Wrong facts kill liens

A builders' lien can be a powerful tool. And the paperwork used to register the lien is meant to streamline the process.

A builders' lien can be a powerful tool. And the paperwork used to register the lien is meant to streamline the process. Unfortunately, if you don't get the details right, you might jeopardize your lien. Here are some examples that illustrate why details matter.

1. Wrong Name

It's no surprise that a crucial piece of information needed for a lien is the name of the person or company who did the work and who claims to be owed the money. Get that detail wrong, and the lien will be invalid.

That's what happened to a subcontractor in the recent case of Thibeault Masonry Ltd. v. Phillipe [2006] A.J. No. 1279. An individual filed the lien in his own name, but he then admitted that no money was owed to him personally; it was all payable to his company. (We looked at some of the problems caused by mixing up companies with their owners a while back in this column; see "Careless Names, Needless Headaches" in ACM March/April 2004.)

He tried to fix it after the fact by assigning the company's claim to himself, but by then the time for registering the lien in the right name had expired. The court had no choice but to cancel the lien.

2. Wrong Land

Another important detail is the right land. A scaffolding supplier learned this the hard way in Quality Rentals v. Electric Furnace Products Company Ltd. [1991] A.J. No. 429. In this case, a petrochemical company operated two plants on the same quarter section of land. However, the land was divided, with separate titles for each plant. Only one parcel was in the name of the operating company; the other was in the name of its parent. This meant, in effect, that there were two separate parcels of land with two different registered owners.

A supplier rented out scaffolding for construction at one plant. When that supplier wasn't paid, it registered a lien against the land that was in the name of the operating company. The problem, however, was that the scaffolding was used on the other plant—the one the same company operated but was in the name of its parent. It was an easy mistake to make. Nonetheless, Alberta's Court of Appeal said that the lien was invalid because it was registered against the wrong lands.

3. Wrong Estate

Different people can have different interests in the same land. For example, while someone may hold the underlying title (called a "fee simple" title), someone else may have rented or leased the land (a "leasehold" interest), and a third person may have the right to cross it (a "right of way"). We call all of these (and other) interests in the same land "estates." And a valid builders' lien must name the proper estate.

Canadian Helicopters Ltd. v. Udo Stephen Building Materials Ltd. [2003] A.J. No. 444 shows what happens when the lien gets the estate wrong. In this case, a company leased land from the provincial government and built a building. One supplier of building materials didn't get paid and filed a builders' lien; however; the lien did not refer to the leasehold interest of the company but charged the fee simple interest of the provincial government (which had no involvement with the construction). The court held that the two interests were not the same and discharged the lien because it was registered against the wrong estate.

Now, there is a section in the Builders' Lien Act that gives some relief when there are minor irregularities with a lien (such as a spelling or typographical error), as long as there is substantial compliance with the main requirements. Unfortunately, the wrong name, land or estate won't make the cut.

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