Removing a Lien by Posting Security

Once someone has filed a builders lien and started litigation, there are only a few ways that the builders lien is going to be removed from the title of the property on which the lien is registered. If there are defects in the lien, the owner of the property can apply to have it removed. Assuming that there are no defects, then the owner could potentially be stuck with the lien on title until the litigation is resolved and any judgment obtained by the lien claimant is satisfied. Of course, this poses a potentially huge problem for the property owner, who may want to clear the title of their property to arrange for new financing or to sell the property.

 

The Builders Lien Act [SBC 1997] c. 45 (the “Act”) creates two options for the property owner or other parties interested in the property to clear the lien from title. Section 23 of the Act allows removal of a lien upon paying into court the total amount recoverable under the lien. That amount will either be the total amount of the lien claim, or, in some circumstances, the amount that is owed by the person depositing security to the person who hired the lien claimant. The latter set of circumstances arises when the lien claimant was hired by a contractor or subcontractor, and the person seeking the discharge of the lien is an owner or someone higher up the contractual chain who has no direct contractual relationship with the lien claimant. Section 23 provides an easier avenue to have the lien discharged if you can provide the required amount of security, which will then be held in court until the lien claim is dealt with or the matter settled.

 

In many cases, it is cost-prohibitive to put up the full amount of the lien claim as security. The lien might be for an amount that seems excessive, or even if the amount doesn’t seem excessive it might be too large to place the full amount in court. Section 24 gives the court a broader ability to cancel a claim of lien if an owner, contractor, subcontractor, or other interested party posts security that the court considers sufficient for payment of the claim of lien. The concept of “sufficient security” opens up a broader range of alternatives than putting up cash as security. Two common forms of alternative security are letters credit and lien bonds.

 

Letters Credit

Letters credit are issued by a bank, and are essentially the bank’s guarantee that payment will be made. In the case of a lien claim, the bank would guarantee that the lien claimant’s judgment will be paid if the court awards judgment to the lien claimant. Banks are risk averse, and are often reluctant to issue letters credit in lien claims unless they have a long-term relationship with the party seeking letters credit. Many banks require 100% cash security as between the bank and the party who requested the letter of credit, and for this reason it is often impractical to use a letter of credit as security for a lien claim.

 

Lien Bonds

The more common alternative is a lien bond issued by an approved surety company. The Registrar of the Supreme Court of British Columbia maintains a list of companies approved to act as sureties. Those companies can issue bonds promising to pay the amount of any judgment obtained by the lien claimant, and those bonds can then be filed with the court to secure the removal of the lien under section 24 of the Act. The surety companies charge a fee for issuing the bond, and also require security to ensure that they will be paid back if they are required to make good upon their bond. That security however is usually less onerous than the 100% cash security often required by banks, making lien bonds a practical alternative to putting up 100% cash security.

 

Having a lien removed from the title of the property is often imperative, particularly when it can take some time for a lien case to go to trial and be finally resolved one way or the other. Construction projects usually involve financing that makes it necessary to deal with any lien claims before the next financing draw can be issued. The Act provides two avenues for the owner or other interested party to clear title by providing security, and both of those alternatives are designed to ensure that the lien claimant is not prejudiced by the removal of their lien from title.

 

If you are looking to have a lien removed, it is always useful to contact a lawyer and utilize the guidance and knowledge they offer. Contact us today to find out how we can help.

 

About the Author

Cadeyrn Christie is a civil litigation lawyer and business lawyer with Velletta & Company. A former tradesperson, business owner, and high performance athlete, Cadeyrn focuses his practice on providing dynamic representation to individuals and businesses.

Since joining Velletta & Company, Cadeyrn Christie has helped clients achieve cost effective legal solutions in a wide variety of contentious matters, including business disputes, debt collections, personal injury litigation, real estate disputes, and construction litigation. Cadeyrn has represented clients at all levels of court in British Columbia, including conducting an appeal in the British Columbia Court of Appeal.

Builders Liens and How to Get Paid in Construction

Builders_Lien

The construction industry is one of the places where disputes often arise over unpaid bills, the scope of work, and whether or not work is done correctly. The end result is that tradespeople are often left fighting to get paid for the work that they performed on a project. Add in the fact that many construction projects are done based on a verbal agreement and a handshake, and you have a recipe for contentious disputes. Even worse, if you are a subcontractor, the head contractor with whom you reached an agreement might go bankrupt, leaving you with a dry judgment that cannot be easily enforced.

 

The law has evolved to recognize that disputes often come up in construction, and that there are unique factors that may make it difficult to get paid. The culmination of the legal solution to this problem is the British Columbia Builders Lien Act (the “Act”). In order to protect contractors and subcontractors, the Act establishes special remedies. In order to qualify for these remedies, you must comply strictly with the Act. If you miss a deadline or make a mistake in filing your lien, your lien will likely be invalid and may be struck if the owner of the property, or anyone else interested in the lien claim, takes you to court. If you lose in court, you may also have to pay the successful party’s legal fees.

 

The Act allows a person who supplies work or material to an improvement on a property, and has an unpaid invoice, to file a builders lien against the title of the property. The lien then goes on the title, like a mortgage or other encumbrance. People who search the title of the property, such as people who are interested in purchasing the property, will see the lien and be alerted to your claim.

 

Once you have filed your lien, the owner of the property and any head contractor may be more willing to negotiate the payment of your invoice. If filing the lien is not enough and there is still a dispute, then You may ultimately have to take your case to court and enforce your claim of lien.

 

The lien gives you security for your claim, against the title of the property that you worked upon. Even if the head contractor goes bankrupt, and you have no contract directly with the owner of the property, you can still potentially recover at least part of your unpaid invoice from the owner. This may seem unfair to owners at first, but keep in mind that the tradespeople who worked on the property improved the property and presumably increased its value.

 

Unfortunately, while the Builders Lien Act provides valuable protection to tradespeople, it also is extremely complicated, and cannot be fully explained in a short article. The Act also involves a series of holdbacks kept all the way down the chain from the owner, to the head contractor, and to the sub-contractor. Unfortunately, these holdbacks are often not dealt with properly, especially on smaller projects where the parties may be used to doing things more informally. If the holdbacks are dealt with improperly, it can further complicate matters.

 

If you are facing a builders lien issue, it likely makes sense to consult with a lawyer. There are tight timelines involved, and if you fail to file your lien within the timelines, then you may completely lose the right to file a builders lien. In some situations the deadline can be 45 days from when you finish the job. This makes it a very tight timeline indeed when you factor in that many invoices are not due and payable until 30 days after they are issued. Because of these tight timelines, you should talk to a lawyer as soon as possible If you get the suspicion that your invoice is not going to be paid on time.

 

If you are facing a builders lien situation, Velletta & Company offers a free consultation to discuss your situation and how we can help you obtain payment for your invoice.

 

Cadeyrn Christie is a civil litigation lawyer and business lawyer with Velletta & Company. A former tradesperson, business owner, and high performance athlete, Cadeyrn focuses his practice on providing dynamic representation to individuals and businesses.