BBB helps homeowners make sense of liens
With media reports of multiple Calgary-based home-builder and renovations companies failing to pay sub-contractors and vendors due to millions of outstanding debt*, some local homeowners are now faced with liens placed on their homes. BBB is helping educate homeowners about property liens and what do to if a contractor places one on your home.
"Despite a business' best efforts and intentions to keep up with their own payments, financial troubles can trickle down and affect homeowners," says Mary O'Sullivan-Andersen, President and CEO of BBB Serving Southern Alberta and East Kootenay. "Property liens can be upsetting and overwhelming for homeowners who aren't expecting to deal with that. That's why BBB is here to help businesses and consumers work together to hopefully prevent situations like this."
What is a lien?
A lien is a notice claiming a right to be paid from the value of your property. In other words, a property lien is a legal claim granting the holder a specified amount of money upon the sale of the property. Such liens are often used to ensure the payment of a debt, with the property acting as collateral against the amount owed.
If a contractor does not pay his suppliers and subcontractors, liens may be placed on your property. Therefore, before you make a final payment at the conclusion of the work, check your property title record at the nearest private registry. Then, depending on the outcome, do one of the following:
- If no lien has been registered, pay the contractor the amount of the bill, less 10 per cent. Withhold this 10 per cent for 45 days after the work has been completed. After 45 days, check your title record at a private registry, and if no lien has been registered, pay the 10 percent hold-back money.
- The Builders' Lien Act (Chapter B12, 15a) makes allowance for a "holdback". However, if you plan to withhold 10 per cent of your payment for 45 days, you should mention this to your contractor when you are discussing the work to be done and prior to signing the contract.
- If a lien has been registered, do not pay any money for the work or materials until the lien claim has been settled. Talk to a lawyer for advice on the best way to settle the claim and remove the lien from the title record. There are two ways to remove liens. First, you can pay the money claimed or negotiate a smaller amount to settle the claim. Once paid, make sure the discharge papers are filed. The second way to remove a lien is to go to court.
- Before making the final payment and signing a completion certificate or any other document that releases the contractor from further responsibility, make sure everything you have been promised is complete.
BBB also offers these tips when hiring a home contractor:
- Ask the contractor for references including complete street address and phone numbers of previous customers.
- Get a detailed written estimate from more than one company. The estimate should indicate start date, completion date, full details of the work and material, and the complete cost.
- Ask if the contractor performs all the work or uses sub-contractors. If the latter is the case, check out each subcontractor individually.
- Check with City Licensing to ensure that the contractor is properly licensed.
- Find out whether or not the contractor charges a deposit. This applies to any payment made to the contractor prior to completion of the work. If charging a deposit, the firm is required to carry a bond through an insurance company and a Pre-paid Contractors License with Service Alberta. The bond covers situations in which there has been default, negligence, misrepresentation, theft, conversion or fraud.
- Ask the contractor if they are members of any associations. There are a number of associations that may be applicable. For example: The Home Builders Associations, Mechanical and/or Electrical Contractors Associations or Roofing Contractors Associations to name a few. If so, contact the association to confirm that the membership is in good standing. Also, inquire if the association is able to assist you, should a dispute arise between yourself and the contractor.
- Find out whether the contractor carries liability insurance. Contractors are NOT obliged by law to carry liability coverage, so damage done to your property or your neighbour's property by the contractor may not be repaired if no coverage exists. Ask the contractor for the name of their insurance company and their policy number and then verify with the insurance company.
- Any warranty covering the work should be supplied in writing. The warranty should answer there following questions:
- Does it cover the materials supplied, the labour involved in the installation or both?
- Who is supplying the warranty - the contractor or the manufacturer of the materials?
- How long does the warranty last and is it transferable to new home owners in the event of a house sale?
- When a contract has been solicited, negotiated or signed in your own home, the Direct Sales Cancellation regulation lets you cancel it in writing within ten days of receiving a copy of the contract.
For more tips you can trust, visit bbb.org.
Leah Brownridge, Media and Corporate Communications Specialist
Better Business Bureau Serving Southern Alberta and East Kootenay
For more than 100 years, Better Business Bureau has been helping people find businesses, brands and charities they can trust. In 2016, people turned to BBB more than 167 million times for BBB Business Reviews on more than 5.2 million businesses and Charity Reports on 11,000 charities, all available for free at bbb.org. There are local,independent BBBs across the United States, Canada and Mexico, including BBB Serving Southern Alberta and East Kootenay, which was founded in 1954 and garners more than one million instances of service annually.
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