Transcript Construction Superconference: Minimizing Project Risks in

Construction Superconference:
Builder’s Liens
Alex Kotkas
January 25, 2010
Techniques for Ensuring Protection under the
Builder’s Lien Act
• General Overview: Purpose and Creation of Lien Rights
• Operation
• Applicability
• Recent case law development
• Concerns Relating to Condominiums
• Registration of Liens
• Re-registration of liens
• Holdback obligations
• Strategies in protecting lien rights
Purpose of the Builder’s Lien Act
• The Act intends to strike a balance between the
interests of the property owner and those who
provide services, labour and materials to that
owner
• To this end, the legislation aims to provide both:
1.
2.
A quick and cost effective method for suppliers of
labour, services and materials to enforce their rights
against both those with whom they have a contract,
and against the owner of the property
A limitation on liability for the owner (s.25)
Creation of the Lien
• A lien is created by registering an interest against
real property at Land Titles in the specified form
(s.34)
• Registration can occur without notifying or
obtaining the consent of the real property owner
• To validly create a lien claim, the registrant must
have done work or furnished material for an
“improvement” to the land
• This work must also have been done for and
(expressly or impliedly) requested by the owner
Operation of the Lien
•
Under the Act, an Owner, when making payment on the
contract, must retain an amount equal to 10% of the value
of the work actually done and materials actually furnished
for a period of 45 days from the date of issue of a certificate
of substantial performance or date of completion of the
contract;
• This holdback money goes into one of two lien funds as
security in case a contractor claim arises:
1. Major lien fund (s.18): 10% of payments until substantial
completion
2. Minor lien fund (s.23): 10% of payments from substantial
completion to completion
Operation of the Lien
(cont’d)
• If the work or materials supplied by the lien-holder
go uncompensated for, the lien-holder can file a
statement of claim to bring an action on the
outstanding payments
• The remedies provided under the Act limit the
owner’s liability to the total of the major and minor
lien funds (s.25)
• The Court can order the sale of the Owner’s
property in order to satisfy claims (s.59)
Applicability of Liens
•
In order for a lien to apply certain requirements must be
met:
• The materials or labour must have been used in making
“improvements” to the property
• The land the lien it is attached to must be lienable
• Value of the lien must be properly stated
• Registration requirements must be followed
• If a claim is intended to be brought on the lien, specific
requirements and timelines must be followed
What is an “improvement”?
• The Act defines an Improvement as “anything
constructed, erected, built, placed, dug or drilled,
or intended to be constructed, erected, built,
placed, dug or drilled, on or in land except a thing
that is neither affixed to the land nor intended to
be or become part of the land”
• Essentially, the Court looks at the nature of the
attachment of the structure or equipment to the
land and the intention that the attachment have
some degree of permanency
What is an “improvement”?
(cont’d)
Improvements:
Not Improvements:
•Architectural services and
•Heavy equipment that
drawings
requires significant effort to
dismantle and move (i.e.:
•Pressure vessels in a
irrigation equipment, drilling
processing plant
rigs, conveyor systems in the
•Modular units where
oilsands)
dismantling and moving
•General maintenance
would cause significant
services (landscaping, snow
damage
removal)
•Equipment rentals used on a
•Legal and accounting
construction site
services
What is an “improvement”?
Strict Interpretation governs
Important points to note in determining what the
Court will view as an Improvement:
1. The Supreme Court of Canada has dictated
that Lien legislation should be interpreted
strictly.
The justification for this interpretation is that
builders' liens interfere with common law
property rights, so no right should be found
unless the law clearly expresses it (Gauntlet
Energy Corp. (Re) [2003] A.J. No. 1720 (Alta.
Q.B.))
What is an “improvement”?
Provincial definitions differ
Important points to note in determining what the
Court will view as an Improvement:
• Alberta’s definition of improvement is
exclusionary, and the principle of strict
interpretation is closely followed.
• The definition in B.C. is inclusive, rather than
exclusive, although reasoning often relies on
the same principles as in Alberta
• The definition in Ontario is exhaustive and
restrictive
Is the land lienable?
Generally, liens cannot be registered or enforced
against certain lands:
•
•
•
•
Crown lands
Indian and Métis lands
Public Highways
Irrigation Districts
Is the land lienable?
(cont’d)
Crown Lands:
• Generally: Liens are not enforceable against
the Crown. S. 14 of the Interpretation Act provides that
no enactment affects Her Majesty unless it expressly
states that the Crown is bound. However, liens against
Crown lands or Crown agents can still be registered at
Land Titles, if the land is jointly owned with persons other
than the Crown and the lien will then apply to the nonexempt portion of the land.
• There is a public policy aspect at play: One of
the remedies under the Act is for the Court to order a sale
on the liened land; to have this remedy apply to public
lands, which can host facilities like hospitals, would go
against the public interest
Is the land lienable?
(cont’d)
Federal: The general rule- no liens are enforceable- applies,
with certain exceptions: if the Crown holds an interest
jointly with other persons; if a provincial agency occupies
the land; and if the federal crown specifically legislates
that the provincial legislation applies (i.e.: NEB Act
specifies that it applies to pipelines). These exceptions
are limited, however, by the concept of interjurisdictional
immunity: even if there is a jointly held interest, if the
purpose the land is being used for is one in which the
federal crown has exclusive jurisdiction, then there is a
possibility no lien can apply (ie: airports, nuclear
facilities). See Vancouver International Airport v. Lafarge
Canada Inc. (2009), 82 C.L.R. (3d) 285 (B.C.S.C.)
Is the land lienable?
