March 12, 2018 by Alexander Spraggs
What are the most important tools for a contractor to bring to a jobsite?
Hammers? Wrenches? A sturdy pickup truck?
… What about builders liens? Builders liens give contractors the leverage they need to turn a job done into a job paid for. What’s more important than that?
So what exactly does a builders lien do? Without a builders lien, an unpaid contractor can only go after the person with whom they have contracted to settle unpaid accounts. However, armed with a builders lien, an unpaid contractor can acquire a legal interest in the property that they worked on, and this interest can be wielded over the owner of the property on which the contractor is delivering supplies or making improvements. Generally, an unpaid contractor with a valid builders lien can get the courts, upon judgment, to sell the liened property and use the proceeds to settle their unpaid accounts.
However, like all tools, a builders lien isn’t right for every project and is only as effective as the person who is using it. Therefore, it is important to get advice from a lawyer who is well versed in the use of this device to make sure that a lien is suited to the project and used properly. You wouldn’t put a chainsaw in the hands of an amateur, and the same can be said about a builders lien (although, it would make a less entertaining horror movie).
For instance, one of the aspects of builders liens that may catch some contractors off guard is the fact that not all property can be the subject of a builders lien. This may result in a contractor reaching for a lien when another tool may be better suited for the job. For instance, in Alberta, the Builders’ Lien Act cannot be enforced against the provincial Crown. However, the Public Works Act provides a useful mechanism to make claims against public works projects. Therefore, a contractor working on a public works project who is thinking about using a builders lien on Crown owned property (not realizing that claiming under the Public Works Act would be a better tool for the job) might miss critical deadlines for filing claims under the Public Works Act and find themselves without the leverage they need to ensure they are paid for their work.
For this reason, every province has its own builders lien legislation, each with its own peculiarities.
Pitfalls like this may be particularly difficult to navigate for larger contractors who take on projects in different provinces around Canada, as no two provinces are the same when it comes to the use and application of builders liens. While the lien has existed in civil law jurisdictions like Québec (where it is called a “hypothec”) since Roman times, it was never a part of the English common law that was imported into the other Canadian provinces. For this reason, every province has its own builders lien legislation, each with its own peculiarities.
In most provinces, builders lien legislation does not work against the provincial Crown (as in the Alberta example above). However, in British Columbia and Prince Edward Island, builders lien legislation is binding on the provincial Crown. Nevertheless, the fact that the legislation applies against the provincial Crown in B.C. and P.E.I. does not mean that liens will have the same effect on Crown owned property and privately owned property. In BC, for example, where builders lien legislation applies against the provincial Crown, lands owned by the province can be liened but cannot be sold to satisfy a judgment in favour of a lien claimant.
Another area where the use of builders liens can be particularly tricky is when property is owned by the federal government. Provincial builders lien legislation does not affect property owned by the federal Crown. However, some federal statutes specifically allow for liens against federal Crown property. For instance, the National Energy Board Act provides that provincial lien legislation can be enforced against federal Crown property with respect to pipelines. But it’s not just federal Crown owned land where builders liens can be problematic: if a lien will impair a federal undertaking (such as the operation of an airport, which falls under the exclusive federal jurisdiction over aeronautics), it will generally be found to be invalid, regardless of whether the land is owned by the federal Crown.
So, while a builders lien is one of the contractor’s most useful and powerful tools, it isn’t the right tool for every job and should be handled with care. While you won’t lose a finger if you use it incorrectly – you just might lose your shirt!
This article is for information purposes only and may not be relied on for legal advice.