Builders Lien Issues for Design Professionals

12 important questions on Builders Lien Issues for Design Professionals

What is a Lien?

Claim against assets that are typically used in collateral to satisfy a debt
Serves to guarantee an underlying obligation
If obligation is not satisfied, creditor can seize the asset that is the subject of the lien

What is a Holdback?

Fund for the subtrades, a defence for the owner and the last 10% of general contract price

What is the value of a holdback? When is it not necessary?

  • 10% the value of completed work
  • Mandatory unless under $100,000 or provincial government
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What is the lien filing period?

45 days

What is the holdback release period?

55 days

What are the triggering events for filing a lien or holdback release?

  • Issuance of certificate of completion of a contract or subcontract
  • Completion or abandonment of the improvement

What is the criteria for substantial completion?

  1. Head contract, contract or subcontract - 3-2-1 percentage of cost to complete formula
  2. Improvement
  3. Strata lot - treated separately - conveyance to first purchaser

What are the cornerstones of the builder's lien act?

  • The Lien - right that the person has improved the property and has the right to file a claim
  • The holdback - reatin 10% on each progress payment for 55 days for unpaid subcontractors if they don't file a lien
  • The trust - not the same as holdback - owners pay contractors fund to pay subcontractors - if funds are misappropriated, this is a breach of trust - can pierce corporate veil

What is the process for acquiring substantial completion?

  • Within 10 days of request by contractor/subcontractor, determine completion/issue certificate
  • Within 7 days of certificate, deliver copy and post notice

What are some of the issues with certification?

- Certification and Notice forms
- Accuracy and completeness
- Effective as of the date of issuance

What is the design professionals' liability in regards to the builder's lien act?

  • Knowledge of the Act
  • Client compliance with Act
  • Certification of payment, completion and holdback release

What are the liens of a design professional? How does it differ from Builders' lien?

Claim against property on which the claimant has bestowed labor. Affords design professionals lien rights when no actual construction of planned work has commenced.
NO HOLDBACK.

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