Lien waiver (Builders Lien Act)

How BC law treats it

Section 42(2) of the Builders Lien Act, SBC 1997, c 45 provides that an agreement that the Act does not apply, or that its remedies are not available for the benefit of the person entering into the agreement, is void. A clause in a construction contract or subcontract that waives future lien rights, or a waiver signed as a condition of a progress payment, therefore does not take away the contractor's right to file a claim of lien. The lien right survives, subject to the 45 day filing deadlines in s. 20. Signed progress payment lien waivers are a US practice and do not work the same way in BC. BC owners protect themselves through the holdback scheme: the owner retains a holdback from each payment, and for larger contracts holds it in a holdback account, so the owner's exposure to lien claimants is generally limited to the holdback if it pays properly. Owners and lenders also ask contractors for statutory declarations confirming that subtrades and suppliers have been paid. Once a claim of lien has been filed, it can be removed from title by posting security, by court order, or where the claimant fails to start an action and register a certificate of pending litigation within one year (ss. 23 to 25 and 33). A claimant who has been paid can also discharge its own filed claim. Whether a release given in settlement of an existing, filed claim is caught by s. 42(2) depends on the facts and should be reviewed before it is relied on.

What it means for your business

Owners, developers and lenders who rely on US style lien waiver forms may believe they are protected when they are not. Contractors and suppliers should know that signing a waiver does not end their lien rights in BC, but they still must meet the 45 day deadline. Getting the holdback, statutory declaration and payment process right is what actually controls lien exposure on a BC project, and it is often a lender's condition of each construction draw. Example: A Langley developer requires its framing subcontractor to sign a waiver of lien rights with every progress invoice. When a final payment dispute arises, the subcontractor files a claim of lien within 45 days and the waiver is no defence because s. 42(2) makes it void.

Risks and common mistakes

Relying on signed lien waivers instead of retaining and managing the statutory holdback. Using US lien waiver templates on BC projects without adapting them to the Builders Lien Act. A contractor assuming that a signed waiver ended its rights and missing the 45 day filing deadline. Releasing holdback funds early on the strength of a waiver, which leaves the owner exposed to subtrade liens. Failing to obtain statutory declarations of payment before releasing progress payments or holdback.