Mistakes and Builders’ Liens: Fixable or Fatal?
Builders’ liens are a great tool for the unpaid contractor, subcontractor and supplier. It gives you leverage over a project, even if you’re only owed a small amount. But the simple one-page form is much more complicated than it appears, and what might be seen as a harmless mistake can be fatal to your lien. The wrong number or word might be enough to invalidate your lien, remove your leverage and catapult you into the pit with other unsecured creditors.
Builders’ Liens: the basics
The builders’ lien form is commonly used in the construction industry. The Alberta government has the form online. A lien claimant fills in the blanks:
- Who did the work, the type of work they did, for whom, and how much they’re owed;
- Legal (not municipal!) address of the land worked on and who owns that land;
- Whose interest is being liened (is it the registered owner i.e. fee simple? Or the party leasing the land); and
- Last day on site (if work is complete).
This seems simple enough, right? But mistakes happen – especially when there’s a rush to get the lien registered in time. However, when there’s a mistake on the lien form, it isn’t always clear if the lien is invalidated.
Oops, I messed up the lien…now what?
The Act (section 37) has a provision that may save a lien that contains a mistake. It provides that “substantial compliance” with the list above is enough, unless, in the Court’s opinion, a party is prejudiced by the mistake. Great! But what is substantial compliance, and what is prejudice? Each case is decided based on its specific facts, but the Court in Norson Construction Ltd v Clear Skies Heating & Air Conditioning Ltd, 2017 ABQB 188 dealt with liening the right lands, but identifying the wrong owner.
The project in question was owned by Pattison. Norson was the general contractor, Whitemud was a subcontractor, and Clear Skies was a sub-subcontractor. Clear Skies hadn’t been paid, so it filed a lien using the form provided and filing in the information on its own. It had most of the correct information, but mistakenly listed Whitemud, not Pattison, as the owner.
Luckily for Clear Skies, the Court decided this was “substantial compliance” with the Builders’ Lien Act, and there was no prejudice to anyone resulting from the mistake. The lien was registered against the right lands and the right interest – i.e. Clear Skies didn’t mistakenly lien a leasehold interest rather than the fee simple.
How does this decision affect you?
Naming the wrong owner in your lien is not fatal, as long as the correct legal address is liened. However, liening the wrong interest will likely be fatal, as will liening the wrong legal address. These two scenarios are common: a given city block might have dozens of different legal addresses. How do you know the exact location you performed work? Other contractors, or the municipality, or online searches may help, but even they can be wrong. “I tried my best to get it right” isn’t enough.
There’s no requirement to hire a lawyer to register a lien, but Field Law recommends doing so. We have qualified staff and lawyers that can perform the necessary searches, complete the lien forms, and take the required enforcement steps to maintain your lien. If you would like more information on how to ensure your hard work is protected by a proper lien, contact us to discuss.