Builders Liens: Use it or Lose it
Case law has continuously recognized that builders liens and all related rights flowing therefrom collectively form a draconian regime which can significantly encumber and restrict the use of real property. To strike a balance, the Builders Lien Act (the BLA) forces lien claimants to pursue their actions in a timely manner and strictly adhere to the requirements of the BLA. Similarly, the Courts have continuously required lien claimants to strictly adhere to the BLA or lose their lien rights and face various forms of censure and penalties.
One of the most basic means by which lien claimants are forced to prove and pursue their lien is s. 33 of the BLA. S. 33 requires that any lien must be “perfected” by the lien claimant filing a certificate of pending litigation (CPL) and commencing an action in the Supreme Court of British Columbia within one year from the date of a lien’s filing. A property owner or another lien claimant who has perfected their lien can also shorten the one-year period by providing a prescribed 21-day notice form which requires a lien claimant to perfect their lien within 21 days of the deemed date of service of the notice.
The language of s. 33 qualifies that the Supreme Court action commenced by a lien claimant must seek to “enforce the claim of lien”.
In the recent case of Trans Canada Trenchless Ltd. v Targa Contracting (2013) Ltd., 2022 BCSC 438 (CanLII) the meaning of “enforce the claim of lien” and the requirement that there be strict compliance with the BLA squarely intersected to demonstrate what strict compliance with the BLA looks like in practice.
In the case a subcontractor had filed a builders lien in March, 2018. The lien was cancelled by the substitution of a bond in place of the land as security for the lien further to s. 24 of the BLA. The standard related terms for the substitution were clear in that all other rights, obligations and remedies of the parties in respect of the lien were preserved saved for the substitution of a bond as security in place of the land.
In October, 2018, the lien claimant commenced its action in the Supreme Court, being within the one year window required for perfection. The action did not name the landowner as a party, did not detail the lien and lien security arrangements and did not seek standard relief of enforcement of the lien against the land.
The legal action plodded along and, approximately three years after the litigation was commenced, the contractor/debtor applied for orders that the lien was invalid. The argument was that perfection of the lien was not done within one year because the Supreme Court action by the lien claimant did not seek to enforce the lien, failed to mention the lien and the landowner was not included as a defendant. The contractor’s application was brought in apparent response to the contractor being required to replace the bond security with cash security.
On the original decision, a Master of the Supreme Court found that s. 33 of the BLA required strict compliance and the failure to properly seek to enforce the lien was fatal to the lien. However, the Master also found that the lien claimant could, in effect, resurrect their lien by adding the owner as a defendant (the owner had consented to this) and amending their claim.
On appeal, the Justice of Supreme Court agreed with the Master that the failure to properly seek the enforcement of the lien within one year was fatal to the lien. The Justice did not agree that an amendment to the claim could resurrect a lien that had not been perfected as required by s. 33 of the BLA.
The Justice reviewed the law underlining the importance of the owner’s inclusion in a lien action. Whether or not any contractual relationship exists between the lien claimant and the owner, a lien action is one that is against the owner’s land and an owner’s inclusion in litigation is both important and necessary.
The Justice went on to find that builders liens are creatures of statute and, as such, the underlying statute, the BLA, must be adhered to. The Justice did not find a purposive approach to statutory interpretation was appropriate where the clear wording of s. 33 of the BLA dictated that the lien in question be cancelled because the action commenced did not seek to enforce the lien. The Justice was not prepared to have the Court exercise discretion to permit the lien claimant to cure the defects in its legal claim after the extinguishment of the lien.
The Justice detailed how pleading the contractual debt claim underlying the lien was not the same thing as commencing and did not satisfy the lien claimant’s requirement to commence an action to enforce the lien. The Justice found there was no apparent common law or statutory basis for the Master to have allowed an extinguished lien to be revived by amendment to the claim.
Simply put, the lien had extinguished and there was no discretion for the Court to allow it to be revived.
Trans Canada Trenchless Ltd. v Targa Contracting (2013) Ltd. is a reminder that, while BLA matters can be simple and routine, a lien claimant can never lose track of the importance of strict compliance with the requirements of the BLA. There is little if any opportunity for most errors in the builders lien process to be corrected. Even if some aspects of a proper claim to enforce the lien in the case may have seemed perfunctory or performative due to the security arrangements entered into, the lien claimant was required to continue to seek to enforce its lien as envisioned by the BLA.
As a final note, the loss of the right to pursue the lien in Trans Canada Trenchless Ltd. v Targa Contracting (2013) Ltd. or any other matter is not fatal to a lien claimant’s rights to continue to pursue any debt claim it may have; what is lost is the security and tactical advantage that a valid lien can provide.
The foregoing was provided for information only. It was not intended nor should be construed as legal advice. Unless noted otherwise, this article only reflected the law in the subject case at the time the case was reviewed. As such, the information or caselaw referred to herein may no longer be current.
If you are dealing with builders lien concerns or civil litigation concerns more generally, please feel free to contact Jeremy Burgess at 250-419-5096 or firstname.lastname@example.org. Reed Pope also has a number of highly qualified lawyers with diverse experiences and expertise who are also happy to assist you and whom you can read about by clicking here.