Complete or Not Complete: When is Substantial Performance Attained?
In Alberta, issuing a certificate of substantial performance allows the major lien fund to be released once the requisite time has elapsed. In British Columbia, issuing a certificate of completion allows the holdback to be released once the requisite time has elapsed.
How can a lien claimant determine when its lien rights may expire if the date of substantial performance or completion as noted in a certificate differs from the date the certificate was posted? What date should be used to determine the time limit to register a builder's lien?
The Supreme Court of British Columbia faced these questions in Powerhouse Sheet Rock v AFC Industries, 2022 BCSC 1484.
Powerhouse Sheet Rock ("Powerhouse") subcontracted with AFC Industries ("AFC") to provide drywall services for a project. AFC prepared a certificate of completion which stated that it was issued on December 8, 2020, and that the contract was completed on November 30, 2020.
A separate notice of certificate of completion, emailed to Powerhouse on December 15, 2020, stated "that on November 30, 2020 a certificate of completion, or court order to that effect, was issued with respect to a contract or subcontract" between the parties and that the notice of certificate of completion was issued on December 8, 2020.
Powerhouse registered a builder's lien on January 21, 2021 – within the deadline to do so if the certificate of completion was "issued" on December 8, 2021, but outside the deadline if the certificate of completion was "issued" on November 30, 2021. AFC argued that the lien was registered out of time and applied to have the lien extinguished.
The date work is completed has no bearing on the date of issuance of a certificate of completion.
The court was asked to consider what date AFC "issued" the certificate of completion and, subsequently, whether Powerhouse's lien was registered in time.
The court noted that the dispute stemmed from the uncertainty of the term "issued" in reference to the certificate of completion. The court also noted the tension created by s. 20(1) of the BC Builders' Lien Act, which refers to the date the certificate of completion was "issued," and the Builders Lien Forms Regulations, which lists the date the certificate of completion was signed and the date the contract was considered complete.
The court concluded that the word "issued" suggests that the information must be received by the other party and must include positive communication of the information within the certificate of completion to parties potentially impacted by the notice. The purpose of providing a notice of certificate of completion is to provide notice to potentially affected parties, such as subcontractors, that the timeline to register a lien is running. The court noted that the important date is not the creation or signing of the certificate, but the communication of the events or deadlines conveyed by the certificate.
The court found that AFC's certificate of completion was issued and dated on December 8, 2020, even though it referred to a completion date of November 30, 2020. As a result, Powerhouse's lien was registered in time.
Applicability in Alberta
While this case is from British Columbia, the same principles would likely apply in Alberta.
Under s. 19 of the Alberta Prompt Payment and Construction Lien Act, a party must issue and deliver a certificate of substantial performance to the owner, which must either be posted in a conspicuous place on the project or sent electronically to all subcontractors and suppliers within three days. Once three days have passed after the certificate is issued, the owner can then release the major lien fund.
Parties to construction projects should be aware that this finding means the date a contractor or subcontractor substantially completes its work is irrelevant. The date the certificate is issued, i.e. provided to the required parties, triggers the timing for the release of the major lien fund.
Understanding the deadlines in contracts can be a complicated task. Contact Anthony Burden or Dan Hrycyk in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law's Construction Law Group if you have questions regarding completion or registration dates.