pedre and Sandhill stand for the proposition that if improvements are “interdependent”, they will be treated as a single improvement for the purposes of the Builders Lien Act and can found a lien against any of the properties on which they are constructed. In my view, those cases do not stand for that broad proposition. Further, that proposition ignores the underlying rationale for the Builders Lien Act, as expressed in Kettle Valley.

[53]       This Court has not, to date, endorsed the proposition that improvements situated outside the boundaries of a parcel of property can form the subject of a lien against that property. There is, however, some attractiveness to the idea that where an improvement situated on a parcel of land also extends beyond its boundaries, the entire improvement may be the subject of a lien against the parcel if its only function is to enhance the value of the liened parcel.

[54]       If that proposition is a sound one, however, the plaintiffs’ claim does not meet its requirements. While the power plant and the transmission lines in this case are connected and there is a high degree of interdependence between them, they cannot reasonably be classed as a “single improvement”. They are functionally distinct, physically remote from one another, and were constructed by different subcontractors at different times.

In other words, the test on what is lienable adopted by Justice Groberman in this appeal is to go back to the objective of the Builders Lien Act, as to what the improvement was intended, not only by the contractors but also for the owners, for the land in question. The analysis is done from a reasonable third-party’s perspective on the facts. The facts in JVD Installations clearly did not meet that requirement, as the “transmission lines” landowner did not intend to build the transmission lines to benefit the separate power plant, which explains why the constructions were done by “different subcontractors at different times”.

The Court of Appeal further limited what is lienable – this soundly balances the interest of the landowner with that of the contractors:

[55]       Even if works that extend beyond a property boundary might be classified as a “single improvement” for some purposes, that will not mean that a lien for the entire cost of the improvement should be available to be claimed against any of the properties on which a part of the improvement is situated. While it is important that the statute be interpreted in a manner that provides protection to contractors, subcontractors, workers and material suppliers, it is also important that it not be interpreted in a manner that penalizes owners of land who receive little or no benefit from having some connection to improvements constructed on other properties.

Does “strict interpretation” apply to the Builders Lien Act?

Strict construction or interpretation of a legislation means how judges are to interpret the law: a “strict” reading of a law means the judge will have little leeway in interpreting the wording from what the legislature put in the legislation.

This issue came up at paragraph 34 in JVD Installations Inc. v. Skookum Creek Power Partnership, 2022 BCCA 81 where the trial judge misread the law laid down by the Supreme Court of Canada and the Court of Appeal. In fact, in Iberdrola Energy Projects Canada Corporation v. Factory Sales & Engineering Inc. d.b.a. FSE Energy, 2018 BCCA 272, the Court of Appeal clarified that today, there is only one approach in interpreting the law:

[28]        The era of strict construction is now largely behind us. In Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27 at para. 21, the Court adopted Elmer Driedger’s “modern rule” of statutory interpretation as the best encapsulation of the correct approach to statutory interpretation in Canada:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

In the reasons for Iberdrola Energy, written by Justice Groberman again, the Court of Appeal considered a narrower reading of the rights to lien created by the Builders Lien Act to be appropriate, because it is consistent with the objective of that legislation:

[33]        Certain passages of the judgment of this Court in Bank of Montreal v. Peri Formwork Systems Inc., 2012 BCCA 4 [Peri Formwork], may appear to support a different approach to the Builders Lien Act. In particular, at para. 62 of that decision, the Court cites Clarkson and says that “because the Act creates new rights, the threshold question of entitlement is strictly construed; it is only once entitlement is established that the Act is to be construed liberally and with consideration to its remedial purpose.” Taken in isolation, this passage appears to suggest a retreat from the Bell ExpressVu approach in favour of the tradition of strict construction.

[34]        In my view, Peri Forwork does not signal such a retreat. The decision is entirely consistent with Bell ExpressVu. In Peri Formwork, this Court began by applying Driedger’s modern rule of statutory interpretation to the sections of the statute that were in issue. It carefully analyzed the purpose of the statute, the language of the provisions under consideration, and their specific role in the statutory scheme. While the Court did consider that certain provisions needed to be construed narrowly, it did so only after a thorough analysis of the Act. It found that a narrow construction of some “entitlement” provisions was “consistent with concern for certainty and fairness to all stakeholders in the construction industry” (at para. 62), which was fundamental to the interpretation of the statute.

