Builders’ Liens: Where does the Lien Line Lie?
May 2021 - 3 min read
The line between what work gives rise to a valid builders’ lien, and that which doesn’t, can be blurry. The recent decision of YoungEnergyServe Inc. v LR Ltd, LR Processing Partnership, 2021 ABQB 101, has set out a framework for determining when a builders’ lien is valid.
In that case, YESCo contracted with LR to clean, repair, and reline the interior of all of the tanks and pressure vessels at LR’s Mazeppa Gas Plant in High River. YESCo alleged that it was owed $1.7 million for its work, registered and filed a builders’ lien against LR’s lands. The Court ruled that the lien was invalid.
Builder’s Liens Must be an “Improvement”
The validity of YESCo’s lien depended on whether its work was done in respect of an “improvement” or was simply maintenance. Section 6 of the Builders’ Lien Act (the BLA) entitles a person to a lien where that person has worked on or contributed material in respect of an “improvement” on that land. Section 1 of the BLA defines improvement as “anything constructed, erected, built, placed, dug or drilled . . . on or in land” and excludes things that are not affixed to the land or not intended to become part of the land.
The Court acknowledged that Alberta courts determine what constitutes an “improvement” in the larger context of the “overall project”. This means that work may be considered as an improvement for the purposes of registering a builders’ lien if it is a component of a different project falling under the definition of “improvement”. The Court further noted that the work does not need to be physically performed on the improvement as long as it is “directly related to the process of construction”.
A Strict Interpretation of the BLA is Required for Lien Validity
Because liens are statutory rights governed by legislation, their validity hinges upon how the legislation is interpreted. The Court noted that a strict interpretation must apply to procedures related to the enforcement of a lien, whereas a broad interpretation applies to the scope of lien rights. In other words, a claimant must meet the strict language of the BLA to establish a valid lien claim. Once a lien claim is validly established, the rights attached to it will be given a liberal interpretation.
Why YESCo’s Claim Failed
In arguing that their work constituted an improvement, YESCo noted that it improved the function of the plant’s vessels, tanks, and pipes; increased efficiency and production; and reduced operating costs. It noted that, without YESCo’s work, the plant would not be able to obtain regulatory approval to continue operating.
Despite all of these arguments, the Court concluded that YESCo’s work was maintenance and that it did not fall within the statutory definition of “improvement” because the work did not involve constructing, erecting, building, digging, or drilling; nor was it related to the process of construction of the plant as an overall project. Even though the work was necessary to maintain compliance with applicable regulations, this was insufficient. The lien claim was therefore considered invalid under the strict interpretation rule.
Application Extra-Provincial Legislation
As part of its analysis, the Court considered the definition of “improvement” and associated case law, from Ontario and Saskatchewan. The definition of “improvement” in the Ontario Construction Act includes “any alteration, addition, or repair” to land. Citing an Ontario case where the claimant validly enforced a lien for unpaid waste disposal work as an “alteration and repair” to land, YESCo argued that this additional definition should apply in their Alberta case.
The Court rejected this argument, pointing out that the clear language differences between the Ontario legislation and BLA must be maintained under the strict interpretation approach. This is consistent with prior Alberta rulings that are often hesitant to apply builders’ lien jurisprudence from other provinces, given the wide divergence in provincial lien legislation.
This case is instructive for parties performing work that may be characterized as maintenance work, as opposed to an “improvement”. Maintenance is not a defined term under the BLA, so the line between maintenance and improvement will likely be the subject of further jurisprudence. As a result, a party may find that performing the same work on two separate projects may lead to one project being lienable, while the other is not, depending on the purpose for which their work is performed.
If you have any questions regarding builders' liens or other construction questions, please feel free to contact Anthony Burden from Field Law’s Calgary office. This article was co-written by Jared Hubbard, summer law student with Field Law in Calgary.