Does filing of a builders lien guarantee that full payment will be made?

No, merely filing a builders lien does not guarantee full payment will be made to the lien claimant. The Builders Lien Act provides a scheme which ensures at least part payment to all lien claimants, but when an entire project fails lien claimants may receive only a fraction of what they are owed.
A lien is merely security for payment i.e. if a lien claimant proves entitlement to payment from the person the lien claimant contracted with then the lien claimant may be able to force the sale of the land to ensure it is paid the amount the court ruled the lien was worth. Having a lien does not make it easier for the lien claimant to prove its entitlement to payment and whether or not the court will declare payment is due to the lien claimant will depend not only on the act of filing the lien but also on whether the lien claimant can prove that it provided work or materials to the land and that proper payment was not made.
The Builders Lien Act is not designed to provide full recovery for contractors and material suppliers, but is merely designed to provide security for partial payment to all lien claimants. This is part of the balance seeking to make the Builders Lien Act fair to both lien claimants and owners.
There are various situations (e.g. when a contractor goes bankrupt) that lien claimants may receive only a fraction of what they are owed. Further, if there is no equity in the land (e.g. if, in a declining real estate market the mortgages registered against title to the land before the lien was filed exceed the value of the land) then the lien claimants may not recover any payment at all from sale of the land.
The rules for determining how much security a lien will provide is complicated, but, by way of example, where A hires B who in turn hires C, the amount secured by a lien filed by C may be as little as 10% of the value of the contract between A and B. Therefore, if B acts as a middle man who does little work and subcontracts most of the work to C, but B does not pass on to C the payment B receives from A, then the amount a builders lien will secure for C may be far less than the amount B actually owes C. Having a lien for less than the amount due does not mean that the lien claimant will never receive the full amount due, but does mean that:
  • the lien claimant cannot rely on the lien as security for the full amount due;
  • the amount the lien claimant can recover from the owner of the land as a non-contracting party is limited; and
  • to recover the full amount from the contracting party the lien claimant must resort to regular creditors remedies procedures (e.g. garnishment, foreclose on land owned by B, seize and sell personal property owned by B, etc.).
For these reasons contractors and material suppliers should carefully select who they grant credit to and only rely on lien rights as a last resort. Having said that, in many cases filing a builders lien can be a powerful tool to ensure proper payment. 




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