Applying the law to the facts, pursuant to Section 20 and 22 of the Builders Lien Act, a builder’s lien for instance must be filed within 45 days after the completion of the project; missing this deadline, the lien is said to be extinguished. Since this right to a lien was created by statute in favour of a contractor, these sections must be narrowly construed in that judges do not have discretionary powers to extend the filing deadline or change the formalistic requirements, as the law provided no such discretion.

What is the lienable amount?

Section 2 of the Builders Lien Act states that a contractor “has a lien for the price of the work and material, to the extent that the price remains unpaid”.

Plainly put, only unpaid material and labour is lienable.

If a contractor or subcontractor placed a lien outside of these two categories, the lien may be removed or reduced.

Often, landowners affected by a builder’s lien apply under Section 24 of the Builder’s Lien Act to the court to have the lien to be replaced with a monetary deposit.

The court also has the power to reduce the amount of the security deposit pursuant to Section 24 (3). This Section is used when the applicant can prove that the lien amount is exaggerated, unsupported by evidence or it contained amounts that were expended for things other than construction material and labour.

When the lien claim was entirely false, and the lien claimant abuses the court’s process in filing the lien, Section 25 (2) of the Builders Lien Act states:

(2) An owner, contractor, subcontractor, lien claimant or agent of any of them may at any time apply to the court and the court may cancel a claim of lien if satisfied that

(a) the claim of lien does not relate to the land against which it is filed, or

(b) the claim of lien is vexatious, frivolous or an abuse of process.

Darwin Construction (BC) Ltd. v. PC Urban Glenaire Holdings Ltd., 2023 BCCA 436 was a case in which the landowner alleged that the contractor’s lien amount was exaggerated and the exaggerated lien amount was an abuse.

The Court of Appeal set out a 2-staged test (at paragraphs 71-72):

  1. under S. 25, whether the claimant can pass the low threshold as to whether an arguable lien was claimed – that it was not bearing on a land on which no improvement was made (as discussed above), it was filed within the deadline etc.; and
  2. If the claim passed the 1st-stage test, the court is then required to consider the entire evidence to determine whether the lien amount should be reduced – the court is to take into consideration that some of the evidence may not be available to the claimant, the threshold to prove the lienable amount being reasonable therefore is not high.

The second stage test focuses on facts which the lien claimant can prove. In Darwin Construction (BC) Ltd. v. PC Urban Glenaire Holdings Ltd., 2023 BCCA 436, the lien claimant had multiple opportunities to present evidence to substantiate the claimed amount which the claimant did not. In paragraphs 109-111, the Court of Appeal confirmed that due to the absence of evidence to meet the above Sections 25 and 24 tests, the $3 million lien as claimed was frivolous and it abused the court’s process, and the lien therefore was cancelled.

Builder’s Lien Considerations for Contractors

In summary, for lien claimants, the following important are to be kept in mind when filing a builder’s lien against land:

  • The builder’s lien must be the result of improvements made to the land which remains unpaid for;
  • The lienable amount consists of material and labour costs only;
  • The claimant should produce as much evidence as possible to substantiate the claim; and
  • The lien must be filed within the 45 days’ deadline using prescribed forms.

Builder’s Lien Considerations for Landowners

For landowners, the following principles are key to minimize the pressure imposed by a builder’s lien:

  • If a landowner is under pressure from the mortgagee (the bank) to remove the lien, or there is an impending sale of the land, the landowner can apply to court to replace the builder’s lien with a security deposit; and
  • If the landowner knows that the lien claim was for things other than material and labour, or it was claimed against a piece of land on which no improvements were made, or the claimed lien amount was exaggerated, the landowner can apply to court to remove the lien, or to have the lien cancelled altogether.

Contact Roland Luo in Vancouver for Tailored Legal Advice on Builder’s Lien Issues

Builder’s lien litigation is a very technical matter that requires a thorough understanding of what the liens are for, which piece of property can be liened, when and how a lien can be claimed and sustained, and requires a thorough understanding of the life of construction project. With 20 years of experience in the modern construction industry, Roland Law has extensive expertise helping clients resolve litigation issues. We also have experience representing industrial and residential builders, as well as institutional and individual landowners.

If you have questions regarding your construction projects, contact Roland Law by phone at (604) 800-4623 or reach out to us online.