British Columbia Court of Appeal Affirms Shimco Lien Principles

Background

For more than 20 years, British Columbia construction law has recognized that the Builders Lien Act creates two distinct forms of lien protection. The first, and by far the more familiar, is the claim of lien against the land and improvement being constructed or located thereon under s. 2 of the Act. The second is a separate lien against the statutory holdback itself.

The distinction was first established by the British Columbia Court of Appeal in Shimco Metal Erectors Ltd. v. North Vancouver (District), 2003 BCCA 193. The Court concluded that the wording of s. 4(9) of the Builders Lien Act creates an independent lien against the statutory holdback. That lien has since become commonly known as a “Shimco lien.”

A conventional builders lien under s. 2 attaches to the owner’s interest in the improvement, the improvement itself and the land upon which the improvement is located. To preserve that lien against the land, a claimant must file a claim of lien in the Land Title Office within the applicable statutory deadline. Once registered, the lien appears on title and can interfere with a sale, refinancing or other dealings with the property.

The Act provides specific mechanisms for removing that lien from title. Most notably, s. 24 of the Act permits an owner, contractor or other person liable under the construction contract to apply to court to have the lien cancelled upon posting security satisfactory to the court. Once security is posted, the lien is removed from title and the construction project can proceed without the lien continuing to encumber the land.

Section 4 requires each payer in the construction pyramid to retain a statutory holdback equal to 10% of the value of the work or payments made. For many projects, s. 5 further requires an owner to maintain its holdback in a separate holdback account at a savings institution. The Act provides that the holdback being retained by the owner is subject to lien rights and that money deposited into the holdback account is charged with payment of liens arising under the contractor from whom the holdback was retained.

Unlike the claim of lien registered against project lands, a Shimco lien is not registered against title. It is a lien against the holdback account itself. Importantly, it does not necessarily disappear simply because the claimant's lien against the land has expired, been cancelled or otherwise ceased to exist pursuant to the strict filing deadlines set out under the Act. The result is what the courts have described as a dual-lien structure. That structure was squarely challenged in Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd., 2025 BCCA 169.

The Kingdom Langley Decision and Section 24 Consent Orders

Kingdom Langley arose from a residential construction project in Langley. WQC Mechanical was a subcontractor to the general contractor, Metro-Can Construction, and remained unpaid for its work. WQC filed a builders lien against the land. Metro-Can subsequently posted a lien bond and obtained a consent order under s. 24 cancelling WQC's lien against title. Importantly, the consent order contemplated that the lien bond would also stand as security for WQC's claim against the holdback.

A dispute nevertheless arose over whether WQC could still look directly to the actual statutory holdback retained by the owner. The owner argued that it should not. In its view, WQC had accepted alternate security and should therefore be limited to recovering against the lien bond. In practical terms, the owner argued that the bond had replaced both the lien against the land and WQC's rights against the holdback.

The Court of Appeal rejected that position. A unanimous five-judge panel reaffirmed Shimco and confirmed that the Builders Lien Act creates separate liens against the land and against the statutory holdback. The Court further confirmed that a s. 24 security order deals with cancellation of a claim of lien filed against the land. Nothing in s. 24 provides that posting alternate security also cancels the separate lien against the holdback.

As a result, the fact that WQC's lien bond expressly provided security for the holdback claim did not mean that the actual holdback ceased to be available to WQC. The security was not a replacement for the statutory holdback. WQC remained entitled to pursue its proportionate entitlement directly from the holdback funds.

The decision has significant implications for the way conventional s. 24 consent orders are drafted. Historically, parties have often treated a s. 24 order as a relatively straightforward exchange. Security is posted, the lien is removed from title and the claimant thereafter looks to the security instead of the project and it was understood by most that the claimant’s entitlement to the holdback account was also thereby extinguished. Kingdom Langley confirms that this analysis is incomplete where a Shimco lien is involved.

The parties also cannot simply solve the problem by agreeing that the claimant waives its statutory rights against the holdback. Section 42(2) of the Builders Lien Act expressly provides that an agreement that the Act is not to apply, or that the remedies provided under the Act are not to be available for a person's benefit, is void. Statutory lien rights therefore cannot simply be contracted away through wording added to a consent order or private security agreement.

There is an important qualification. The Court of Appeal did not decide that a court could never make an order affecting or cancelling a holdback lien. What Kingdom Langley establishes is that the ordinary machinery under s. 24 does not accomplish that result simply because alternate security has been posted or because the parties contemplated that the security would respond to the holdback claim.

For owners, contractors and counsel, the practical consequence is significant. A conventional consent order should no longer assume that a lien bond or other s. 24 security stands entirely in place of both the land lien and the statutory holdback. The land lien can be removed while the separate statutory rights against the holdback may remain extant. Until the law changes, the holdback must therefore be treated as its own source of statutory security rather than simply another component of the lien registered against the land.