Understanding Builders Liens and How to Manage Them with a Holdback
When purchasing a newly built home—especially a custom house, infill, or new half-duplex—it’s important to be aware of builders liens and how they may impact your closing. A builders lien is a legal tool contractors and trades can use if they haven’t been paid, and while it’s more common behind the scenes, it can become an issue for buyers if not properly managed.
That’s where the holdback comes in. On smaller-scale new construction purchases, a holdback is a key tool that helps protect buyers from becoming liable for the builder’s unpaid debts.
Here’s what you need to know about how a builders lien works, what the holdback is, and how it’s applied—depending on the type of property you're purchasing.
Disclaimer: This article is for general informational purposes only and does not constitute legal, financial, or building advice.
What Is a Builder’s Lien?
Under B.C.’s Builders Lien Act, contractors, subcontractors, and suppliers have the right to file a lien against a property if they haven’t been paid for their work or materials. This lien gets registered on title and can delay closing, resale, or financing—even though the unpaid work happened before the buyer took ownership.
That’s why, in certain cases, your conveyancer (lawyer or notary) will withhold a portion of the sale proceeds to cover this potential liability. This withheld amount is known as a holdback.
When Is a Holdback Used?
A holdback is typically used when buying:
- A new custom-built home
- A newly constructed half-duplex
- A small-scale infill development
In these situations, the buyer’s conveyancer will retain 10% of the purchase price of the improvements to safeguard against potential builder liens.
Important: A holdback isn’t automatic. It needs to be written into your contract and agreed to by the seller before closing. If it isn’t included in the deal, you won’t be able to insist on it later. That’s why it’s critical to raise the issue early—ideally before subjects are removed—so your agent and lawyer can negotiate it on your behalf.
However, in larger presale developments—such as condo or townhouse projects—things work differently.
Presale Developments: Different Contract, Different Rules
When purchasing a presale unit in a larger condo or townhouse project, the risk of a builder’s lien still technically exists, but the way it’s handled can be quite different from a custom build or duplex.
Developers will often file what’s called a Notice of Interest under the Builders Lien Act. This legal notation generally protects the developer by stating that their property interest isn’t bound by liens unless the work was done at their express request. In other words, only improvements authorized by the developer may result in a valid lien against the project.
Because of this—and because presale purchase contracts are written into the project’s Disclosure Statement—buyers typically are not permitted to hold back funds at closing (remember: holdbacks must be mutually agreed upon and are not automatic). Instead, lien risk is generally managed at the developer and project-financing level, not by individual buyers.
That said, if a lien is registered after you’ve taken ownership, you could still face some limited liability depending on the circumstances.
If you ever encounter a lien on a presale purchase, it’s important to seek legal advice immediately to understand your rights and next steps.
How the Holdback Works
When a holdback is mutually agreed upon and applied (e.g. for a new house or duplex), here’s how it works in practice:
10% of the purchase price of the improvements is held back by the buyer’s conveyancer and not released to the seller right away.
The Holdback Period
This amount is held for 55 days, starting from one of the following:
If a Certificate of Completion is issued:
- 55 days from the issuance date of the certificate
If no Certificate of Completion is issued:
- 55 days from the later of:
- The date the head contract is completed, abandoned, or terminated, or
- The date the occupancy permit is issued
This 55-day window allows any unpaid trades or contractors to register a lien if necessary.
What Happens After the Holdback Period?
Once the 55 days are up:
- If no liens have been filed: the buyer’s lawyer releases the holdback to the seller.
- If a lien has been filed: the buyer’s lawyer can either:
- Continue to hold back an amount equal to the lien(s) until the seller clears title, or
- Pay the amount into court under Section 23 of the Builders Lien Act for legal resolution
This process ensures buyers don’t inherit someone else’s financial obligations when they purchase their new home.
Thinking About a Buying New?
Whether you're purchasing a new half-duplex, a custom home, or a presale unit in a large-scale development, our team has the experience to help you navigate the contract, timelines, and make sure your interests are well-represented.
If you're still in the early stages of research, you can start by browsing presales in your desired area:
We’re proud to offer our clients early access to many of the most sought-after new developments thanks to our strong relationships with local developers. And when it comes time to review the contract, we’ll help make sure you understand everything—including how builders liens and holdbacks apply to your specific purchase.
Have questions about builders liens, holdbacks, or how new construction contracts work?
Reach out to our team today—we’re here to make the process clear and stress-free.