Multiple Contracts Raise Question About Limitation Period For Liens feature image

Multiple Contracts Raise Question About Limitation Period For Liens

One of the most useful tools available to contractors is the ability to use liens to encourage payment for completed projects. It’s important to work with an experienced construction law lawyer when dealing with liens or any other legal matters related to the construction industry, as it involves highly technical regulatory requirements. In particular, contractors must remember that the timeframe for registering liens varies from 60 to 90 days, depending on the type of work.

In 2020, Alberta introduced Bill 37: The Builders’ Lien (Prompt Payment) Amendment Act, 2020 which, once proclaimed, will attempt to address many issues related to liens. However, a recent decision from the Court of Queen’s Bench of Alberta emphasizes the continued importance of keeping track of lien timelines where multiple agreements are involved. 

Parties Disagreed Which Contract Triggered Deadline to Register Liens

In 1406676 Alberta Ltd. v. Five Star Engineering Inc., the respondent (the subcontractor), registered liens against two buildings it constructed on behalf of the applicant (the owner).The Builders’ Lien Act requires liens to be registered within “45 days from the day that the performance of services is completed or the contract to provide the services is abandoned.”

The subcontractor’s liens were registered against the owner’s buildings on January 20, 2017. The owner said that the services provided by the subcontractor were pursuant to two distinct contracts. The first was between the subcontractor and the general contractor, whose contract was terminated by the owner prior to the project’s completion. The second contract was subsequently entered into between the subcontractor and the owner directly, which required the subcontractor to complete the final inspection. 

The owner’s position was that the work associated with the liens fell under the first contract (between the subcontractor and the contractor). If that was the case, the subcontractor had missed the 45-day window within which a lien could be filed. The subcontractor took the position that the contract it subsequently entered into with the owner directly also covered the work that was requested under the original contract, and as such, the liens were registered in time. At the initial trial before a Master of the court, the court agreed with the owner’s interpretation and dismissed the subcontractor’s claim.

Court Found Owner Accepted Responsibility for Payments Owed to Subcontractor

The subcontractor appealed on the grounds that there was a “prevenient” (or preceding) agreement between the subcontractor and the owner that included all of the subcontractor’s work on the buildings. This was based on the fact that the owner dealt directly with the subcontractor from the outset of the project and continued to do so until the last service, which was provided within 45 days of the day the liens were registered.

At the time the owner terminated its agreement with the contractor, it retained the subcontractor to complete the project’s final inspection. The owner advised the subcontractor that due to ongoing refusals by the contractor, the owner could not pay the outstanding amounts owed to the subcontractor by the contractor. Despite this, the subcontractor agreed to perform the final inspections and provided a cost estimate. Correspondence between the parties suggested that the subcontractor was under the impression that someone would be paying its outstanding fees, though the owner had not openly offered to do so.

Upon completion of the inspection, the subcontractor sent the owner a new invoice for all of its outstanding payments, including those owed by the original contractor. The owner denied having any responsibility for the amounts owed to the subcontractor from the contractor.

The court reviewed how the owner and subcontractor conducted business throughout the project. The court found the correspondence between the parties demonstrated the owner accepted responsibility for the payments owed to the subcontractor under the subcontractor and contractor’s original agreement. It noted the owner requested and received specific services covered by that agreement and the owner did not establish an intention for the subcontractor to conduct the final inspection pursuant to the original agreement.

The decision of the lower court was overturned and the liens were found to be valid as they were registered within 45 days of the completion of the subcontractor’s work under its agreement with the owner. In addition to the right to register the liens, the subcontractor was also awarded costs amounting to $1,350.

Contact HMC Lawyers in Calgary for Reliable Advice on Construction Disputes

At HMC Lawyers, our construction lawyers offer exceptional legal advice to parties regarding all construction matters, including builders’ liens and related issues. We can help you make well-informed decisions regardless of whether you are an owner, supplier, contractor, or subcontractor seeking payment for completed work. Our knowledge of regulatory requirements and the governing law gives our clients the comfort of knowing that their liens are registered properly and in time. Contact us at 403-269-7220 or online for advice about your legal rights and responsibilities in construction transactions and disputes.

 

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Contact HMC Lawyers for Exceptional Legal Guidance

At HMC Lawyers, we offer strategic legal advice. Our breadth of practice experience allows us to promptly handle almost every litigation-related legal issue that may arise, and anticipate potential roadblocks that may delay its resolution. To make an appointment with a member of our team, contact us online or call 403-269-7220

For articling student inquiries please contact Sean Jeffers at 403.261.3329 or sjeffers@hmclawyers.com

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