(cont’d)
•
Indian and Métis land: As an area of exclusive federal
jurisdiction Provincial lien legislation does not apply
(Palm Dairies Ltd. v. The Queen (1978), 91 D.L.R. (3d)
665 (F.C.T.D.)). An exception exists where the trust
provisions of provincial lien legislation is used to apply to
monies used or intended to be used in the construction of
improvements on reserve lands (Skukowski v. James
Conci Holdings Inc. [1998] O.J. No. 4343). This is
dependant on the federal crown being an “owner” under
the provincial lien Act (Jones Masonry Ltd. V. Defence
Construction (1951) Ltd. (2009), 81 C.L.R. (3d) 277
(NBQB), affirmed by the NBCA in 2010); it should be
noted that the Alberta Act does not expressly include or
exclude the Crown in its definition of “owner”.
Is the land lienable?
(cont’d)
Provincial: The general rule applies with several
exceptions: any joint interest with the Crown can be
liened (Kardinal Homes Ltd. v. Alberta Housing Corp.
(1978), 8 Alta. L.R. (2d) 56);
Mineral Rights: Liens against mineral rights in
provincial crown land must be registered with
the Minister of Energy as per s.36 of the
Builders Lien Act (rather than at Land Titles as
with normal liens against surface rights).
Is the land lienable?
(cont’d)
Municipal: Unless public policy exempts the lien from
applying then the regular provisions of the Act apply and
municipal land can be liened (Prairie Roadbuilders Ltd. v.
Stettler 23, 1983 CanLII 1085 (AB Q.B.)). Liens cannot
be filed in respect of municipal streets.
Is the land lienable?
(cont’d)
•
Public Highways & Irrigation Districts: s.7 of the AB
Builders Lien Act prohibits a lien from applying to
improvements in either of these areas
Major litigation themes in this area:
Recent Alberta case law:
1. Applicability of liens to federal Crown land (Vancouver
International Airport- BC case but potential effects in AB)
2. Who and what is caught by the definitions:
•
•
•
“improvement”- frequently an issue;
“owner”- frequently an issue; in E. Gruben’s Transport Ltd. v.
Alberta Surplus Sales Ltd. 2010 ABQB 244, the prospective
purchaser’s consent to subdivision did not make it an owner
for the purposes of the Act;
“person”- in Canbar West Projects Ltd. v. Sure Shot
Sandblasting & Painting Ltd., 2010 ABQB 372, individuals
who entered into a contract as a company (pre-incorporation
but then failed to follow through on incorporating) were found
to not be a person for the purposes of maintaining a lien
Major litigation themes in this area:
Recent Alberta case law (Cont’d)
3. Words not defined in the Act:
• “interested party”- Schubert v. A-S4 Steel Ltd., 2010
ABCA 62 determined that a sublessee could be an
interested party for the purposes of having standing to
vacate a lien
4. Calculation of the lien amount:
•
non-lienable work cannot be sheltered under a lien for
lienable work (John Barlot Architect Ltd. v. 413481
Alberta Ltd. 2010 ABCA 51)
Concerns Relating to Condominiums
The Condominium Property Act R.S.A. 2000 c. C-22 deals
with liens on condos in relation to:
1. Work Requested by Owner- s.78(1)(a)
•
A lien can be registered against the unit and also extends to
the owner’s share of the common property
2. Work Requested by Corporation on Common
Property- s.78(1)(b), s.78(2)
•
A lien can be registered against the estates of all of the
owners in all of the units and common property
3. Work Requested by Corporation on Individual Unitss.78(1)(c)
•
A lien can be registered against the unit and also extends to
the owner’s share of the common property
Registration of Liens:
Procedure under the AB Builders Lien Act
•
•
•
Under s.41, a lien must be registered within 45 days
from the date when the last materials were furnished,
services were provided or the contract was completed or
abandoned (90 days for oil and gas wells).
If substantial performance is achieved (and a
certificate is issued) there is likewise 45 days to
register the lien in order to have it attach to the major
lien fund (s.21)
To keep the lien alive, within 180 days of registering the
lien a claim must be commenced and a Certificate of Lis
Pendens must be filed with Land Titles (s.43(1))
Re-registration of Liens
•
•
•
The only provisions for re-instatement of a lien are
under s.38, which allows the Court to reinstate the lien if
it was invalidated by an order or judgment under s.155 or
s.156 of the Land Titles Act (for not being a properly
attested instrument for registration)
If the lien is not registered within the 45 days provided by
s.41, it ceases to exist (s.42) and cannot be subsequently
registered
If the lien is initially registered but the s.43 provisions
aren’t met in the required period (180 days), it ceases to
exist and the Registrar can on its own initiative or on
request cancel registration of the lien
Holdback Obligations
S.18 of the BLA requires an owner who is liable on a
contract under which a lien may arise to holdback the
required funds.
• The statute imposes a holdback requirement on owners
who are liable on contracts where liens potentially exist
• This lien right cannot be waived by agreement (s.5
prohibits this on policy grounds)
• A payment schedule does not exempt the owner from
the holdback obligation (s.18)
• A direct purchase may not exempt the owner from
the holdback obligation (ie: when material is paid for up
front and delivered to the worksite, if the supplier knows
that the materials are being used for an improvement on
specified lands a lien can still arise)
Summary:
Strategies in Protecting Lien Rights
For Owners:
• If there is a possibility that a lien may arise, make sure to meet
the holdback requirements
• Do searches and more searches before paying out
• If a lien is claimed:
•
•
•
check to ensure that it can apply and registration procedures were
followed
Ensure that the value is accurately stated and that lienable work isn’t
sheltering non-lienable claims
Pay funds into trust to obtain removal if required
For Lien-Holders:
• Ensure activity allows for lien (requested by owner, work or
material going towards an “improvement”, land is lienable)
• Ensure registration steps and timelines are followed
Questions?