A lawyer who acts in a transaction must consider the applicability of the Builders’ Lien Act 1 with particular emphasis on the hold back provisions, and advise the client accordingly.
A lawyer must check for any undischarged liens and certificates of lis pendens filed relating to the parcel.
A lawyer who vacates a lien for which no lis pendens has been filed, but for which a lawyer has determined that the lien has ceased to exist pursuant to legislation or common law, should take the necessary steps to have the lien removed from the parcel register at the appropriate land registration office. A lawyer who vacates a claim for lien for which a certificate of lis pendens has been filed must ensure a court order is obtained and recorded to remove the lis pendens from the parcel register.
- Builders’ Lien Act, R.S.N.S. 1989, c. 277
- Land Registration Act, S.N.S. 2001, c. 6 – “lien” defined: s. 3(1)(i) – interest may be recorded: s. 47(1) – certificate of lis pendens expires [“may be removed”] after five years: s. 58(2)(d) – filing lien under Registry Act, R.S.N.S. 1989, c. 392 has no effect on migrated parcel: s. 70
- John Kulik / “Liening in a New Direction: Recent Amendments and Case Law on Construction Liens” (January 28, 2005).
The Builders’ Lien Act requires the person primarily liable on the contract to holdback 10% of the value of the contract price or actual value of work, service, and/or materials provided.
When construction or renovation is being carried out, a lawyer has an obligation to advise the client of the holdback provisions under the Act.
Agreements of Purchase and Sale
(i) For the purchase of a new construction home, where the Buyer purchases both the land and home on the closing date from the Seller/Builder, the person primarily liable would be the Seller.
Where lawyers are involved in the transaction, the usual practice is for the Seller’s lawyer to retain the holdback for the required period. The Buyer is protected when the Seller’s lawyer retains the holdback.
Where no lawyer is retained by the Seller (which is unusual), the Buyer or the Buyer’s lawyer would retain the holdback.
Where the work is ongoing or substantial performance of the work occurred less than 60 days before the closing date, the holdback will be required.
Construction Contracts and Renovations
(ii) The Builders’ Lien Act also extends the liability to a person who has any estate or interest in the land upon or in respect of which the work or service is done, or materials are placed or furnished. When a land owner contracts with a Builder to construct or renovate a home on the land, the person primarily liable will be the owner of the land.
In the case of a contract with progressive draws to a builder, the holdback is deducted each time a payment is made. The accumulated holdback amounts are held for a period of 60 days after the work has been substantially performed. In most custom built home contracts, the owner’s solicitor will retain the holdback, unless the contract specifies otherwise.
In the majority of transactions, there will be a lender involved. Lawyers must consider the applicability of the Builders’ Lien Act when dealing with lenders and how the holdback provisions of the Builders’ Lien Act apply.
A lawyer must follow the lender’s instructions if they specifically direct that a holdback must be maintained.
Amended by Council on July 19, 2013