Holdback liens clarified: BC Court of Appeal reaffirms Builders Lien Act protections in Kingdom Langley decision

The British Columbia Court of Appeal’s decision in Kingdom Langley Project Limited Partnership v. WQC Mechanical Ltd., 2025 BCCA 169 (“Kingdom Langley”) provides important clarification on the operation of holdback liens and security orders under the Builders Lien Act, SBC 1997, c. 45 (“BLA”).

The ruling underscores the importance for construction stakeholders in BC to properly retain holdbacks and understand the circumstances under which liens may be secured or cancelled. It also highlights evolving case law that directly affects how parties manage their risk exposure in construction projects.

To learn more about the case and its implications, read on.

Builders Lien Act overview

The BLA establishes statutory rights for individuals providing work, services, or materials on construction projects, while also offering mechanisms for project owners to limit liability.

The BLA provides for two distinct liens: one against land and the other against holdback. While the former arises under s. 2, the latter arises under s. 4(9) and is referred to as the “holdback lien.” The ’section 2 lien’ is registered against the land, while the ’holdback lien’ is not.

A claim for lien under s.2 typically prevents the sale or transfer of a property until the lien is removed from title, encouraging prompt payment and dispute resolution within the contractor-subcontractor chain. A lien against land is removed from title by order of the court under s. 24. A lien against the holdback, on the other hand, is not effective against land and does not incur the same prohibitions against dealing with the land. A lien against holdback is not typically subject to an order under s. 24 unless explicitly stated.

The distinction between the s.2 and s.4(9) lien is central to the dispute in Kingdom Langley.

Appeal overview

The appeal centred on a lien claim by WQC Mechanical Ltd. (“WQC”) and an order requiring its proportionate share of holdback funds to be paid from funds retained by the project owner, Kingdom Langley Project Limited Partnership (“Kingdom”), under s. 4 of the BLA.

Kingdom argued that WQC had given up its claim to the holdback by accepting a lien bond posted by general contractor Metro-Can Construction (TC) Ltd. (“Metro-Can”) under s. 24 of the BLA. The chambers judge disagreed with Kingdom’s argument. Kingdom appealed.

Background

The case arose from a multi-unit residential project in Langley, BC. Kingdom, the developer, retained Metro-Can under a fixed-price prime contract requiring Metro-Can to prevent lien registrations. Subcontractors, including WQC, were engaged by Metro-Can under contracts with “pay-when-paid” clauses.

WQC registered a lien which included a claim against the statutory holdback. Kingdom applied under section 24 to cancel the lien by posting security but argued this should only apply to the non-holdback portion.

The chambers judge ordered Kingdom to post security for the entire lien, holding that WQC had not relinquished its right to the holdback. Kingdom appealed that decision.

Court of appeal decision

Kingdom argued that the BC Court of Appeal’s decision in Shimco Metal Erectors Ltd. v. North Vancouver (District), 2003 BCCA 193 (“Shimco”), was wrongly decided. Shimco established that the BLA provides for a lien on holdback funds that is separate from the lien on land and improvements created in s. 2 of the BLA. The creation of a separate holdback lien is known as a Shimco lien.

Contrary to the Court’s ruling in Shimco, Kingdom took the position that the BLA, properly interpreted, creates only one lien, which applies to the land, improvement, materials (as contemplated by s. 2) and the holdback (as contemplated by s. 4(9)). In Kingdom’s view, security posted under section 24 cancels the lien against holdback and land. The Court of Appeal rejected this position and dismissed the appeal, reaffirming Shimco and holding that:

• A security order under s. 24 does not cancel a holdback lien;
• A holdback lien is a separate and distinct statutory entitlement;
• The BLA provides no mechanism under s. 24 for cancelling holdback liens.

Even where a lien bond posted under s. 24 purports to cover the holdback, it does not extinguish a lien claimant’s right to share pro rata in retained holdback funds.

Quoting Stuart Olson Construction Ltd. v. Structal Heavy Steel, 2015 SCC 43 at para. 22, the Court emphasized that: “Cancellation of the land lien does not alter the positions of the parties or the underlying nature of the lien claim. It remains an action in rem, with all the ‘intricacies’ of the BLA preserved.”

When can a lien be cancelled?

Under s. 24, a lien against land may be cancelled by court order upon the posting of sufficient security. However, as confirmed in Kingdom Langley, holdback liens are not cancellable under s. 24.

Thus, while s. 24 allows construction to proceed by removing liens from title, it does not affect the lienholder’s substantive rights in relation to the holdback.

Comparison to Ontario’s Construction Act

Under Ontario’s Construction Act, there is only one lien. The lien is preserved by either registration against title to the lands where the labour, materials, and services were supplied, or by giving the lien to the owner. The former attaches to the land while the latter is a charge against the holdbacks and any amounts owed by a payer to the contractor or subcontractor making the claim.

The Act specifically provides that upon posting sufficient security the lien – whether a lien against the land or a charge against the holdbacks – becomes a charge upon the security (s. 44(6) and (7)).

As stated by the BC Court of Appeal throughout the decision of Kingdom Langley, security posted is only an assurance that the surety will pay the amount of a lien judgment if the lien defendant fails to do so. The same is true in Ontario. Most if not all sureties make this explicit in the language of the lien bond.

Kingdom Langley serves as a reminder for owners in Ontario to be vigilant of their holdback obligations, particularly in light of the coming changes to the Construction Act that will make annual release of holdback mandatory.

Conclusion

Kingdom Langley reinforces the enduring authority of Shimco, confirming that holdback liens are distinct from liens against land and cannot be cancelled by s. 24 security orders.

As mentioned at the beginning of this article, it’s important that construction stakeholders in BC ensure they retain holdbacks properly, understand when and how liens may be secured or cancelled, and consider how evolving case law affects their risk exposure.

Our team in Toronto have experience in both Ontario and BC and can assist you in navigating challenges with builder’s liens and the relevant legislation. Should you have any questions on this article or require tailored advice in respect of future opportunities or projects in Canada, please contact Andrés Durán and Dylan Dilks.