Trigger of lien filing period based on actual completion

Actual completion (distinct from issuance of certificate of completion) of a head contract (if a head contractor was retained) is a triggering event for the lien filing period. 

 

A “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”: s. 1. Not every job has a head contractor.

 

The definition of “complete” in s. 1 of the Builders Lien Act indicates that so far as contracts are concerned “complete” does not been fully complete, but just substantially complete, which in turn is defined by the 3-2-1 formula in s. 1(2):

 

For the purposes of this Act, a head contract, contract or subcontract is substantially performed if the work to be done under that contract is capable of completion or correction at a cost of not more than

(a) 3% of the first $500 000 of the contract price,

(b) 2% of the next $500 000 of the contract price, and

(c) 1% of the balance of the contract price.

(Builders Lien Act, s. 1(2)).

 

One cannot use hindsight to determine whether a project was substantially completed at some earlier date. In K.A. Ray Limited v. UPA Group Canada Limited Partnership, 2007 BCSC 1881 an issue arose as to whether liens were out of time, which depended on whether the project was substantially complete as of August 29, 2006. A key issue in applying the 3-2-1 formula was whether replacement of a sewer pipe (estimated cost of $56,335) should be counted as outstanding work. That work was eventually done in a different way that cost only $4,200 and Ray (the owner) argued that the approximately $52,000 difference between the initial and actual rectification costs should not be counted in considering whether the project was substantially complete on August 29, 2006, or perhaps even earlier on August 4, 2006. The court rejected that argument:

 

I do not accept, as urged upon me by the petitioner, that on the material presently before the court that I can simply deduct some $52,000 from the UPA calculations and find that there was substantial completion as of August 4, 2006.  The eventual reduction in costs could not, on the material before me, have been assured or guaranteed as of August 4, 2006, and indeed the proposed and eventually accepted “fix” which led to the cost reduction was not accepted and approved by the Municipality until September 8, 2006.

(K.A. Ray Limited v. UPA Group Canada Limited Partnership, 2007 BCSC 1881 at para. 6).

 

“Completion” of the improvement occurs when the improvement is ready for use:

 

For the purposes of this Act, an improvement is completed if the improvement or a substantial part of it is ready for use or is being used for the purpose intended.

(Builders Lien Act, s. 1(3)).

 

An occupancy permit being issued is evidence of the improvement being ready for use:

 

The occupancy permit was not placed in evidence but it is, I think, accepted to be at least prima facie proof that the residence was "ready for use".

(Carmel Pacific Enterprises Inc. v. Spirit Equestrian Centre Ltd., 2005 BCCA 266 at para. 13).

 

If there is no certificate of completion in respect of the contract, and there is no head contract, then the holdback trigger may be completion of the improvement i.e. if an improvement is being used for its intended purpose despite deficiencies, the lien and holdback periods may be triggered earlier thorough use of the improvement than would be the case through a certificate of substantial completion. 

 

In Carmel Pacific Enterprises Inc. v. Spirit Equestrian Centre Ltd., 2005 BCCA 266 the owner moved into the premises in October 2003 and the occupancy permit for the house was issued in November 2003 (para. 13). The Court of Appeal found that s. 20(2)b) applied: 

 

[T]he relevant section was s. 20(2)(b), that is, "[a] claim of lien that is not governed by subsection (1) may be filed no later than 45 days after… (b) the improvement has been completed or abandoned". 

(Carmel Pacific Enterprises Inc. v. Spirit Equestrian Centre Ltd., 2005 BCCA 266 at para. 12).

 

Despite that as of the end of November 2003 a swimming pool still needed to be constructed the court found that the improvement was substantially complete. 

 

The issue under s. 20(2)(b) of the Act was whether the "improvement" had been "completed".  The question was not whether the "contract" was completed… The evidence was sufficient in my view to show that the improvement was completed more than 45 days before the lien was filed…

 

… I would order that the plaintiff's claim for a declaration of lien as registered in the land titles office be dismissed.

 

(Carmel Pacific Enterprises Inc. v. Spirit Equestrian Centre Ltd., 2005 BCCA 266 at para. 17-18).

 

A strata lot (as defined by the Strata Property Act), is completed not later than the date the strata lot is first occupied:

 

For the purposes of this Act, an improvement is completed if the improvement or a substantial part of it is ready for use or is being used for the purpose intended.

(Builders Lien Act, s. 1(4)).