Contractors who are party to construction contracts in British Columbia should be across at least some of the basics of construction dispute law and the provisions of the Builders Lien Act.
This knowledge will help protect your business in case of a dispute and outline the legal options available for resolving issues, so that lengthy, expensive, and disruptive litigation can be avoided.
Although construction law can be complex, it can be broken down into a more easily digestible format that everyone can understand. Here is what you need to know…
Construction contracts
At the heart of any British Columbia building project is the construction contract. This defines the legal rights and obligations of all parties.
Well-written construction contracts also help to define the scope of work, how the parties will work together, agreed timelines, payment terms, insurance and indemnities, change orders, warranties, and guarantees, termination clauses, and processes for dispute resolution.
To be legally valid, construction contracts must comply with BC construction law. This generally means having contracts drafted and reviewed by the appropriate legal counsel.
Understanding prompt payment legislation in BC
The British Columbia government introduced prompt payment legislation in 2019 under the Builders Lien (Prompt Payment) Amendment Act.
While the prompt payment legislation has not passed into law yet, many commentators suggest that it could be enacted as early as fall 2025. Contractors should be across the main points of the proposed laws because they are the main beneficiaries.
The legislation aims to establish mandatory payment timelines for construction projects. This should ensure that contractors and subcontractors are paid promptly for their work. Under the proposed terms:
- Owners must pay contractors within 28 days of receiving an invoice.
- Contractors must pay subcontractors within seven days of receiving payment from the owner.
Disagreements are a relatively normal part of construction projects and should be expected. However, lengthy disputes can be highly disruptive to projects and should be prevented or resolved quickly should they arise.
Contractors must, therefore, familiarize themselves with the main methods for resolving construction disputes:
- Negotiation: Many disputes can be resolved simply by the parties discussing the issue(s) and negotiating a mutually acceptable resolution.
- Mediation: The next step is usually mediation, where a trained and independent mediator facilitates discussions between the parties in an attempt to find a resolution (the decision-making power remains with the disputing parties).
- Arbitration: This is where a neutral third party (the arbitrator) hears the arguments from both sides and makes a legally binding decision that both parties agree to abide by.
- Litigation: The B.C. court system resolves the dispute, the matters become part of the public record, and a judge decides, usually resulting in a “winner” and a “loser”.
Construction dispute resolution methods
Understanding the Builders Liens Act
The BC Builders Lien Act provides contractors, subcontractors, and suppliers with certain protections if they are not paid for their work or materials.
Under the terms of the Act, contractors, subcontractors, or suppliers can file a lien against a property to which they have provided work or materials, providing a security interest in the property until they are paid.
The lien must be filed in the land title office within 45 days of the date of completion, abandonment, or termination of the construction project. More details about how to register a claim of lien follow.
Registering a claim of lien in BC
Section 2 of the Builders Lien Act provides the legal right for contractors to register a claim of lien. As already noted, the claimant must first file a claim with the land title office using the appropriate form within 45 days of a triggering event, such as:
- The issuance of a certificate of completion.
- Abandonment or termination of the head contract.
- Abandonment of the project.
- Conveyance of a strata lot.
The claimant must also start a lawsuit to seek enforcement of the lien within one year of the filing. Otherwise, the claim will be “extinguished”.
The owner of the property (the subject of the builder’s lien) can advance the process and reduce the one-year timeframe by serving a notice to commence an action. The lien claimant must then begin a lawsuit to enforce the lien within 21 days of receiving the owner’s notice.
How to remove a builder's lien in BC
Owners and other subjects of lien claims can legally remove the lien from title in some circumstances. This action can allow the owner to dispose of the land/property but will only be approved by the court if it preserves the contractor, subcontractor or worker’s security.
The main ways to remove a lien are as follows:
- Apply to the court to post money, lien bonds or letters of credit as security for the lien claim. If approved, the claim of lien is removed but the dispute may continue.
- Apply to the court to remove the lien because of one of the following:
- The lien claimant failed to comply with the deadlines for filing either the claim of lien or the lien enforcement action.
- The lien claimant’s action to enforce the lien is dismissed or discontinued.
- The debt has been paid in full.
- The claim of lien does not relate to the correct parcel of land.
- The claim is vexatious, frivolous or an abuse of process.
Enforcing construction timelines in BC: A case study
To illustrate the importance of understanding the legislation concerning construction disputes and, in particular, the timelines concerning builders’ liens, it helps to consider a recent case study from the BC Supreme Court.
In Clough Pacific Joint Venture and PPM Civil Contractors, ULC v AECOM Canada Limited, an application to cancel builders’ liens for being filed beyond the 45-day deadline was dismissed because a certificate of completion and the related notice did not comply with the required timelines under the Builders Lien Act.
Why was the case dismissed?
Under the terms of the Builders Lien Act, a certificate of completion must be issued within 10 days of the date of the request by a contractor or subcontractor, provided the work is complete. If a certificate of completion is issued, notice of the certificate must be posted on the project site within seven days.
In the case in question, Clough Pacific was the contractor and AECOM the sub-contractor. A payment dispute arose, and AECOM filed two builders’ liens against the contractor. Because of the failure of the contractor to meet the timeframes for issuing the correct documentation, the case for the removal of the liens was dismissed, even though the liens were filed after the standard 45-day timeframe specified in the legislation.
This case demonstrates the importance of understanding and observing the timelines and other provisions of the Builders Lien Act, should disputes arise. The BC court system will apply the legislation rigidly, so it is best to seek reliable legal advice from an attorney with intimate knowledge of local construction laws.
For a free 30-minute consultation about your legal options during a construction dispute in BC, contact the team at Legalbird today
