Whether or not someone owns a piece of land might seem like a straightforward issue to resolve. But as we’ve often seen, seemingly easy to answer questions can often lead to interesting legal questions. A recent decision from the Court of Queen’s Bench of Alberta answers “can a registered owner of land, who knows that work is being done on the land, defeat the liens of unpaid contractors on the basis that the it is not an ‘owner’ for the purposes of section 1(j) of the Builders’ Lien Act (the “BLA”) where it does not expressly request the work nor agree to pay the contractor for it.”
The Builders’ Lien Act
The purpose of the BLA is to allow builders and contracts to collect money owed to them after the completion of a project by putting a lien on the land they improved. The BLA defines an owners as
“ person having an estate or interest in land at whose request, express or implied, and
(i) on whose credit,
(ii) on whose behalf,
(iii) with whose privity and consent, or
(iv) 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”
The court categorized the case as one where the issue being decided upon often arises, being a case of a developer/vendor (registered owner of land) who agrees to sell land, and allows the purchaser to build on the land prior to completion of the sale, disavows liens placed on its land by unpaid contractors of the purchaser.” In the case at hand, the owner agreed to sell 48 lots of land to a purchaser. The purchaser was putting houses on the land, with the agreement allowing them to pay the owner as houses sold. While the owner was contractually entitled to become involved in the building process being undertaken by the purchaser, the evidence showed that it rarely became involved in the building or the marketing of the homes.
The question before the court
The question the court had to answer was whether the owner was actually an “owner” under the meaning of the word in the BLA.
The lienholders argued that despite the owner’s lack of involvement, the contract stipulated the owners were to supervise and be involved in the construction of the houses. While the owner’s contractual obligations were a relevant consideration, the court did not see it as significant in how the matter was to be determined, noting a 1998 decision where a landlord had the contractual rights to become involved in a construction project by a tenant but chose not to and was not found to be an owner under the BLA.
The court turned to common law to guide it in its decision. The first case was from 2000 and involved an apartment builder owner who sold the building to a company who wanted to convert the apartments to condos. The deal fell through after the purchaser performed some work converting apartments, and the owner was found not to be an owner under the BLA.
The second case was from 2010 and was about a land owner who sold land to a developer who began development of a road before the deal was closed. Again, the court disallowed the lien, writing “(the owner) had no direct or indirect involvement in arranging for the road work to be done. Its participation in the road work was entirely passive. It did not request that work either expressly or impliedly. It was not an “owner” within the meaning of s. 1(j) of the Builders’ Lien Act.
The last case also dates back to 2010 and dealt with a developer who purchased land to be subdivided in order to build houses. The deal fell through and the contractor sought a lien against the vendors of the land. The court determined the issue based on the degree of involvement by the vendor.
In the present case the court determined that the owner was not sufficiently involved in the project, and it is the amount of involvement rather than the opportunity of involvement that should be used to determine whether someone qualifies as an owner under the BLA.
The Exceptional team at HMC Lawyers advises construction industry participants about their rights and obligations surrounding builders’ liens. Our construction team has decades of combined experience in construction law. We understand the importance of handling lien matters quickly and cost-effectively while protecting the interests and rights of our clients. To speak with one of our lawyers please reach us online or call us at 1-800-480-3534.