Chapter 4: The Lien
4.1 | What is a lien?
Commentary: a lien is a claim or charge on property for the payment or performance of some debt, obligation or duty. Rights of this kind may be created by express agreement between the parties. They may also arise by operation of the common law or a statute. The word “lien” is most often used to refer liens created by operation of laws such as liens arising under the Builders Lien Act.
4.2 | Who can claim a lien under the Act?
Who can claim?
Commentary: a lien may be claimed by a contractor, subcontractor or worker.
[See section 2(1)]
Those are defined terms which may also embrace architects, engineers and material suppliers.
[See paragraphs 3.2, 3.4, 3.7 and 3.8]
4.3 | Who cannot claim a lien under the Act?
Who cannot claim?
Commentary: liens cannot be claimed by persons who are engaged by or under architects, engineers or material suppliers.
[See paragraphs 3.4 and 3.7]
4.4 | For what kind of things may a lien be claimed?
A lien for what?
Commentary: the core provision is section 2(1)
2(1) Subject to this Act, a contractor, subcontractor or
worker who, in relation to an improvement,
(a) performs or provides work,
(b) supplies material, or
(c) does any combination of those things referred to in
paragraphs (a) and (b)
has a lien …
(2) Subsection (1) does not create a lien in favour of a person
who performs or provides work or supplies material to an
architect, engineer or material supplier.
The meaning of this provision is illuminated by a number of defined terms.
4.5 | The things for which a lien may be claimed must be done in relation to an improvement. What is an improvement?
Commentary: “improvement” is a defined term in the Act:
“Improvement” includes anything made, constructed, erected, built, altered, repaired or added to, in, on or under land, and attached to it or intended to become a part of it, and also includes any clearing, excavating, digging, drilling, tunnelling, filling, grading or ditching of, in, on or under land;
This definition embraces a broad range of alterations to land and is not confined to conventional buildings or structures.
4.6 | What is work?
Commentary: “work” is a defined term which means “work, labour or services, skilled or unskilled, on an improvement.” “Services” is, itself, a defined term.
(a) services as an architect or engineer whether provided before or
after the construction of an improvement has begun, and
(b) the rental of equipment, with an operator, for use in making an
4.7 | What is material?
Commentary: “material” is a defined term in the Act:
“Material” means movable property that is delivered to the land on which the improvement is located and is intended to become part of the improvement, either directly or in a transformed state, or is consumed or used in the making of the improvement, including equipment rented without an operator;
The words “directly or in a transformed state” in the definition were included to overcome the problems raised by a group of cases which denied a lien on technical grounds relating to the “transformation” of materials.
[See generally, Coulson paragraph 1.20]
4.8 | Why does equipment rental appear both in the definition of “services” and “material?”
Commentary: the rental of equipment may constitute either service or material depending on whether or not the arrangement includes the provision of an operator for the equipment. An operator working on the project site would be a “worker” who would be entitled to a lien. Since a lien cannot be claimed by a person claiming under a material supplier, the rental of equipment with an operator must be characterized as “services,” with the result that the equipment renter is characterized as a contractor or subcontractor.
When the equipment is rented without an operator, the question of further liens does not arise and it is appropriate to characterize the renter as a “material supplier.”
4.9 | What does “operator” mean in this context?
Commentary: “operator” is a defined term in the Act.
“Operator” means an individual who operates equipment at an improvement site but does not include an individual who temporarily or periodically is present at the improvement site to install, inspect, service, empty or remove equipment;
For example, the person who attends the project site to service portable toilets that have been rented is not an operator and the renter is a material supplier only.
4.10 | Can liens be claimed only with respect to work done or material supplied to the project site itself?
“In relation to an improvement”
Commentary: the general policy of the Act is that persons should be able to claim liens only for things provided at the project site. This is subject to specific exceptions such as those created for architects and engineers.
[See definition of “services” in section 1(1) and paragraph 4.6]
Nonetheless, the use of the words “in relation to an improvement” do open the door to the possibility that a lien might be claimed against things provided away from the project site but which are a necessary and integral part of the improvement. Even under the more restricted wording of the former Act, some cases appeared to recognize this possibility.
[See Coulson paragraph 1.20]
4.11 | What about successors in interest?
Successors in interest
Commentary: the Act permits a lien holder to assign lien rights to another person. The Act also provides that lien rights may pass by operation of law. An example of this would be where the lien holder dies or becomes bankrupt. In that case, the lien rights would pass to the lien holder’s estate or to the trustee in bankruptcy.
4.12 | What does the lien secure?
What is secured?
Commentary: according to section 2(1), the lien secures “the price of the work and material, to the extent that the price remains unpaid …”
4.13 | What is the “price” in this context?
Commentary: price is determined with reference to the contract or subcontract between the person who claims the lien and whoever engaged that person. If the price cannot be determined with reference to the contract or subcontract, it would be determined with reference to the actual value of the work or material.
[For an analogy, see section 4(3)]
4.14 | What about workers’ wages?
Commentary: here, the price would be the unpaid wages owed to workers. In the Act, “wages” receives an extended definition. In addition to normal wages, the definition sweeps in incentive payments, amounts payable under various provisions of the Employment Standards Act and other money required to be paid under a collective agreement.
[See the definition of “wages” in section 1(1) of the Builders Lien Act and the definition of “wages” in section 1(1) of the Employment Standards Act.]
4.15 | What property is subject to the lien?
