Commentary: this raises the issue of the transition from the old Act to the new. Guidance on transition is provided in section 48 of the Act. It describes the way that the Act applies to “transition projects.” In section 48(1), “transition project” is defined as an improvement for which the time for filing liens under the former Act has not yet expired.

The basic rule set out is that the new Builders Lien Act applies to a transition project unless all parties agree that the former Act continues to apply.

[See section 48(2)]

In practice, on a large project, the number of parties will be large and an agreement that the former Act continues to apply will be difficult to obtain. On smaller projects, such an agreement is a realistic possibility.

Other provisions of section 48 create some specific rules respecting the application of the Act to transition projects including certain exceptions to the basic transition rule.

A safety net of sorts is provided by an express provision that, on a transition project, nothing done in compliance of the former Act is invalidated by the basic transition rule.

[See section 48(6)]

22.2 | What about the owner’s holdback?
Owner’s holdback account not required

Commentary: on a transition project, the owner is not required to create or maintain a holdback account under section 5, even with respect to portions of the holdback retained after the new Act comes into force. [See section 48(3)]

22.3 | What about holdbacks by contractors and subcontractors?
Other holdbacks

Commentary: the former Act did not require that contractors or subcontractors retain holdbacks from the persons they engage. The new Act does impose that requirement where there is a possibility of further liens. The transition rules ensure that the holdback requirement is not imposed retroactively. Contractors and subcontractors are required only to retain holdbacks with respect to advances or payments made after the new Act comes into force.

[See section 48(4)]

Even though, on a transition project, holdbacks will not have been retained by contractors and subcontractors from the time work started, it is necessary for certain provisions of the Act to presume that they did. Section 23 defines the amount of money which must be paid into court to clear liens from the owner’s title. Section 34 defines the maximum aggregate amount that can be recovered by a class of lien claimants. In both of those sections, the relevant amount is calculated with reference to the “required holdback.”

Fairness to lien claimants requires that their claims should not be cleared from the title or limited with reference to the smaller amount actually held back. The Act therefore sets out a transition rule that provides that on a transition project, in a calculation under section 23 or 34, “required holdback” should be taken to mean the amount that would have been retained if the Act had applied to the transition project from the time the improvement was started. This will ensure that liens are not cleared or limited through the use of an inappropriately low figure.

[See section 48(5)]

22.4 | What about the purchaser’s holdback?
Purchaser’s holdback

Commentary: the purchaser of a transition project is entitled to retain a holdback under section 4(7) only where a binding agreement of purchase and sale had been entered into after the new Act comes into force. [See note at the beginning of chapter 15 and section 48(7)]

22.5 | What about money paid into court under the former Act?
Money in court

Commentary: the former Act provided for the clearing of liens in its section 33 by a procedure similar to that provided in section 24 of the new Act. Under that provision, money might be paid into court or to be some other form of security. [See paragraph 9.4]

Although section 33 of the former Act is analytically similar to section 24 of the new Act, functionally, it serves the same role as section 23. The transition rule set out in the Act, therefore, deems this money to have been paid into court under section 23 for the purposes of the new Act. Money paid into court under section 20(4) of the former Act is similarly characterized.

Security posted under the former Act which did not take the form of money paid into court is not affected by this transition provision.

[See section 48(8)]

22.6 | What if the parties cannot agree on the way the transition rules apply to a particular project?
Application to court

Commentary: parties to a dispute respecting a transition project may apply to the court for directions concerning the application of the transition rules to the dispute. [See section 48(9)]

22.7 | What if the transition rules do not appear to cover the circumstances of a particular case?
Regulation making power

Commentary: the Provincial government has a very broad power to make regulations in relation to transition issues. Section 47(3) provides:

47(3) The Lieutenant Governor in Council may make regulations the Lieutenant Governor in Council considers necessary or advisable for meeting or removing any difficulty arising out of the transition to this Act from the Act repealed by this Act and for preserving and giving effect to the rights of persons arising under the repealed Act except as those rights are expressly varied by this Act, and the regulations may be made to apply generally or to a particular case or class of cases.

Thus, regulations may emerge which provide further guidance on transition as experience may require.

There are also transition rules of general application that may assist the parties.

[See Interpretation Act, section 36]

The post Chapter 22: Transition first appeared on British Columbia Law Institute.

Commentary: reference has already been made to the rights of a lien holder to seek information from the owner or the construction lender.
[See paragraphs 6.12 and 17.2]

The owner is also given certain rights to information. A written request may be directed to a contractor or a subcontractor where a claim of lien has been filed for particulars of any subcontract including the identity of the parties, the price and the state of accounts.

[See section 41(2)]

Where a request is delivered by either the owner or a lien holder, the person obliged to provide the information must do so within ten days. A failure to do so may result in liability for any loss or damage caused to the person who requested the information.

[See sections 41(3) and 41(4)]

Where a request made by the owner is not complied with within the time required, the owner may withhold further payments from a contractor or instruct the contractor to withhold further payments to a subcontractor who has failed to comply.

