Restrictive Covenants and Builder’s Liens


Restrictive Covenants and Builder’s Liens

A Restrictive Covenant is a clause in a deed or lease to real property that limits what the owner of the land or lease can do with the property. It is a binding provision. Restrictive covenants allow surrounding property owners, who have similar covenants in their deeds, to enforce the terms of the covenants in a court of law. They are intended to enhance property values by controlling development.  

Land developers use restrictive covenants when they subdivide property for residential developments. After a property is subdivided into lots, blocks, and streets, the covenant imposes certain limitations on the use of the lots in the development. These may include a provision restricting construction to single-family dwellings with no detached outbuildings, as well as specifying that the dwellings are to be built at least a specified distance from the street and from the side and back lot lines, commonly called a "set back" requirement. Another common restrictive covenant may specify a minimum or maximum permissible square footage for dwellings. There may be a variety of other restrictive covenants that seek to control the way the development looks and is maintained. These covenants are filed with the approved plan. 

A person who purchases a lot in a development with restrictive covenants must honor the limitations. When the purchaser resells the lot to a buyer, the new owner will take the property subject to the restrictive covenants, because the covenants "run with the land". It is therefore very important to conduct due diligence as a restrictive covenant may prohibit the intended use of the property by the new buyer. 

If a person violates or attempts to violate one or more of the covenants, a person who is benefited by the covenants, usually an adjacent property owner, may sue to enforce the restrictions. Courts generally strictly interpret restrictive covenants to allow a landowner to use her land for any purpose that is not specifically prohibited by the restrictive covenants. 

Some restrictive covenants may be so unfair, however, that a court will declare them contrary to public policy and make them legally unenforceable. 

A covenant included in a deed to real property that the buyer (grantee) will be limit (or restrict) as to the future use of the property. Some examples are as follows:

no fence may be built on the property except of steel wire and not more than seven-feet high;
no tennis court or swimming pool may be constructed within 20 feet of the property line; no structure can be built within 30 feet of the frontage street; and no trees to be planted on the North Slope

Commonly these covenants are written so that they can be enforced by the grantor and other owners in the subdivision. This also ensures future owners will be bound by the covenant (called "covenant running with the land" therefore are enforceable against future owners).

Builder’s Liens

It is also known as a Lien on land. When a lien is registered in the Land Title Office, it becomes a charge against the title to the land or property and it runs with the land. It is used to secure a claim for payment for work done or materials supplied for construction, repairs or renovations made to an existing structure. 

It is an operative tool to recover unpaid debts owed to contractors and material suppliers.

Why do we need to file a builder’s lien?

A lien claimant can file a builder’s lien to secure payment for work done, material supplied for improvement to land, such as a home construction project or even large projects. A large construction project is like a triangle, with a landowner sitting at the top. Small landowner mostly handles the construction personally and as it gets scaled up they hire a general contractor. The landowner or the general contractor may hire several subcontractors such as a carpenter, roofer, plumber, electrician, painters etc. These subcontractors hire workers and material suppliers. It may happen that in this chain someone may not get paid. 

The BC Builders Lien Act helps those who have worked on a construction project or supplied material to it but haven’t been paid. Under this Act, they can file a charge against the property to secure payment of the money owed to them. 

Even though this Act offers security to a worker, contractor or the supplier, it is inadequate when a project fails. There is no substitute to a well-drafted contract and prudent credit granting practices.

Filing Builder’s Lien

You can file a Builder’s Lien if you have done any of the following:

Worked on a construction project.
You have supplied materials used on a project including provision of rental equipment contractors hired by the landowner to work on the project. subcontractors hired by the contractor or by other subcontractors to work on the project. engineers and architects on the project (their suppliers cannot file builder’s lien)

Time limit to file a Lien

A Lien must be filed within 45 days after the project has been substantially completed, ended or abandoned. This timeline to file a Lien is affected by the following:

The Head Contract is completed, abandoned or terminated
The improvement has been completed or abandoned A “Certificate of Completion” has been issued Once a “certificate of completion” is issued, the deadline is 45 days commences from the date the certificate was issued. The deadline is sacrosanct.

How does a lien claimant file a lien?

A claimant can file a lien personally or have a Notary or a lawyer file it. To file a lien Form 5 prescribed under Builders Lien Act is filed with the Land Title Office where the land is registered. Costs associated to file the lien can be claimed if the lien is proven. 

To file a lien, you need the legal description of the site.  A Notary can help you find the legal description of the site. Legal Description of the site can also be obtained from BC Assessment Website or from the respective City Tax authority.

After filing a lien

To enforce the lien and prove it is valid, a claimant must commence legal proceedings, in the BC Supreme Court registry under whose jurisdiction the land is situated. Once the legal proceedings have been instituted a claimant must also file a “Certificate of Pending Litigation” (CPL) against the property in the Land Title Office after filing the lawsuit in Supreme Court. These actions of filing a claim in the court and registering a CPL must be completed within a year or else the lien is no longer valid and it lapses.

Landowner's Actions

A builder’s lien and subsequent registration of Certificate of Pending Litigation hinders the landowner ability to sell or finance the house or a project. This in effect forces the owner of land to discharge the lien and the consequent CPL. 

Even if the landowner disputes the builder’s lien, it is prudent for the landowner to pay the claimed amount or related holdback amount to the court and get the lien and CPL removed. The money is held by the court as a security and is paid to the claimant only if lien is proved in the court. 

To hasten the process of getting a builder's lien removed, the landowner may give a notice to the claimant to speed up the process. If the claimant does not start a lawsuit and file the CPL within 21 days of the notice, the court will order the lien to be removed.

Actions by the Court

If the court decides that the lien is valid and the landowners fails to pay the claimed amount, the court may order the sale of the property and the use of the sale proceeds to pay the lien, alternatively if the claim is not found to be valid, it will remove the lien, and it may order the claimant to pay the costs. pay the landowner’s costs resulting from the lien and the court case. 

If liens are proven, the claims are paid proportionately based on the holdback funds available for the purpose.

How does the Builder’s Lien Act Help a Landowner

Mostly the landowner pays the contractors and suppliers in time to keep the project on course. However, one or some of these subcontractors may not pay their suppliers or employees. These unpaid workers can file a claim under Builder’s Lien Act. A landowner has already paid and it is unfair to make him pay twice for the same job. The act allows a “hold back” of 10% of the contracted amount for 55 days after the work has been completed. After this period of 55 days is up and no lien has been filed within 45 days of completion of work, the landowner is obliged to pay out the holdback amount. This amount is held in a separate ‘holdback account ‘managed by the landowner and the contractor. If any liens have been filed, the holdback may be used to help pay these liens. 

This works in favor of the landowner as the landowner does not have to pay lien claimants more than the holdback amount, the claimants may receive only part of their claimed amount under the lien.


As a landowner the biggest takeaway is to lay down everything in the contract and follow prudent credit granting practices. All discussions done orally must be followed up with an email or a note on record. A landowner must holdback 10% of the contract amount and payout after 55 days of issue of Certificate of Completion only if no Builder’s Lien has been filed with 45 days of issue of Certificate of Completion and no lien has been filed against the holdback funds.