Commentary: a number of provisions identify the property that is subject to the lien. The lien may attach to:
- the improvement itself
- holdbacks retained under the Act
- money paid into court
- insurance proceeds.
4.16 | What does the lien on the improvement embrace?
Lien on the improvement
Commentary: section 2 provides that the lien is “… on all of the following:”
(d) the interest of the owner in the improvement;
(e) the improvement itself;
(f) the land in, on or under which the improvement is located;
(g) the material delivered to or placed on the land.
The lien against material is reinforced by section 39 which prohibits the removal of material from the land to the prejudice of a lien holder.
4.17 | What creates a lien against holdbacks?
Lien against holdback
Commentary: holdbacks are described more fully in the next chapter.
[See chapter 5]
The obligation to retain a holdback arises under section 4 of the Act. Section 4(9) provides:
4(9) Subject to section 34, a holdback required to be retained under this section is subject to a lien under this Act, and each holdback is charged with payment of all persons engaged, in connection with the improvement, by or under the person from whom the holdback is retained.
[See also section 5(2)(a)]
4.18 | When will there be a lien on money in court?
Lien on money in court
Commentary: the Act permits an owner and others to pay money into court, then to apply for an order that the lien be transferred to that money. When that is done, the money stands in place of the improvement and the land.
[See section 23(2)(a) and paragraph 9.7]
Money paid into court under this provision is only subject to the liens of certain persons claiming under the person who made the payment. It will not secure liens of all persons who were engaged under, or are in a contractual chain that does not include the person who made the payment.
4.19 | What about insurance proceeds?
Lien against insurance proceeds
Commentary: where an improvement is destroyed by fire, insurance proceeds may be subject to lien claims. Section 44 provides:
44 If all or part of property subject to a lien under this Act is destroyed by fire, insurance money receivable by the owner, mortgagee or other encumbrancer as a result of the fire stands in place of the property so destroyed, and is, after satisfying any mortgage, charge or encumbrance, in the manner and to the extent set out in section 36, subject to the claims of all persons for liens to the same extent as if the insurance money were realized by the sale of the property in an action to enforce a claim of lien.
Section 44 does not appear to apply to insurance proceeds arising out of a disaster other than fire.
4.20 | To what property will a lien not attach?
Filing by non-contracting owner
Commentary: the lien will not attach to the interest in land of a non-contracting owner was filed a notice of interest in the Land Title Office under section 3(2). “Notice of interest” is a defined term.
“Notice of interest” means a notice in the prescribed form warning other persons that the owner’s interest in the land described in the notice is not bound by a lien claimed under this Act in respect of an improvement on the land unless that improvement is undertaken at the express request of the owner;
The prescribed form is form 1 in the regulation.
A typical non-contracting owner who might wish to file a notice of interest would be the landlord of an office building or a shopping centre. In these cases, improvements and alterations are frequent occurrences. Since it is normally the tenant who requests that the work be done, a lien under the Act is available against the tenant’s interest in the property (the tenant’s rights under the lease.)
But the landlord’s interest in the property is also vulnerable to a lien if the landlord has knowledge of the improvement. In that case, section 3(1) deems the work to have been done at the request of the owner. This is sufficient to trigger a lien against the owner’s interest. Filing a notice of interest under section 3(2) nullifies the effect of that deemed request.
The filing of a notice of interest does not expire and is intended to cover improvements requested by any tenant, present or future.
4.21 | Are there other circumstances in which a lien cannot be claimed?
Commentary: a lien cannot be asserted if the amount of the claim (or aggregate of joined claims) is less than $200.
[See section 17; as to “joined claims”, see paragraph 8.4]
4.22 | The Act uses two different expressions to describe persons entitled to liens – “lien holder” and “lien claimant.” What is the distinction?
Terminology: “lien holder” and “lien claimant”
Commentary: under the Act, a person becomes entitled to a lien from the time that person first provides material or services. Certain steps are required, however, before the lien becomes enforceable. The first step is the filing of a claim of lien under the Act. This is discussed below.
[See chapter 8]
Various provisions of the Act are intended to apply to all persons having lien rights under the Act while other provisions are intended to apply only to those who have taken the further step of filing a claim of lien. To make this distinction clear, the Act contains the following two definitions:
“Lien claimant” means a person who files a claim of lien under this Act;
“Lien holder” means a person entitled to a lien under this Act;
[See the definitions of “lien claimant” and “lien holder” in section 1(1)]
A provision which refers to “lien claimants” is intended to apply only to the persons who have taken the additional step of filing. A provision that refers to “lien holders” applies to all persons entitled to a lien under the Act, which will include, not only lien claimants, but persons entitled to a lien under section 2 but who have not filed.
[For the use of “lien claimant”, see sections 15(2), 16, 18, 20(4), 23, 25, 30(1), 31(1), 32(3), 33(2), 37 and 38]
[For the use of “lien holder,” see sections 4(5), 5(3), 7(2), 34(1), 34(2), 39(1), 41(1), 42(1), 43 and 52]
4.23 | What is a “class of lien claimants?”
“Class of lien claimants”
Commentary: this is a defined term in the Act:
“Class of lien claimants” means all lien claimants engaged by the same person in connection with an improvement;
Figure 5 illustrates this usage. The expression is used to define rights and entitlement in relation to the Act’s multiple holdback scheme.
[See sections 10(3), 23, 34 and 37]