Builders Lien Removal in BC: Sections 23 and 24 of the Builders Lien Act Explained

Written by Adrian M. Alden

A Builders Lien Has Been Filed: What Are Your Options?

A sale is fast approaching. The project lender will not release the next advance under a construction loan. Or you have completed your work, but the contractor in the contractual hierarchy above you is withholding payment because one of your suppliers or subtrades has filed a lien.

For owners, developers, contractors and subcontractors, a builders lien can turn a disputed invoice into a much larger business problem. A relatively modest claim can disrupt financing, delay a sale, strain project relationships and leave money tied up when it is needed for payroll or the next project. The immediate priority is often to remove the lien while preserving your ability to dispute the amount claimed. British Columbia’s Builders Lien Act provides mechanisms to do exactly that, without first resolving the underlying payment dispute.

Section 24 of the Builders Lien Act: You Do Not Have to Own the Property to Address the Lien

Contractors and subcontractors can find themselves caught between a claimant below them and an owner or general contractor demanding that the lien be removed with urgency. A glazing subcontractor may face a lien from its supplier, or a general contractor may face one from an electrical subcontractor it engaged. In either case, the contractor or subcontractor may be under significant contractual and commercial pressure to clear the lien from title to the owner’s property.

Section 24 is not limited to property owners. A person against whose land a lien has been filed, as well as a contractor, subcontractor or other person liable under a contract or subcontract connected with the improvement, may apply to the Court to have the lien cancelled upon providing sufficient security. The Court determines what security is satisfactory after considering the relevant circumstances, and the Act expressly permits the amount of security to be less than the face value of the lien.

Where an urgent closing, financing advance or payment is being held up, security equal to the full amount of the lien is often proposed to simplify and expedite the application. However, whether a lesser amount may be appropriate should be considered before funds are committed. For a contractor or subcontractor awaiting a substantial progress payment, taking control of this process rather than waiting for another party to act can be particularly valuable.

Clear Title While Preserving Your Position

Under section 24, security is substituted for the lien against the land. Posting security does not constitute an admission that the claimant is entitled to payment. The underlying dispute remains to be resolved.

Depending on the circumstances and the terms of the Court order, security may include cash, a letter of credit or an acceptable lien bond. Lien bonds can be particularly useful where tying up cash would create unnecessary pressure on working capital. Where appropriate, Sportschuetz & Company can connect clients with a bonding agent to assist with obtaining lien security.

Before choosing the form of security, it is worth considering who will provide it, the impact on current and anticipated cash flow, the availability of bonding facilities and the urgency of the application. It is also important to consider which form of security may accrue interest while deposited with the Court, since such interest can often be used as leverage during future negotiation.

Can the Lien Be Removed by Consent?

An early discussion with the lien claimant or their lawyer may avoid a contested Court hearing. The parties can agree on the amount and form of security and submit a Consent Order for Court approval. The terms should be carefully drafted, including provisions dealing with the form of security and its eventual release.

Consent discussions should not consume the time needed to meet a commercial deadline. Where a closing, financing advance or contractual payment deadline is approaching, the Court application can be prepared while negotiations continue.

What if the Claimant Refuses, or the Deadline Is Urgent?

A lien claimant’s refusal to consent does not prevent an application under section 24. The Court can order the lien cancelled upon the provision of security satisfactory to the Court.

Where the ordinary timetable would create serious commercial consequences, it may be appropriate to seek short leave, meaning permission to have the application heard on shortened notice. The evidence should clearly explain the urgency, the consequences of delay and the proposed arrangements for providing notice to the lien claimant.

A self-represented claimant can also consent to an order. If consent cannot be properly documented, or a contested hearing is required, an approaching sale, financing advance or payment deadline may make short leave necessary.

Could Section 23 of the Builders Lien Act Reduce the Amount Required?

Before committing funds to a section 24 application, it is worth considering whether section 23 provides a more economical route. For qualifying lien claims, an owner, contractor or subcontractor may apply to pay money into Court and have the liens removed. The amount is generally the lesser of the total filed lien claims and the amount owing by the applicant to the person through whom the liens arise, provided the statutory requirements concerning the required holdback are satisfied. Section 23 does not apply to a class of lien claimants engaged directly by the owner.

This means section 23 can sometimes allow liens with a significant combined face value to be removed by paying substantially less into Court. Payment under a section 23 order discharges the owner from liability in respect of the affected lien claims, the money paid into Court stands in place of the land and the liens are removed from title.

Where several suppliers or subtrades have filed liens, choosing between sections 23 and 24 can make a substantial difference to the amount of working capital tied up. We review the contracting chain, payment history, amounts remaining owing and holdback position early to determine which mechanism is more practical.

When Does a Negotiated Settlement Make More Sense?

Sometimes, negotiating payment of an amount less than the face value of a lien claim is the most commercially effective way to remove the lien and bring the dispute to an end. That decision should be assessed against the underlying records, including the agreed scope, invoices, payments, change orders, deficiencies and back charges.

The broader commercial comparison also matters. How much payment is being withheld because of the lien? What will security cost? How quickly can the lien be removed? How much management time will the dispute consume? Those considerations help determine whether a proposed settlement represents commercial value.

Where sensible settlement terms are unavailable, securing the lien can solve the immediate title problem while preserving the ability to defend the claim and advance any counterclaim.

A Practical Response, From Lien Removal to Resolution

Our approach to builders lien removal brings the legal and commercial objectives into a single strategy. We assess the available statutory route, coordinate security and Court materials, pursue consent where practical and seek an urgent hearing where necessary.

Once the lien has been removed from title, we can continue with negotiations or litigation concerning the underlying payment dispute. Where the lien itself may be legally improper, we also consider whether an application under section 25 is available to have it cancelled, including where the claim is vexatious, frivolous or an abuse of process.

If a lien is affecting your property, placing you under pressure from the contractor above you, delaying a financing advance or standing in the way of payment, send us the lien, the relevant contract or subcontract, and any demand or approaching deadline. Those documents usually allow us to quickly identify the available options and develop a practical path toward removing the lien.

This publication is for general information only and does not constitute legal advice. Contact Adrian M. Alden at aalden@sportschuetz.ca for a consultation concerning builders lien removal.