October 2, 2018 by Krista Johanson and Siobhan Small
Completion certificates play an important role in any construction contract or subcontract.
This article sets out how certificates of completion influence projects, details how to issue a valid certificate and explores some common mistakes that can postpone the lien period. While we focus on British Columbia regulations in this column, most other Canadian provinces have similar rules that stipulate how to manage certificates of completion.
The posting of a “notice of certification of completion” can trigger both the 45-day lien filing period and the 55-day holdback period that follows substantial completion. The lien period runs from the date of substantial completion, but as this date can be difficult to pin down, it is important to ensure that the payment certifier issues a valid certificate of completion and posts a proper notice of certification of completion.
Invalidly-posted certificates can hurt the parties relying on them. For instance, claims of lien may still be valid when they should have expired if notice had been posted properly. An owner who pays out a holdback while relying on a certificate that was never posted could be liable to pay a second time to discharge lien claims. In another scenario, contractors or subcontractors trusting a notice might assume a lien period had expired and forego their right to file a lien, only to find out the lien period hadn’t even started.
It is important to comply strictly with the provisions of the Builders Lien Act that specify how to issue a certificate of completion and post notice of certification of completion.
Certification of completion must be done at the request of the person from whom the holdback was retained. The owner or payment certifier cannot unilaterally decide to trigger the lien filing and holdback release periods by declaring the contract complete.
Certification must be done by the payment certifier – usually the architect, engineer, or consultant. If the contract does not identify a certifier, the owner is the certifier for contractors. The contractor and owner typically work together to certify subcontract completion.
A project with a head contractor is considered substantially complete when the remaining cost of completion equals no more than three per cent of the first $500,000 on the contract price, two per cent of the next $500,000, and one per cent of the balance (known as the 3-2-1 test).
The BC Builders Lien Forms Regulation provides an official form for certification of completion. This form is not mandatory, but the certifier must include every piece of information specified in that form. Missing information can invalidate the certificate.
The regulation provides a second form for notice of certification of completion. This form is mandatory and is different from the certification of completion form.
The payment certifier must issue the certification within 10 days of the request. To be issued, a copy must be delivered to the owner, the head contractor (if one exists) and anyone who delivered a written request for it. A payment certifier can be liable for failing or refusing to certify completion without a valid reason.
The certifier (not the contractor) must, within seven days of issuance of the certification of completion, post a notice of certification of completion. This is to ensure lien claimants are given adequate notice that the chance to file a lien is coming to a close.
The notice of certification of completion is a separate form from certification of completion. Posting a copy of the certification of completion is insufficient. Unlike certification of completion, the notice of certification must be in the legislated format.
The notice must be posted “in a prominent place on the improvement.” It must be visible to the public and physically attached to the actual work. For instance, a court held a notice of certification posted inside an on-site office trailer was invalid because the trailer was not part of the improvement.
Krista Johanson and Siobhan Small practice construction law at Borden Ladner Gervais LLP. This article is for information purposes only and may not be relied on for legal advice. Please send comments to firstname.lastname@example.org.
This article first appeared in the October 2018 issue of On-Site. You can check out the full issue here.