Which Parties Must Be Sued to Enforce a Builders’ Lien?
February 2022 - 3 min read
Builders’ liens are a common tool for unpaid parties on a construction project to try to secure payment for their work. But simply registering a lien is not enough to perfect a lien claim.
In Alberta, a Statement of Claim and Certificate of Lis Pendens (“CLP”) must be filed within 180 days after a lien is registered. What happens if the Statement of Claim fails to name the owner or the general contractor? Does this extinguish the lien? Is this affected by payment into court to discharge the lien?
Courts in British Columbia and Alberta have both addressed this issue, and their analyses highlight the different approaches taken by the two provinces based on the differing legislation.
In Alberta, section 49(3) of the Builders’ Lien Act (“Alberta BLA”) specifically requires a Statement of Claim to name the owner and general contractor as defendants, even if the lienholder had no contract with either party. However, section 44 states that if security is paid into court, then no CLP is required, and no action needs to be commenced to enforce the lien.
In British Columbia, section 33 of the Builders’ Lien Act (“BC BLA”) similarly requires a Notice of Civil Claim and Certificate of Pending Litigation to be filed within 1 year after the lien is registered. However, unlike the Alberta BLA, commencing an action is required in British Columbia regardless of whether security is posted. Additionally, the BC BLA does not specify which parties must be named as defendants in an action to enforce a lien.
Consequences for Failing to Sue the Owner
In Trans Canada Trenchless Ltd v Targa Contracting (2013) Ltd., 2021 BCSC 2518, the plaintiff subcontractor registered a lien and filed a Notice of Civil Claim to enforce it within the one-year limitation period. The general contractor posted security to have the lien discharged from title.
However, the Notice of Civil Claim failed to name the owner as a defendant. The general contractor argued the lien should be extinguished because the Notice of Civil Claim was faulty, and the one-year time limitation to sue the owner had passed. The lien claimant applied to Court to add the owner as a defendant.
While the BC BLA does not specify which parties need to be listed as defendants, the Court held the owner was a necessary party to the action because the owner owns the land against which the lien claimant has a claim in rem. A lien claim always was, and is, even if security is posted, a claim in rem against the land.
Despite the subcontractor’s failure to name the owner as a defendant, the Court allowed the owner to be added as a defendant after the one-year limitation. This case turned on the narrow fact that the owner consented to being included as a defendant, as it was not prejudiced by the time elapsed. The Court allowed the Plaintiff to amend its claim nunc pro tunc, meaning the amendment placed the parties and the claim as they ought to have been at the outset.
In an earlier Alberta decision, Golden Triangle Construction Management Inc. v Nuwest Interior Systems Inc., 2019 ABQB 292, a lien claimant similarly had its lien discharged from title upon the posting of security into Court. The Order allowing the posting of security also required the lien claimant to commence an action within 180 days of lien registration. The lien claimant did so but failed to name the general contractor as a defendant.
The Court held that because security was posted, the requirement of naming the owner as a defendant did not arise pursuant to the Alberta BLA. The only requirement for an action at that time was via Court Order. As such, although the Statement of Claim failed to name the general contractor, the Court granted the lien claimant a time extension to file a correct Statement of Claim. The Court noted that it had the discretion to extend the 180-day limitation, as it was a deadline imposed by Order, not by statute.
Name the Proper Parties, or Roll the Dice
In both Alberta and British Columbia, commencement documents that fail to name the owner or general contractor as a defendant may not be fatal to a lien claim. The cases above detail arguments a lien claimant can advance if it finds itself in such a situation.
However, these cases demonstrate that a lien claimant being allowed to continue a lien action despite failing to name the proper parties is risky. While the Court may allow this to occur in a specific fact scenario, it is not advisable to seek relief for a mistake that could have been avoided.
When commencing an action to enforce a lien in either province, it is important to understand the nuances of the legislation and to get it right the first time. Errors risk extinguishing otherwise valid liens, regardless of whether security has been posted. These nuances underscore the importance of engaging counsel familiar with the intricacies of the province’s lien legislation in which they practice.
Contact Anthony Burden or Melissa Guenette from our Calgary office or Ryan Krushelnitzky or Scott Matheson from our Edmonton office with any questions related to these cases or builders’ liens.