Fundamentals of materials liens: Payment for materials in construction contracts
June 11, 2018 by Alexander J. Spraggs
In a typical subcontract, a subcontractor will periodically, throughout the duration of their work on or supply for the project, apply for payments at a value proportionate to the amount of the subcontract work performed and/or the materials delivered to project.
This means that many, if not most construction contracts, require a supplier of materials to have delivered materials to a project site before they are paid for those materials.
This arrangement places the risk of a defaulting materials purchaser squarely on the materials supplier. Fortunately, throughout Canada, lien legislation gives those who provide materials to construction projects a lien for the value of the material. In Ontario, for example, “[a] person who supplies services or materials to an improvement for an owner, contractor or subcontractor, has a lien upon the interest of the owner in the premises improved for the price of those services or materials.”
What are “Materials?”
In general, “materials” can be defined as the goods supplied to a construction site that are to be used for the construction of the project. For instance, in British Columbia, the word “material” is defined as “moveable property that is delivered to the land on which the improvement is located and is intended to become part of the improvement, either directly or in a transformed state, or is consumed or used in the making of the improvement, including equipment rented without an operator.”
It is important to note that definitions vary from province to province. In Manitoba “material” includes property that isn’t yet on the construction site, but has been made to contract specifications and delivered to the contractor or subcontractor for use in performance of the contract or subcontract. In Saskatchewan, “material” does not include rented equipment. While Northwest Territories, Yukon, Alberta, New Brunswick and Prince Edward Island do not contain definitions of the word “material,” all provinces do give persons supplying materials in accordance with that province’s respective legislation some manner of lien for the purchase price of those materials.
Removing Materials from a Project
After the materials have been delivered to a construction project, an unpaid materials supplier may be tempted to help themselves by taking back the materials. However, it will likely be difficult to do so as those materials will then be located on a construction site which does not belong to the supplier and the supplier will not be able to enter into the construction site lawfully without the owner’s permission.
Fortunately, builders lien legislation across Canada typically provides that materials which are the subject of a builders lien cannot be removed from property to the detriment of the lien holder. In some provinces this includes protecting those materials from being seized to enforce a debt unless the debt being satisfied is that of the supplier who supplied those materials. All in all, there are several legal protections in place to ensure that unpaid suppliers of materials are paid for the materials they have delivered and that those materials don’t find their way off the property until the supplier of those materials is paid.
Protecting Lien Rights
While a lien over building materials arises the moment those materials are delivered to a project, it is important for a materials supplier to recognize that they must act quickly if they wish to preserve their lien. Generally speaking, a claim of lien must be registered within a prescribed number of days after completion or abandonment of the contract or subcontract at issue.
Getting liens registered in time can be particularly precarious for materials suppliers who do not provide any services or labour to a project. For instance, in Alberta, a lien holder must register their lien within a set amount of time after their last day on the job site (so, for a materials supplier providing no services, the clock starts ticking the moment they deliver their last shipment of materials). Also in Alberta, materials liens may be extinguished once those materials are incorporated into the project.
It is important for materials suppliers to know their rights when delivering supplies to a construction project. If you are a materials supplier and are unsure how or when to register a builders lien for materials or if you anticipate that you may be facing non-payment after supplying materials to a construction project, be sure to engage a lawyer experienced in construction law to ensure your rights are protected.
Alexander is an Associate in the Vancouver office of Borden Ladner Gervais LLP (BLG), practicing in the area of construction litigation and arbitration. This article is provided for general information only and may not be relied upon as legal advice.