What holdbacks are required by the Builders Lien Act?
In a scheme designed to ensure at least partial recovery to all project participants while also protecting project participants from default by those below them on the contractual chain, the Builders Lien Act requires participants up the contractual chain to hold back 10% of the amount owed to those below them (except that no holdback need be retained from those at the bottom of the contractual chain). The holdback amounts are then available to those lower down the contractual chain if an intermediate party defaults. If the lien claims of those claiming on a single holdback exceed the value of that holdback the lien claimants will unlikely be fully compensated and may have to resort to suing the defaulting intermediate party for breach of contract in order to obtain fuller recovery.
A party who fails to retain a proper holdback may be liable to pay twice i.e. once to the party the holdback should be been retained from, and a second time to the lien claimant lower down the contractual chain. Legal advice should be obtained before paying out on a lien because the lien may have been filed late, or be defective, which may be a complete defence to the claim of lien.
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