Determining Vicinity As It Relates To Builders’ Liens feature image

Determining Vicinity As It Relates To Builders’ Liens

Builders’ liens are effective ways for contractors and subcontractors to protect their rights in the event that they do not receive payment for their work. A builder’s lean, when properly registered, can give a contractor or subcontractor a claim against property worked on. But as we often see is the case, the wrinkles in the facts from one case to another can sometimes cause seemingly cut and dry issues to become a little more complicated. This was what happened in a recent decision concerning a lien on property that is not the same property where the work was conducted.

To the gravel pit

The defendant is the operator of an oil sand project located outside of Fort McMurray (“the project”). They entered into a Master Agreement with a contractor who then subcontracted work to two other parties. One of them is referred to as “NDV” in the decision, while the other is referred to as “Tyalta.” NVD entered into a contract with the contractor to grant the contractor exclusive right to remove sand and gravel from a gravel pit located about 30 km from the project site (though the road to access it is 89km long). Tyalta rented equipment to crush and screen the sand and gravel, which would then be used in connection with the project.

Eventually, the contract related to the gravel was terminated due to non-payment. Both NDV and Tyalta filed liens against the defendant, though the project was not actually where the equipment was used.

Where was the construction site?

The issue revolves around the interpretation of Section 6(4) of the Builders’ Lien Act which states,

“For the purposes of this Act, a person who rents equipment to an owner, contractor or subcontractor is, while the equipment is on the contract site or in the immediate vicinity of the contract site, deemed to have performed a service and has a lien for reasonable and just rental of the equipment while it is used or is reasonably required to be available for the purpose of the work.”

The defendant argues that the lien is invalid because the project site was not the same as the site where the gravel work was done, nor is it in the “immediate vicinity” of the project site. Meanwhile, Tyalta argued, “having the rental equipment be used in the specific areas covered by a mineral lease is not required to establish lien rights. All that is necessary is a sufficient nexus to the use of the rental equipment and improvements to the estate or interest to which the lien attaches.”

The court noted that nothing at the gravel pit was improved because of the work, nor was anything constructed. Instead, the work at the gravel pit contributed to the physical construction and improvement of the project site. As a result, the project site was the construction site, but the gravel pit was not.

Immediate vicinity

The court then asked whether the gravel pit was in the immediate vicinity of the project site. This is where the court turned its attention back to the relationship between the two sites. The gravel was not available at the construction site and therefore had to be brought in from elsewhere. Therefore a common purpose was established. The defendant tried to argue that allowing such a generous application of “immediate vicinity” would open the floodgates to more litigation. However, the court was not convinced, writing that the question of “immediate vicinity” would have to be asked in each separate and potential case.

At HMC Lawyers, our Construction Team offers exceptional legal advice on builders’ liens and related disputes to various segments of the construction industry. We provide personalized service to each of our clients to help them make well-informed decisions about their business while protecting their legal rights. To speak with one of our lawyers, call 1-800-480-3534 or contact us online.

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