Construction Law

A builder’s lien is a charge registered against the title of the owner’s property, which charge acts as security for the contractor’s payment for work done on, or materials delivered to, the property.

Work done to a property is considered an improvement which benefits the owner. The person who did the work relating to the improvement is entitled to get paid by the person who contacted with him, and if not, the owner should stand in therefor. This ensures that the owner enforcing strict payment of contractors and subcontractors.

At any time after the work has been done, and mostly when due payments are not made on time.

A contractor, subcontractor, or their authorized agent, i.e. a lawyer, can register a builder’s lien.

Pursuant to section 20(1) of the Act, a lien must be filed within 45 days:

• after a certificate of completion has been issued;

and if no certificate of completion was issued,

• the head contract has been completed, abandoned or terminated; or
• the improvement has been completed or abandoned.

Pursuant to section 33(1) a notice of claim to enforce the claim must be filed within one year of the date when the lien was filed.

Section 4 of the Builders Lien Act requires the owner to retain a holdback equal to 10% of the total payments made under the contract. As this is a statutory requirement, this is not negotiable.

Section 8 of the Builders Lien Act requires the owner to retain the holdback for a period of 55 days, after a certificate of completion is issued; which certificate is issued once the work is complete.

Always!

If the contract in respect of the improvement is more than $100,000, section 5 of the Builders Lien Act requires the owner to establish a holdback account with a savings institution, pay the holdback into, and administer, the account together with the contractor from whom the holdback is being retained.

The holdback is specifically there to, by agreement between all the parties, pay liens, or if the amounts are in dispute, the owner must hold the amount in trust for this purpose.

Section 6 of the Builders Lien Act prohibits using the holdback to pay for the completion of the contract, pay for damages, or any other purpose, until the possibility of a lien arising under the person who is in default is exhausted. If no lien is filed within the allowed 45 days, the holdback may be applied.

Section 88(2) of the Strata Property Act, read with Regulation 5.2, requires the purchaser of a strata lot from a owner developer must retain 7% of the gross purchase price, for a period of 55 days after the strata lot has been conveyed. This is to allow contractors who have not been paid to file a lien. If no-one does, the holdback is paid to the owner developer.