Mistakes on Builders' Liens: Can They Be Cured?
Constructive Thoughts Newsletter
June 2023 - 4 min read
Two recent cases in Alberta and British Columbia examined the validity of construction liens with mistakes. In Alberta, a court ruled that liens with substantial compliance and no prejudice can be valid, even with certain mistakes. In BC, a court ruled that misnaming the contracting party on a lien was a material mistake, rendering the lien invalid. The cases highlight that courts assess the validity of liens based on the extent of deviation from statutory requirements. While technical mistakes may be permissible, substantial errors like misnaming the liable party are not likely to be saved.
For a lien to be valid in Alberta, lienholders must comply with the Prompt Payment and Construction Lien Act (the "PPCLA") provisions. In British Columbia, lienholders must comply with the Builders Lien Act (the "BLA") provisions.
To register a lien, the lienholder must comply with the registration requirements under the legislation. Both s. 34 of the PPCLA and s. 15 of the BLA mandate that a lien must be "in the prescribed form." Notably, s. 37 of the PPCLA allows courts to permit registration upon "substantial compliance" with s. 34. No similar provision exists in the BLA.
Often, mistakes are made in the lien form. What kinds of mistakes can be rectified, or are fatal to a lien's validity, was considered in two recent cases out of Alberta and BC.
Avli BRC Developments Inc v BMP Construction Management Ltd. ("Avli BRC")
The Court was tasked with determining whether mistakes on a lien could be corrected under s. 37 of the PPCLA. Avli contracted BMP to construct a condominium project. BMP subcontracted four other companies to supply materials and perform work.
Avli had previously registered a single certificate at the Land Titles Office for ownership of the lands subject to the condominium project. While construction was substantially underway, Avli registered its condominium plan. The new registration resulted in Avli owning the lands via individual condominium units rather than a single parcel. Upon registration of the new certificates at the Land Titles Office, Avli also incorporated Condominium Corporation No. 1912037 (the "Corporation"), but without an interim board of directors.
Avli failed to pay BMP, and in turn, BMP did not pay any of its subcontractors. The subcontractors then registered liens and made the following mistakes:
- Desa and Grant Metal registered liens against the Additional Condominium Sheet, which named Avli as the owner of the lands but did not lien the individual condominium units. The lien also incorrectly identified the Corporation as requesting the work, not Avli. The Corporation did not exist when Avli requested the work.
- Grant Metal incorrectly stated the Corporation as the owner of the lands instead of Avli.
- Rimrock and Shanahan only identified single units on their lien, despite doing work on the whole project.
The Court noted that the liens should not be invalidated under s. 37 of the PPCLA if they are:
- In substantial compliance with s. 34 of the PPCLA; and
- In the absence of prejudice, which should be framed as "anyone [being] misled and [doing] anything to their detriment in consequence."
The Court deemed the liens to be valid because they met both requirements. Avli was still the owner of all the individual units and controlled the Corporation when the liens were registered. No units were sold before the lien registrations. On these facts, the Court deferred to the chambers judge's decision to validate the liens.
Orbital Construction Inc v Hansen ("Orbital Construction")
The Hansens hired Barbato to renovate their property in Langley. Barbato subcontracted Orbital to perform drywall and mudding work for the renovation. The Hansens fully paid Barbato for the renovation, but Orbital was not paid for its work by Barbato.
Orbital claimed that the Hansens and Barbato were jointly and severally liable for its debt. Orbital also claimed that it performed work and provided materials per its contract with Barbato, with the knowledge and consent of the Hansens.
Orbital registered a lien against the property. The key mistake on the lien was that it named Mr. Hansen as the "person who engaged the lien claimant or whom the lien claimant supplied materials, and who is or will become indebted to the lien claimant" instead of Barbato. Essentially, Orbital listed the owner as the party who retained it when it should have listed Barbato.
The Court held that the lien was invalid because misnaming the person contracting with Orbital was a material and consequential mistake. The Court described the legal analysis as follows: "In my view, the law does not demand perfection in completing the form of lien claim and allows for inconsequential deviations from the required form, but not for a deviation that omits any reference to the contractor, erroneously claims the owner to be the contractor, and erroneously claims the owner is indebted for the full contract price."
Comparison + Takeaways
In Avli BRC, Avli still owned the individual units and had obligations on the land after the condominium plan was registered. Without a functioning interim board, Avli was the only one who could provide permission for the work undertaken by the subcontractors. As a result, the mistake of registering the lien against the Additional Sheet and misnaming the owner was not fatal since the only parties impacted were not prejudiced.
In contrast, in Orbital, the contract was between Barbato and Orbital, and the Hansens did not have any contractual obligations with Orbital. By mistakenly omitting Barbato from the prescribed form of lien entirely, Orbital failed to include an essential aspect of any lien claim – the party who owes the underlying debt giving rise to the lien claim.
Although BC does not have a clause similar to s. 37 of the PPCLA permitting an otherwise defective lien to be saved, it is likely that an Alberta court would also hold that mistakenly listing an owner in place of the contractor in a subcontractor lien would not be saved under s. 37.
These cases illustrate that courts will assess the validity of liens based on the degree to which a lien deviates from the requirements under the applicable statute. It is clear that, as demonstrated by Orbital Construction, misnaming the party actually liable under contract is a substantial error that cannot be corrected. However, where a mistake is more technical, like the one in Avli BRC, courts are more willing to permit the mistake and validate registration.
Ensuring liens are free of mistakes can be a challenging and technical task. Contact Anthony Burden or Todd Kathol in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law's Construction Law Group if you need assistance with registering your lien in compliance with Alberta law.
Link to decisions:
Special thanks to Janika Sumaylo, Field Law Summer Student, for assistance authoring this article.