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The following is no substitute for advice provided by a lawyer specifically for you. It is intended only to help you understand that advice. No responsibility is taken for any problems arising except due to paid legal advice.

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Construction Law

Builder's Lien Act


The Act itself

The area of construction law was considered by the government to be rife with fly-by-night operators, leaving innocent people holding the bag. So, the Builder's Lien Act was passed, to add on some extra rights and responsibilities, and to extend duties beyond those of normal contract law.

To understand it, it is essential to keep in mind that the chain of contracts might be very long, from owner, to contractor, to sub-contractor, to sub-sub-contractor, etc. This Act permits those below, to claim against any or all of those above.

Trust

The first feature of the special system set up by the Builder's Lien Act, is that any moneys received for the work must be kept in trust. That might include the government's matching grant. There are exceptions. Normally work done for personal household repair is excepted.

Anyone who does work on the land, even if the owner has no direct agreement with them, may claim against the trust if they are not paid. The right to claim against this trust expires after a year unless a court action is begun. The trust will be divided according to priorities set out in the Act.

The trust can be paid out 40 days after the job is done or abandoned provided there were no notices of claim and no liens registered.

Holdback

The second feature is the holdback. Nobody can legally pay more than 90% of what is owing until 40 days after the job is done or abandoned. Then the rest can be paid unless there are liens registered or there have been "Written Notices" delivered before the actual payment. If there has been a Notice of Lien, then the 10% holdback may be increased.

The holdback is intended to protect contractors 'down the chain' of contractors where someone above them in the chain fails to pay. If the proper holdback is not kept, the payer will become personally responsible to those below him in the chain.

If you ever work for a contractor, and not directly for the owner, be sure to get me to put a lien on the property before 40 days are up! That ensures that the owner pays you if any of the contractors 'above' you don't pay. However, sometimes this will interfere with financing of the project or be contrary to your contract. In these cases, good legal and financial judgment is crucial.

If you are paying for work, you should get me to check the title before you make final payment whenever your sub-contractors hire further sub-contractors! Otherwise, their sub-contractors might force you to pay them even if you've already paid the sub-contractors you actually hired.

Again, there are exceptions. See your lawyer.

Lien

The third feature is the lien, which is necessary for a claim against the holdback or for breach of the trust, but also is simply an ordinary lien against the property.

It lasts until the owner delivers a Request to the Registrar to Lapse to the Land Titles Office Registrar, who then lets the lien-holder know that if he doesn't start a court action against the owner within a certain number of days the lien comes off. Once the court action is started, it must be set down for trial within two years or the lien holder automatically loses the lien. The lien will not protect a claim for interest.

Some cases say that you must start the court action within a certain period of time. See your lawyer.

Contract

Your ordinary rights to sue and be sued are unchanged however. Therefore, you can claim interest, it just isn't protected by the lien. You can claim after 40 days, you just can't expect those above your debtor in the chain to pay you.

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