New Housing Holdbacks
2008/01/09 Originally published in the Vernon Morning Star.
In 1997 the current Builders Lien Act was introduced. It proposed that buyers could retain a holdback when they entered into building contracts and purchase contracts on new houses. But when the Act was actually proclaimed that particular provision was not included. So, a new house buyer is not entitled to a holdback under the most recent Builders Lien Act.
I am not saying that Buyers cannot negotiate a holdback equivalent to that of the Builders Lien Act of yesteryear. It is just that a new house buyer is not automatically entitled to do so. If the Buyer wants such a provision added to the contract it becomes part of the negotiation process and the Builder may or may not agree to it. If you are a new home Buyer it's best to consult both your realtor and your lawyer to assist and advise you. If a lien holdback is negotiated, the common figure is 10% of the cost of the construction, not 10% of the lot and construction costs combined.
There is an important exception to this in the sale of condos, apartments, townhouses etc. The Strata Property Act does provide for such lien holdbacks. In fact the Strata Property Act requires the purchaser to hold back 7% of the total purchase price (including the land value). Even if the strata property buyer has no such clause in their contract the lawyer or notary handling the conveyance will automatically arrange for the holdback because it's the law.
The Builders Lien Act was never intended to cover holdbacks that had to do with inferior or incomplete work. It was only meant to create a reserve of funds so that dollars would be available if the building contractor failed to pay some or all of their sub-trades.
Jane Field works with RE/MAX Vernon. Jane has over 30 years experience in the Real Estate business. To suggest topics for future articles or to ask Jane questions, email her or call 503-3755.
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