Construction Law: Contract Conflicts And Extra Work Claims

A new construction project is an exciting time for you. Whether you are building a family home or working on a large-scale project, construction matters can be stressful. Working in collaboration with contractors and builders within a defined budget and tight timelines can complicate things, causing issues to arise between parties.

Construction Law is a specialized and critical component of Pathfinder Law services. We have significant and broad experience in all aspects of construction law, and our extensive breadth of experience and knowledge has provided our clients with a competitive advantage in dealing with the industry’s complexity.

Case Examination: Anway Construction Ltd. v. Hunte, 2020 BCSC 601

The case of Anway Construction Ltd. v. Hunte, 2020 BCSC 601, is a thorough examination of a contract dispute between a contractor and homeowners over the construction of a home under a cost-plus contract. The addition of a guaranteed maximum price was a legal alteration to the contract, according to the court, and the contractor was in breach of the contract by exceeding that sum. As a result, the court dismissed the case.

The court dismissed the contractor’s claim that overbilling was due to the many changes made by the homeowners throughout the course of the work, modifications that did not trigger the contract’s change provisions. Because no “consultant” had been assigned under the contract, the contractor claimed that the contractual change clauses had been superseded by the parties.

The contractor’s contention that the homeowners had agreed to a waiver of contractual change terms was similarly rejected by the court. The court did so by referring to the circumstances that must be met before a court may agree to waive contractual change restrictions, which were outlined in Kei-Ron Holdings Ltd. v. Coquihalla Motor Inn Ltd., 1996 CanLII 3443 (BC SC): (1) the work conducted was “additional labour” not covered by the contract’s terms; (2) the work was permitted by the owner; (3) the owner was aware that the extra work would increase the project’s cost; and (4) the owner waived or acquiesced the parties’ willful disregard for those provisions. This ruling is still being appealed.

As shown in the above-cited case, disputes can arise between homeowners and contractors, which have the possibility of becoming a much larger issue. Pathfinder Law has drafted a wide range of construction-related agreements, ranging from simple home construction and renovation contracts to complex construction documents on huge projects. We can also involve our construction litigation attorney in the assessment and careful drafting of such agreements to help identify and handle any foreseeable concerns before they become an issue.

We are also familiar with and skilled at deciphering and explaining the complex legal and technical requirements that commonly arise from documents commonly used in Construction Law. We have extensive experience assisting clients in the resolution of construction disputes before they become litigious, and are well equipped and experienced in guiding our clients through the rigours of the legal process.

Our goal is to work alongside clients and industry professionals to achieve the best possible outcome, through reconciliation, mediation, or arbitration whether in Small Claims Court, the Supreme Court, or the Court of Appeal. Pathfinder Law represents clients from every sector of the residential, commercial, and industrial construction industry. There is no case too big or small for Pathfinder Law.

Disclaimer – The information contained herein is of a general nature. It is not intended to be legal advice and it is not intended to address the exact circumstances of any particular individual or entity. You should not rely on or act upon such information without receiving appropriate professional advice and without a thorough examination of your particular situation.

The BC Builders Lien Act – Whether you are the supplier of materials used on a project, a subcontractor, or the prime contractor, the BC Builders Lien Act has significant ramifications for most parties within a construction project. It provides rights and imposes obligations in addition to parties respective rights under their contracts; and is the Law in BC and must be adhered to. As such, if you are involved with construction in BC, you need to be aware of what the Act could mean for you.

So what is a Builders Lien? (BC Builders Liens)

A builders lien allows contractors, subcontractors, or workers to recuperate the money owed if they are not paid for work done and/or materials supplied on a construction project. When a builders lien is filed, it is registered as a charge against title to the property under construction. This gives the lien claimant some security for payment that is owned.

If you are seeking the protection of a builders lien, you must be aware of the strict timelines and filing requirements associated. If you miss the deadlines or do not properly prepare and register the forms required, you will lose your opportunity to be protected by a lien.

Important things you need to know:

Filing a builders lien requires that a completed “claim of lien” be registered at the appropriate Land Title Office, along with a filing fee. This form includes:
- The legal names of any person or company that owes money to the lien claimant
- A legal description of the related property (which the lien is being filed against)
- A description of what work was done and/or material supplied
- Detailed accounts of the amount owed, including when it became due
The amount owing to you must be over $200, or else you won’t be allowed to file a lien.
Because a builders lien is registered against the property, it can hinder a landowner’s ability to sell the property or maintain mortgage financing. As a result, it is in the best interest of a landowner to take steps to clear the lien. Sometimes there may be a dispute about whether the claim is valid or the owner might not be the person at fault. In order to keep the property from being tied up, a landowner can apply to simply pay money into court. The court can then order the lien (and its effect) removed from the property.
The deadline to file a builders lien is 45 days
- In order to file a builders lien, you must act quickly as there is generally a deadline of only 45 days to file a lien after the project is substantially completed, abandoned, or ended. One common event that triggers this 45-day window is when a certificate of completion is issued. It is wise to seek legal advice on these matters to ensure you do not miss deadlines and lose the protection of a builders lien.

Does this apply to me?

BC Builders Liens apply to more than just contractors, subcontractors, architects, engineers, material suppliers, or works – it also applies to owners and lenders as well. If you are involved with a construction project, chances are, you have obligations to comply with, and/or rights to pursue.

While the BC Builders Lien Act can provide a lien against the land and building where work was performed, it also creates additional obligations on many parties involved. Each party paying out to the company he/she contracted with, retails a holdback of 10% of the amount owing until the work has been completed and no applicable liens have been filed (in the 45-day window). The 10% holdback is “notional” for everyone except the owner, who must create an actual holdback account of funds.

The owner is required to open a trust account at a financial institution and keep a holdback amount there until the work or contract has been completed and no liens have been filed within the 45-day window. This fund is used to pay for any liens against

What it means for you

If you are a prime contractor or subcontract on a construction project, be prepared to only receive 90% of the amount due while the other 10% is held in a trust account by the owner – pending substantial completion of the work you are doing.

Conversely, if you are a material supplier or worker, you should be receiving 100% of any money owed to you as the holdback provisions of the Act do not apply to you.

Also note, in most instances, there must be an actual trust account opened at a financial institution by the owner; unless the total value of work and materials under contract is less than $100,000.

Summary

The BC Builders Lien Act is an important protection for parties involved in a construction project. Whether you are a material supplier, the prime contractor, or the owner of a construction project, the Act provides both obligations and protections. Whether you are a landowner, contract or subcontractor, you need to remember to create a 10% holdback fund to account for any potential liens. Also, if you believe you are entitled to money for work or materials that you haven’t been compensated for, you must make sure you file a builders lien within 45 days of when a project is substantially completed, abandoned, or ended.

The BC Builders Lien Act has many intricacies that go beyond what has been covered in this article. Complications can arise around subjects like “who is owing?” and “what if I missed the deadline to file a lien?” You may feel like you are entitled to the money that was held back from you under the BC Builders Lien Act, and the owner doesn’t agree. In that case, you might need to obtain a court order.

It is always wise to seek the advice of a legal professional to make sure you do not miss deadlines or lose the protections of a builders lien. An experienced construction lawyer can help you navigate the complexities and unique situations that may arise for you as an owner, contractor, subcontractor, etc.

If you need assistance when it comes to the Builders Lien Act or other construction-related legal issues, contact Pathfinder Law today.

This information from Pathfinder Law explains, in a general way, the law that applies in British Columbia, Canada. This information is not intended as legal advice. For legal advice relating to your specific situation, contact Pathfinder Law.

Category: Construction Law

Construction Law Blog: Contract Conflicts And Extra Work Claims