[See section 41(5)]

The Act also provides for an application to court by an interested party for the inspection of contracts, documents and records relating to the contract or subcontract in respect of which a request has been made.

[See section 41(6)]

The post Chapter 21: Rights to Information first appeared on British Columbia Law Institute.

Commentary: governmental bodies seldom act as contractors or subcontractors so the real question here is the impact of builders lien legislation on such bodies in their capacity as the owners of land on which improvements may be made. From this analysis, two main questions emerge. Are governmental bodies obliged to retain holdbacks under the Act? Is the land on which the improvement is situated liable to be sold to satisfy a lien?

There are three main kinds of governmental bodies that should be considered in connection with the Act – Local Governments, Provincial Government and the Federal Government.

20.2 | What about local governments?
Local governments

Commentary: with one exception, there is nothing in either the Builders Lien Act nor the various statutes under which local governments are constituted that would in any way limit the application of the Builders Lien Act. The Act applies to cities and municipalities in their capacity as owners and developers in the same way that it applies to an owner/developer in the private sector. The exception referred to is a limitation placed on the ability of lien claimants to force a sale of land belonging to a municipality. Section 31(6) provides:

(6) No order for the sale of an interest in land owned by the Crown or a municipality may be made, but the court may give judgment for an amount equal to the maximum liability under this Act, as owner against either of them, and any money realized on the judgment must be dealt with as if it were the proceeds of a sale of the interest in land.

This provision also applies to land owned by “the Crown.” As to the meaning of that term, see paragraph 20.4.

20.3 | What about the Provincial Government?
Provincial government? 

Commentary: it was once a legal rule that a statute did not bind the Crown unless the statute expressly said it was binding. That rule was changed in British Columbia in 1974 by a provision of the Interpretation Act which now reads:

14(1) Unless it specifically provides otherwise, an enactment is binding on the government.

That provision, standing by itself, would suggest that the Builders Lien Act applies fully to the provincial government and its capacity as owner/developer. The provision, however, must be read subject to subsection (2).

14(2) Despite subsection (1), an enactment that would bind or affect the government in the use or development of land, or in the planning, construction, alteration, servicing, maintenance or use of improvements, as defined in the Assessment Act, does not bind or affect the government.

The impact of this provision is uncertain. It is capable of being interpreted in a way that would exclude the applicability of the Builders Lien Act.

On the other hand, there are a few cases that have considered the applicability of the Builders Lien Act to provincial government projects and in none of those cases has subsection 14(2) been raised.

[See Coulson, paragraph 2.41]

Moreover, there is internal evidence in the Builders Lien Act which suggests that it was the intention of the legislature that provincial government be bound. These are the reference to “government”* in section 5(8) and the reference to “the Crown” in section 31(6).

The analysis is further complicated by the fact that much of the construction in the public sector is not done for the government itself but for the many emanations of the Provincial Government such as Crown corporations and quasi-independent boards and commissions. Where such a body can be said to be an “agent of the Crown,” it will share whatever immunity from the legislation the provincial government itself might have. But determining whether or not this body is such an agent can be a difficult legal question involving very close analysis of its enabling legislation.

The strict legal position of the provincial government in relation to the Builders Lien Act awaits judicial clarification. In the meantime, caution suggests that the provincial government should regard itself as bound by the Act and conduct its affairs accordingly.

The two provisions of the Act that expressly apply to the provincial government are section 31(6) (discussed in paragraph 20.2) and section 5(8) which relieves the provincial government from the necessity of establishing a holdback account where it is the owner.

20.4 | What does the Act mean when it refers to the “Crown?”
“Crown”

Commentary: the Interpretation Act contains the following definition:

“Her Majesty”, “His Majesty”, “the Queen”, “the King”, “the Crown” or “the Sovereign” means the Sovereign of the United Kingdom, Canada, and her other realms and territories, and head of the Commonwealth;

A reference in a statute to the “Crown” can embrace the government of any Canadian province, the government of Canada, the government of the United Kingdom, the government of Australia and of most other commonwealth countries.

Thus, if the government of Australia were building a consulate in Vancouver, it would have the benefit of section 31(6).

[See paragraph 20.2]

The application of the Builders Lien Act to the federal government is problematic. As a general rule, legislation enacted by a province cannot bind the federal government.

[As to the application of the former Builders Lien Act to the federal government, see generally Coulson at paragraph 2.36 and 2.37]

The post Chapter 20: Public Bodies and the Builders Lien Act first appeared on British Columbia Law Institute.

Commentary: the previous chapter examined the status of liens against improvements on land which has not been brought into the province’s land registry system. The lack of a public registry for claims against improvements built by the holders of interests such as grazing leases and forest tenures leaves the Builders Lien Act only partially applicable.

