First Reference company logo

Inside Internal Controls

News and discussion on implementing risk management

machine cogs image

Builders liens: The consequences of less than strict compliance

Builders liens

In my previous article, Builders Liens: Strict Compliance or Lose Your Lien, I explored how a family company lost its lien rights by making the mistake of pursuing its lien in the name of its principal rather than the company. The case was illustrative of the strict compliance required by the courts when contractors, subcontractors, workers and suppliers seek to enforce claims for unpaid work and materials supplied in respect of the improvement of real property through the Builders Lien Act, S.B.C. 1997, c. 45 (the “Act”).

The recent case of Sandhu v New Western Plumbing & Lighting Supplies Ltd.2018 BCSC 1930 (CanLII) underscores the importance of strict compliance with the Act and highlights the risks of censure a party faces in failing to meet those standards.

In Sandhu, the Plaintiff had registered a builders lien against a property owned by the Defendant, New Western Plumbing & Lighting Supplies Ltd. (“New Western”). The lien in question was for $230,000, was registered on December 20, 2013 and was in relation to improvements alleged to have occurred between September, 2010 and June, 2013.

New Western’s position (pursued through a receiver) was that the time for filing the lien expired four months prior to its filing, that there was no agreement with respect to the price and terms related to the Plaintiff’s work and that much of the work the Plaintiff liened for did not constitute an improvement which was lienable under the Act.

It is often difficult to calculate the running of the 45-day time limit in which builders liens have to be filed since a number of factors can trigger or extend that limit and clarifying such factors is beyond the scope of this article. As it happened in Sandhu, the question as to when the 45-day time limit turned on determining the date of completion or substantial completion of the Plaintiff’s work.

The Court determined that the Plaintiff’s work was completed by the end of June, 2018. The Court also cited Persepolis Contracting Inc. v. 0887678 B.C. Ltd.2014 BCSC 2016 (CanLII) for the principle that after completion or substantial, the time for filing a builders lien is not extended by a party performing further small jobs or unrelated work.

The Court expressed separate concerns that the Plaintiff alleged in at examination for discovery that $260,000 rather than the liened amount of $230,000 was owed for its work. Further, the Plaintiff produced evidence that suggested its work was worth only $143,000.

Since the work was completed by the end of June, which was more than 45 days prior to the date the lien was filed, the lien was found to be out of time and could not attach to the lands in question.

The Court noted s. 19 of the Act which provides that a party filing an improper lien which does not attach is liable for the costs and damages incurred by an owner as a result. The Court also noted s. 45 of the Act which provides that a party which knowingly files a false lien has committed an offence and is liable to a fine not exceeding the greater of $2,000 and the amount by which the lien exceeded the actual claim ($87,000 in the case at hand).

The Court ultimately found that the receiver’s legal fees and costs of $71,036 were recoverable. While finding that the Plaintiff knowingly filed a false lien, the Court declined to find the full penalty of $87,000 be ordered for the excessive claim but assessed that penalty to be $3,000.

Sandhu is illustrative of the substantial costs and censure a party is exposed to when it improperly files and/or inflates its lien claims. Although not discussed in Sandhu, the Courts can and do forgive parties for wrongly filed or excessive liens where, at the time, the lien was filed in good faith. Whether a party “knowingly” filed a lien out of time and for an excessive amount is key. That said, it remains in a party’s best interests to be careful in filing or instructing counsel to file a lien.

It is also notable that retaining the assistance of counsel is no guarantee that a lien has been filed in time or for a proper amount. Liens are often filed at the last minute to preserve a limitation date and without counsel being instructed to or being afforded the opportunity to conduct a full review of circumstances. There is also a significant increase in costs to clients to have counsel review and advise on the background of a dispute rather than just to assist in ensuring the filing of a lien, which many clients choose not to incur. As such, whether a party retains counsel to assist with the filing of a lien or not, that party should carefully consider ss. 19 and 45 of the Act when completing a builders lien or providing instructions for the completion of a builders lien and avoid filing a lien it knows is out of time or is excessive.

By Jeremy Burgess, Pushor Mitchell LLP

Occasional Contributors

In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
Send to Kindle

, ,

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.

This site uses Akismet to reduce spam. Learn how your comment data is processed.