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Builders’ Lien Act Considerations when Purchasing a New Home

While the purchase of a newly constructed home is an exciting time, it is important that proper consideration be given to the protections afforded both home owners and contractors under The Builders’ Liens Act of Manitoba (the “Act). Individuals or companies who perform work and/or provide services/materials on a project are able to file a lien against the property. While builders’ liens can be registered before work has begun, in practice, such liens are almost always registered after trouble has arisen. The ability for a contractor, subcontractor or supplier to file a lien expires 40 days after the day when work was last performed on the property, or 40 days after substantial performance or abandonment of the contract.

The Act provides provisions which protect a new home buyer. For example, all sums received by a contractor as part payment of a contract form part of a trust fund for the benefit of not only subcontractors, but also the owner. Further, any agreement that attempts to provide that the provisions of the Act do not apply, or that attempts to waive any lien or right of lien under the Act, is void as it is considered against public policy. The Act also requires that 7.5% of the total contract price be retained by the person primarily liable for payment under the contract (normally the owner), for at least 40 days after a certificate of substantial performance is given. It is important to note when making payments to a builder upon completion of progressive stages, that a 7.5% holdback is required for each advance. In addition, where there are outstanding matters to be completed (ie. seasonal items like brick, stucco, landscaping) the person primarily liable for payment shall retain 7.5% of the total value of the remaining work to be done for at least 40 days after the work has been completed.

The Builders’ Liens Act is very complex, and if you are building a new home, or buying a newly constructed home, contact a lawyer to discuss the Act and how it relates to your contract.

Notice: The articles on our website are provided for general information purposes only and should not be relied upon as legal advice or opinion. They reflect the current state of the law as at the date of posting on the website, and are subject to change without notice. If you require legal advice or opinion, we would be pleased to provide you with our assistance on any of the issues raised in these articles.