Most mining tenures are also on unregistered Crown land but they differ from the other kinds of interest in that there is a public register available where lien claims can be registered. These are the records of mineral titles maintained in the office of the Gold Commissioner under the applicable legislation.

[See Mineral Tenure Act R.S.B.C. 1996, c. 292]

The Builders Lien Act takes advantage of this registration machinery to ensure that the Act applies fully to improvements on mining property.

19.2 | How is a lien filed against mining property?
Filing against mineral title

Commentary: the procedure to file a claim of lien against mineral title is set out in section 18(1). Basically, the lien claimant must file a prescribed form in the office of the Gold Commissioner where the mineral title is located.

The prescribed form is Form 5*. It is the same form used to file a claim in the Land Title Office but with the description of the property adapted to set out a sufficient description of the mineral title.

In those instances where the mining property is on land within the land title system, a second filing must be made in the appropriate land title office.

19.3 | Does the Act contain any other special provisions in relation to liens against mineral titles? 
Other provisions

Commentary: the Act contains a number of provisions that refer expressly to the Gold Commissioner, Gold Commissioner’s Office and Mineral Title. Generally speaking, whenever these expressions appear, it is in a context that contains a parallel reference to the Registrar of Titles, the Land Title Office or the land itself.

[See sections 18, 23, 24, 25, 28, 33 and 35]

The post Chapter 19: Improvements on Mining Property first appeared on British Columbia Law Institute.

Commentary: not all of the land in the province has been brought within British Columbia’s land registration system. Where a parcel of land is brought within the system, a certificate of title is created in the appropriate land title office. This certificate records both the ownership of the land and any other interests or claims such as mortgages, leases and builders liens.

However, for land covering the vast majority of the province, no registered title exists. Ownership of the land is in the province itself. Even in urban areas, a significant portion of the land is unregistered. Land used for streets and highways is an obvious example.

Registering a lien against the title to the land on which the improvement is situated is an important part of asserting rights under the Builders Lien Act. Consider the following example:

A municipality engages a paving contractor for the construction of a municipal road. A supplier of raw materials such as aggregates or asphalt has not been paid by the contractor. No certificate of title exists for the road

How should the Act apply?

An identical point of principle would arise if the improvement were an animal shelter constructed at the request of the holder of a grazing lease over unregistered Crown land, or a logging road built on a forest tenure.

A starting point is to consider the applicability of the trust created under section 10 of the Builders Lien Act.

18.2 | Does the trust apply?
Applicability of the trust 

Commentary: it was noted earlier that the trust rights created by section 10 of the Act operate independently of the lien remedy. It is not necessary to have registered to have perfected a lien claim by registering to assert rights under the trust.

[See paragraph 12.3]

Case law under the former Builders Lien Act was clear that a subcontractor or worker could claim rights as a beneficiary under the statutory trust even though it would be impossible to enforce a lien claim because it cannot be registered against the land on which the improvement is situated. (ie. unregistered Crown land)

[See Bank of Nova Scotia v. O. & O. Contractors Ltd., (1965) 55 W.W.R. 103 (B.C.C.A.)]

18.3 | If there is no place to register, does a lien ever come into existence?
Does the lien exist?

Commentary: yes. Section 2 governs the creation of the lien itself and the ability to register it is not a necessary feature of its creation.

The absence of registration machinery simply means that the lien created under section 2 is liable to be extinguished by section 22 on the expiry of the time limit for filing. During that period, the creditor has the status of “lien holder” although that person can never become a “lien claimant” within the meaning of the Act. Thus, all the provisions applicable to “lien holders” apply.

[See paragraph 4.22]

18.4 | If the creditor can never become a “lien claimant,” is the owner, contractor or subcontractor still required to retain a holdback under section 4?
Holdback requirement

Commentary: yes. Section 4 requires that the person primarily liable under the contract or subcontract “under which a lien may arise” must retain a holdback. As noted in the previous paragraph, the absence of a place to register does not prevent the lien from arising. It only prevents it from becoming enforceable as a “lien claim.”

Requiring a holdback in such a case is not an exercise in futility. The holdback will supplement the creditor’s rights as a beneficiary under the statutory trust since the holdback may ultimately become subject to the trust and become available to the creditor.

Consider the example set out in paragraph 18.1. Assume the value of the paving contract is $500,000 and the municipality has held back $50,000. The paving contractor owes its main supplier $70,000.

Once the holdback period has expired under section 8, the owner must pay the money to the contractor. That payment, in the hands of the contractor, is a trust fund to which the supplier is entitled and to which it will have enforceable legal rights.

In this example, if the owner had not retained a holdback and merely paid the full amount owing to the contractor upon completion, the contractor may have taken those funds and dissipated them before the supplier had time to take any steps or was even aware that there was a problem. Requiring holdbacks with respect to improvements on unregistered land plays a useful role in strengthening the rights of workers, suppliers and subcontractors.

The post Chapter 18: Application of the Builders Lien Act to Improvements on Unregistered Land first appeared on British Columbia Law Institute.