Every owner who pays a contractor in British Columbia carries a legal duty that is easy to overlook until a dispute lands on the title of the property. The Builders Lien Act is the provincial law that protects the people who build, and it also gives owners a clear way to protect themselves. For developers and property owners in Kelowna and across the Okanagan, understanding how liens and holdback work is part of running a commercial project with confidence.
What the Builders Lien Act Does
The Builders Lien Act allows contractors, subcontractors, suppliers and workers who have not been paid to register a claim of lien against the land where they worked. The claim is filed at the Land Title Office and shows up on the property title, which can stop a sale or a refinancing until it is resolved. The law exists so that a trade who adds value to a building has a way to recover payment even when the party who hired them cannot or will not pay.
For an owner, the practical risk is that a dispute between a general contractor and a subcontractor can become your problem. If a lien is registered against your title, your lender will notice, and your closing or draw schedule may be affected. The Act also sets out what an owner must do to limit that exposure, and the main tool is holdback.
How the Ten Percent Holdback Works
Holdback is the portion of each progress payment that an owner keeps back instead of paying out. Under the Act, an owner must retain ten percent of the value of work done or materials supplied, based on the greater of the amount certified or the amount actually paid. This money is not a penalty on the contractor. It is a pool of funds that stays available to satisfy valid lien claims from the trades who worked on the job.
Holdback is calculated on every payment, not only at the end, so it builds steadily over the life of the project. Owners should confirm that their payment certificates show the holdback amount clearly and that the funds are tracked separately from the general project account. Clean records here make the final release far simpler.
The Certificate of Completion and the Release Period
The clock that governs holdback starts with the certificate of completion. On most commercial projects the certificate is issued by the architect or engineer acting as payment certifier, and it confirms that the contract work is substantially complete. From that point, trades generally have 45 days to register a claim of lien, and the owner must keep the holdback in place for 55 days before it can be released.
Those dates are not suggestions, and releasing the holdback early can leave an owner liable to pay twice. It is worth building the 55-day period into your cash flow and your lender’s expectations from the beginning. The same discipline that keeps a project on budget, such as setting aside a construction contingency, applies to planning for holdback.
What Happens When a Lien Is Registered
If a claim of lien is filed, the owner is not powerless. The lien generally expires after one year unless the claimant starts a court action and registers a certificate of pending litigation. In the meantime, a lien can be removed from title by paying the disputed amount into court or by posting acceptable security, which allows a sale or financing to move ahead while the underlying dispute is sorted out.
Most liens are avoidable. They usually arise from payment delays further down the contract chain, so an owner who knows who is on site and whether they are being paid is far less likely to face a surprise. This is also where the structure of the contract matters, and our guide to the difference between a construction manager and a general contractor explains how payment flows differ between delivery models.
Practical Steps for Owners on a Commercial Project
Start by naming a payment certifier in the contract and requiring statutory declarations from the contractor with each draw, confirming that subcontractors and suppliers have been paid. Search the title before each major payment, and again before releasing holdback. Keep a simple register of who is working on site, since every one of them is a potential lien claimant.
Planning early also helps. Owners who invest in pre-construction services can set payment terms, holdback procedures and reporting requirements before the first shovel is in the ground. Because lien law has strict deadlines and real consequences, it is also wise to have a construction lawyer review your contract and your release plan. This article is general information and not legal advice.
How Team Construction Approaches Builders Lien and Holdback Management
We build holdback tracking, trade payment verification and clear monthly reporting into every project, so owners always know where they stand before a payment or release is made. Transparency on payments protects our clients’ titles and keeps trades paid on time across the Okanagan.
Contact Team Construction Management to talk through your next commercial project.