Deposits, progress payments and the holdback: how money moves under BC's Builders Lien Act

Deposits and progress payments

A building contract can pay the builder in three kinds of amounts: a deposit at signing, progress payments during the work, and a final payment at completion. A deposit is a payment on account of the contract price, and its size is a contract term to negotiate. Progress payments follow one of two patterns. Stage payments are set amounts due when a named stage is finished, such as foundation, framing or lock-up. Value payments are made at set intervals for the value of work done in that period. CCDC 2, the national standard fixed price contract, assumes monthly progress payments.

For a homeowner, the safer pattern is the one where each payment can be checked against something on site. A stage payment should name the stage in terms an inspector would recognise, and can be tied to a passed city inspection. A value payment should come with a breakdown of work done against the schedule of values, the list that splits the contract price across the parts of the work.

On a Metro Vancouver build with a construction loan, the lender's draw schedule sets when money is available. Section 4 (4) of the Builders Lien Act lets a mortgagee that is a savings institution, authorised by the owner to pay out mortgage money, keep back the holdback the owner would otherwise retain. If it does, that counts as the owner's compliance, and section 4 (5) gives the lender the owner's obligations for that holdback. Ask the lender in writing whether it will keep the holdback, and match the contract's payment schedule to the draw schedule before signing.

The 10% holdback and the holdback account

Section 4 (1) says the person primarily liable on a contract under which a lien may arise must retain a holdback equal to 10% of the greater of two amounts: the value of the work or material provided, and the payments made on account of the price. On a contract between a homeowner and a builder, the homeowner is that person. Section 4 (2) applies the rule whether payments are periodic or made at completion.

Section 5 (1) then requires the owner to open a holdback account at a savings institution for each contract under which a lien may arise, pay the holdback into it, and administer it jointly with the contractor. Money in the account is held in trust for the contractor and is charged with the liens under the Act (section 5 (2)). Interest goes to the owner during the holdback period and to the contractor's credit after it (section 5 (6)). Section 5 (8) (b) says the account is not required for a contract where the total value of work and material is less than $100,000 (threshold as of 24 October 2026). The 10% holdback itself still applies below that amount.

Skipping the account has a direct cost. Section 5 (7) makes failure to pay the holdback into the account a default under the contract, and lets the contractor suspend work on 10 days' notice while the default continues.

When the work counts as complete

Most of the Act's deadlines run from completion, and the Act defines it. Section 1 (1) defines completed to cover work that is finished in substance, even if some small items remain. Section 1 (2) gives the test: a contract counts as performed when the work left can be completed or corrected for no more than 3% of the first $500,000 of the contract price, 2% of the next $500,000, and 1% of the balance (bands as of 24 October 2026). On a contract under $500,000, that means the work left is worth no more than 3% of the price.

An improvement also counts as complete when it, or a substantial part of it, is ready for use (section 1 (3)). For a strata lot, section 1 (4) says construction is complete no later than the date the lot is first occupied. Section 1 (5) adds an abandonment rule: a contract is deemed abandoned after 30 days with no work, unless the stop had a listed cause such as a strike, weather or a court order. Abandonment and termination start the same deadlines as completion when no certificate has been issued.

The clearest way to fix the date is a certificate of completion. Under section 7 (1), the payment certifier is the architect, engineer or other person the contract names as responsible for certifying payment. If the contract names no one, the owner acts as certifier for amounts owed to the contractor. On a request from a contractor or subcontractor, the certifier must decide within 10 days whether the contract is complete and, if it is, issue a certificate (section 7 (3)). Within 7 days of issuing it, the certifier must give copies to the owner, the head contractor and the person who asked, and post a notice of the certificate in a prominent place on the site (section 7 (4)).

Lien deadlines and the most an owner can owe

A claim of lien is filed in the land title office (section 15). Under section 20, it must be filed no later than 45 days after the certificate of completion is issued. Where there is no certificate, the 45 days run from completion, abandonment or termination of the head contract. Section 8 sets the holdback period at 55 days from the same starting point. The owner can pay out the holdback after the period ends, and section 8 (4) says the liens it secured are then discharged unless a claim of lien was filed or an enforcement action started in the meantime.

Section 34 caps what all lien holders claiming under one contractor can recover: the greater of the amount the owner still owes that contractor and the required holdback. Two rules stop an owner from shrinking the amount owing by paying at the wrong time. A payment made in bad faith does not reduce it, and neither does a payment made after a lien is filed, with actual notice, while the lien is on title (section 34 (2)). An owner who paid the builder in full but kept no holdback can therefore face liens up to the holdback that should have been kept.

A lien for less than $200 cannot be filed (section 17, as of 24 October 2026). A filed lien has a time limit. Under section 33 (1), the claimant must start a court action and register a certificate of pending litigation within one year of filing, or the lien is extinguished. An owner can shorten that time by serving a notice to commence action, which gives the claimant 21 days (section 33 (2)). Section 23 lets an owner remove liens from title by paying into court the lesser of the total claims and the amount owing, as long as the payment is at least the required holdback.

Deposits, progress payments and home warranty

A homeowner building on their own land may expect home warranty insurance to protect money paid before the house is finished. Check that expectation against the rules. The Homeowner Protection Act Regulation, as consolidated to 20 October 2026, sets the minimum warranty coverage in Schedule 3: defects in materials and labour, the building envelope and the structure. It contains no deposit cover. BC Housing's homeowner page on home warranty insurance, current as of 22 September 2026, does not mention deposits or progress payments either.

For a fee simple home built on the owner's land (a home on its own title), Schedule 3 says coverage begins at the earliest of actual occupancy, the granting of an occupancy permit, or the date the home is complete and ready to occupy. Section 12 (1) sets the lowest claim limit a warranty provider may use: for a fee simple home, the lesser of the original purchase price and $200,000; for a strata home, the lesser of the original purchase price and $100,000 (limits as of 24 October 2026). If deposit protection matters to you, ask the warranty provider in writing what its policy covers before occupancy, and get the answer before you pay the deposit.

Before occupancy, the practical protection comes from the contract and the Act: a deposit sized to the work about to start, payments tied to stages you can check, the holdback kept, and proof that trades were paid with each draw.

Prompt payment rules on the way

British Columbia passed the Construction Prompt Payment Act in November 2025. The province's page, last updated 20 August 2026, says it received Royal Assent on 27 November 2025 and is not yet in force. It will start on a future date, after regulations are written and an adjudication authority is chosen. Once in force, an owner who pays in full must pay the contractor within 28 days of the date a proper invoice is given, an owner who will pay only part or nothing must give notice within 14 days, and the contractor must pay subcontractors within 7 days of being paid. Payment disputes can go to an adjudicator from a registry of qualified professionals, and the province says determinations are issued within weeks.

The province's spring 2026 discussion paper says the Act will apply to new contracts made on or after it comes into force, and that contracts already underway will not be affected. It says the government's proposed approach is to apply the Act to all projects. Until it is in force, the payment timing on a house contract is what the contract says, so write the due date for each payment into it.