Understanding the Builder’s Lien Act in Alberta
October 12, 2017
The provincial Builder’s Lien Act exists to assist and protect the contractors, subcontractors, labourers, and suppliers who have provided labour or materials to a construction project. The Act is enforced where these individuals are not paid for their efforts.
A lien gives an unpaid contractor, subcontractor, labourer, supplier or other relevant party the right to foreclose on the land in question in order to get paid.
The requirements for liens are quite technical, relying on a dedicated regulatory framework and complex legal precedents. Anyone working in the construction industry, or working closely with those in the industry should have a basic understanding of builder’s liens in order to protect their rights and interests. This week we explore some common questions that arise with respect to liens.
Who May File Liens?
A contractor, supplier, or other party is entitled to register a lien where they have:
- Done work or caused any work to be done based on an “improvement” in the land; or
- Provided any materials to be used in that improvement.
An improvement is anything that is constructed, built, erected, dug, or drilled or intended to be done so, on or in land. It does not include anything that is not affixed to the land or intended to be attached to the land.
This generally means that a claimant may have a valid lien for the supply of materials where those materials are actually incorporated into the improvement, or if they are used in the construction process. The materials in question must be placed on or in the immediate vicinity of the contract site, and the supplier must know that they are intended for a specific project.
Work done or materials supplied for things that are not permanently affixed to the land will not give grounds for a lien.
What Properties Can be Liened?
A lien can only be registered against the interests of an “owner” as defined in the Act. Under section 1 of the Act, an “owner” is:
a person having an estate or interest in land at whose request, express or implied, and
- on whose credit,
- on whose behalf,
- with whose privity and consent, or
- for whose direct benefit,
work is done on or material is furnished for an improvement to the land and includes all persons claiming under the owner whose rights are acquired after the commencement of the work or the furnishing of the material.
For the purposes of a lien, there may be multiple owners. For instance, where a registered landowner hires a contractor, that contractor can lien the title of the land. Where a tenant living at the registered landowner’s property hires a contractor, the contractor can lien the tenants lease (and also the landowner’s property if the landlord also qualifies as an owner under the Act. Different rules apply to condos.
Lands and the estate of the Crown are not subject to lien claims, but there may be lien rights against the estate of a tenant or “lessee” of the Crown. The ability to do so depends on the nature and degree of control the Crown has over the estate.
A lien cannot be registered against an Indian Band’s interest if the land is in the name of the Indian Band.
What are the Timelines for Liens?
A lien is deemed to be in existence from the time that work is started or materials are supplied. However, liens will expire where they are not registered within the specific time frame outlined in the Act. Subject to some exceptions, a lien for materials, services, or wages may be registered any time up to 45 days from the day the last materials, services, or wages were provided, or since the contract was abandoned. After those 45 days elapse, the lien expires.
Some exceptions include where the improvements in question are done to an oil or gas well, or where there is “prevenient agreement” in place between the parties.
Where improvements are made to an oil and gas well, the lien must be registered within 90 days.
A “prevenient arrangement” exists where there is a preliminary understanding between the relevant parties that they are entering into an ongoing relationship for the supply of services or materials. In such arrangements, the supplier or subcontractor agrees that they will provide materials occasionally, sometimes at multiple locations. The contractor or supplier is then entitled to lien for the entire value of the contract by registering a lien within 45 days of the last day services or materials are provided, as opposed to filing within 45 days of each service that is provided or material that is furnished.
How Do You Preserve a Lien?
In order for a lien to be enforced, a Statement of Claim must be issued and a “lis pendens” must be registered within 180 days of registration of the lien. A lis pendens is a certificate issued by the court to confirm that a Statement of Claim relating to the land in question has been issued.
If another lien claimant starts an action regarding the same lien fund within the 180-day window, a Statement of Claim will not be required, but a lis pendens will still be necessary.
Where the lien fund, or security for the lien is paid into court, the obligation to start a lien action or register a lis pendens within the 180-day window is waived.
How Do You Remove a Wrongfully Registered Lien?
There are a number of mechanisms within the Act that allow for removal of a lien.
- Section 27 allows an owner or mortgagee may give security or pay the amount of the lien fund into court. On receipt of the security or payment, the court will then order liens to be discharged. Such security or payment is not an admission of validity of any lien claims. Where necessary, the matter will proceed to negotiation or litigation in order to resolve any outstanding dispute regarding entitlement to the funds.
- Section 48 allows for the removal of a lien where the court is given security or is paid for the full amount of the lien claims. Unlike an application under section 27, an application under section 48 can be made by any relevant party. The court will determine the amount of security or payment needed, plus interests and an allowance for costs, and will direct how any outstanding issues between the parties should be resolved. This section also grants the court the discretion to remove a lien where there is no doubt that a lien claimant is not entitled to a lien (for instance, where the lien deadline was missed).
- Section 29 allows a party to pay the lien claim of a subcontractor. In order to make such a payment, five days’ advanced notice must be provided to all affected parties. These payments cannot be made if there is any objection.
Other methods of removing a lien include:
- Where a lien holder does not file a Statement of Claim and register lis pendens within 30 days from the date of service of the Notice to Commence Action, the line may be discharged through a letter to the Registrar of Land Titles, enclosing proof of service of the Notice to Commence Action.
- If a lien holder fails to register a lis pendens within 180 days of the date of registration of the lien, a letter to the Registrar will also be sufficient to remove the lien.
- If a lien holder fails to get to trial within 2 years of the date of registration of the lis pendens, it may be possible to have the lien removed. In order to do so, a court application is required and the court may refuse the application if there is an adequate explanation for why so much time has gone by.
These are only some of the most common questions that we hear with regards to liens. There are many more technical and legal nuances that are important to understand with respect to these enforcement mechanisms. If you are in the construction industry, and have questions about liens and how to enforce your rights contact HMC Lawyers. Our Construction Team offers exceptional legal advice on builders’ liens and related disputes. To speak with one of our lawyers, call 1-800-480-3534 or contact us online.