A clear understanding of the time limits for filing a lien under the Builders Lien Act, SBC 1997, c 45 (the “BLA”) is critical for any construction professional in BC. Section 20 of the BLA provides that a claimant has 45 days from the date that either a certificate of completion has been issued, or the date that a “head contract” or the “improvement” is completed, abandoned or terminated to file a claim of builders lien. This 45 day deadline is strictly enforced given the significant impact of builders liens to owners and construction projects.
In a 2022 decision of our court, Stoneworks Marble & Granite Ltd. v. Edgeline Construction Ltd., 2022 BCSC 1096, [Stoneworks], a material supplier filed a lien where there was no certificate of completion issued or “head contract”. The Court in that case found that the 45 day lien period began running on the completion of a material suppliers’ scope of work. Recently, however, the BC Supreme Court in TDM Excavating & Contracting Ltd. v 1046416 B.C. Ltd., 2023 BCSC 944, [TDM Excavating] clarified the law on when the 45 day lien period will begin to run for work in the absence of a “head contract”.
The underlying dispute in TDM Excavating arose in connection with a contract between the TDM Excavating & Contracting Ltd. (“TDM”) and 1046416 B.C. Ltd. (“104”) whereby TDM would perform initial excavation and civil works required to obtain building permits for a planned subdivision (the “Work”). Pursuant to the contract, TDM performed the Work on improvements being constructed on various lots of the subdivision, including lots later sold to individual and corporate owners. (TDM resolved its dispute with some but not all of the purchasing owners before summary trial.)
On November 6, 2019, TDM filed a claim of lien (the ”Lien”), against the subdivision lands for work performed in or around summer or early fall 2019. 104 and the defendant owners took the position that the Lien was invalid as the contract with TDM and 104 was a “head contract” and the Work was completed in July 2019, and therefore that the Lien was filed outside the 45-day lien period.
“Head contract” is not defined by the BLA, but “head contractor” is defined as a “contractor who is engaged to do substantially all of the work respecting an improvement, whether or not others are engaged as subcontractors, material suppliers or workers”.
The Court in this case was tasked with determining when the lien period began to run, and, whether or not the Lien had been filed out of time. As no certificate of completion existed, this required consideration as to whether the TDM contract was a “head contract” and, if so, if it was completed more than 45 days before the Lien was filed, or, if not, if the “improvement” was completed more than 45 days before the Lien was filed.
104 and the defendant owners took the position that TDM was a “head contractor” and that TDM completed its work in the summer of 2019. As an alternative position, 104 and the defendant owners argued that as the purpose of the Work (the “improvement”) was limited to preliminary excavation and civil works required to obtain building permits, the Work (“improvement”) was completed in the summer of 2019 as that is when building permits for the subdivision lots began to be issued.
The Court disagreed with the arguments put forward by the defendants and found in favour of TDM.
First, the Court noted that, under the BLA, the measure of when a contract is completed requires an assessment of the value left to be completed on the contract. Specifically, section 1(2) of the BLA sets out the “3-2-1 Rule”: a contract is only substantially performed where it is capable of completion or correction of a cost of not more than 3% of the first $500,000 of the contract price, 2% of the next $500,000 contract price, and 1% of the balance of the contract price. On the evidence before the Court, the TDM contract was not completed based on the “3-2-1 Rule”.
Second, the Court found that the “improvement” was not completed more than 45 days before the Lien was filed.
Section 1(3) of the BLA provides that an “improvement” (defined as “anything made, constructed, erected, built, altered, repaired or added to, in or under land, and attached to it or intended to become part of it, and also includes any clearing, excavating, digging, drilling, tunneling, filling, grading or ditching of, in, on or under land”) is complete when all “or a substantial part of it is ready for use or is being used for the purpose intended”.
TDM argued that neither the Work nor the “improvement” were completed in the summer of 2019 as the Work was only a part of the intended “improvement”, namely, the development of the subdivision lots, none of which had structures erected on them in the summer of 2019. TDM relied on the decision of NR Excavating & Services Ltd. v. Mand, 2013 BCSC 723 [NR Excavating] for the proposition that excavation and civil services (which TDM provided) were not separate or distinct improvements under the BLA, but rather, properly understood as component parts of a larger improvement – in this case, the development as a whole. As TDM argued, when measured from completion of an “improvement” the 45 day lien period could only commence on completion of the planned development on the subdivision lots.
104 and the defendant owners argued that the decision of NR Excavating should not be followed and directed the Court to the decision of Stoneworks, where the Court concluded that “improvement” is to be understood as the specific work and services described in a lien claimant’s contract. Accordingly, as summarized above, the Court in Stoneworks found that the material supplier’s lien filing period began to run when its scope of work was completed.
The Court in TDM Excavating agreed with TDM that the “improvement” was not completed in summer of 2019, and accordingly, that the Lien was filed in time. In making these findings, the Court declined to follow Stoneworks in favour of the reasoning in NR Excavating. As noted by the Court, the decision in Stoneworks appeared to rely on a prior version of the BLA, and did not refer to relevant authority such as NR Excavating.
In making this decision, the Court provided clarity, confirming that that “improvement” in the BLA is understood as the entire functional structure of a project, not a specific scope of work.
This decision provides important clarity on the procedural requirements when filing builders liens on projects where no certificate of completion is issued and there is no “head contract”. In these circumstances, the 45 day lien filing period will likely begin to run on the completion or abandonment of the “improvement”.
This decision is also a good reminder to both owners and contractors to be aware of the lien filing periods on your projects.