Chapter 13: Enforcing the Lien
13.1 | Once a person has filed a lien under the Act, what further steps are necessary?
Commentary: sometimes, no further steps will be required. The filing of a lien may, of itself, result in pressure being brought to bear on the debtor with the result that the lien claimant is paid the amount owed. Where no immediate steps are taken to discharge the debt, what happens may depend on the circumstances in which the default arose, and whether the default is isolated or goes to the heart of the construction project.
Claims are frequently resolved by agreement. The parties will identify the funds that are available and agree to a distribution among lien claimants according to the principles of the Act. Again, no further steps are necessary that might be characterized as “enforcement.” This is frequently the case where the default arises out of a person’s insolvency.
But in some cases
- there will be a dispute as to the validity of the lien (concerning the amount claimed or whether filing deadlines have been met,
- the parties will have been unable to agree as to a distribution of available funds
- it will be necessary to seek a sale of the improvement itself.
In these cases, further steps are required to enforce the lien.
13.2 | How is a lien claim enforced?
Enforcement by action
Commentary: section 26 of the Act provides that a claim may be enforced by an action according to the rules of court.
Bringing such an action is a highly technical procedure and lien claimants will invariably have the assistance of a lawyer. No attempt is made in this discussion to provide a detailed examination of the mechanics of bringing an action to enforce a lien. Rather, the focus is on particular provisions of the Builders Lien Act that are relevant to an action to enforce the lien.
13.3 | What are the time limits for bringing an action to enforce a lien?
Time limit for enforcement
Commentary: the basic rule is that an action to enforce a lien must be commenced not later than one year from the date the lien was filed. In addition, and within the same time limit, a certificate of pending litigation [CPL] in respect of the action must be registered in the Land Title Office in which the claim was filed. A CPL is a document issued by the court warning that title to particular land may be affected by the outcome of ongoing litigation. The CPL need not be filed where the lien has been removed from the title or cancelled under section 23 or 24.
[See section 33(1)]
The Act also sets out a procedure by which this one year period can be made shorter. It permits the owner, or a lien claimant who has commenced an action, to serve on lien claimants who have not commenced an action a notice in Form 6.
Form 6 requires a lien claimant on whom it is served to commence an action to enforce the claim of lien within 21 days after service of the notice and to register a CPL. The notice may be served personally on the lien claimant or mailed or delivered to the address for service given in the claim of lien. When the notice is mailed, service is deemed to have occurred on the eighth day after mailing. [See section 33(2,3,4)]
When a lien claimant fails to commence an action and register the CPL within the time required, the lien is extinguished.
[See section 33(5)]
13.4 | Where must an action to enforce a lien be brought?
Venue for proceedings
Commentary: the Builders Lien Act incorporates by reference a “local venue” found in the Law and Equity Act that stipulates the location in which foreclosure proceedings must be brought.
The relevant provision* of the Law and Equity Act is complex. The core idea is that enforcement proceedings should be brought in a registry of the Supreme Court that is relatively close to the improvement itself.
This local venue rule not only applies to enforcement proceedings. It also applies to applications brought under the Act under sections 23, 24 and 25 to clear liens from the owner’s title.
13.5 | Is the court given any special powers where an action is brought to enforce a lien?
Power of court
Commentary: yes. The policy of the Act is that the court should be able to resolve all outstanding issues between the parties before it. It can give judgment for the debt on which the lien is based and deal with matters raised by way of counterclaim.
[See section 30]
An important power given to the court is to order a sale of the land or the improvement. For the purposes of a sale, the court may order removal of the liens filed from the title and that there be an upset price of not less than the balance owing under all registered mortgages having priority over the lien(s).
[See sections 31(4) and 32(1)]
13.6 | Are there any special provisions that assist lien claimants in proving their claims?
Evidence of filing and delivery
Commentary: yes. First, the Act contains a special provision that assists in proving that material was supplied for an improvement. Section 29 provides:
29 If a person to whom material is supplied signs an acknowledgment of receipt of the material stating that it is received for inclusion in an improvement at a named address, the acknowledgment is proof, in the absence of evidence to the contrary, that the material was delivered to the land described by the address.
A copy of the lien claim (which shows the date of filing), once certified by the Registrar or the Gold Commissioner, is proof of the fact that the lien was, in fact, filed and of the date of filing.
[See section 28]