Chapter 8: Filing Liens
8.1 | A number of earlier comments refer to liens having been filed. What is the significance of filing?
Significance of filing
Commentary: while the Builders Lien Act confers rights on workers and subcontractors immediately on the provision of material or services, they have no immediate right to enforce the lien. Moreover, the lien is vulnerable to being subordinated to a variety of third party interests.
A further step is necessary to “perfect” the lien so it becomes enforceable against the improvement and third parties. This step is filing the lien.
8.2 | Does this mean the lien secures only work and materials provided after it has been filed?
When lien takes effect
Commentary: no. Section 21 stipulates that a claim of lien filed under the Act takes effect from the time work began, or the first material was supplied, for which the lien is claimed. The apparent priority conferred by section 21 is subject to a number of exceptions in favour of persons who have altered their position in some fashion before the lien is filed.
[See sections 32(1), 34(2)(c)]
In the case of an architect or engineer, a lien may embrace services provided before the construction of an improvement has actually begun.
[See definition of “services” in section 1(1)]
8.3 | How is a lien filed?
Commentary: the first step is to properly complete a “claim of lien.” The claim of lien is Form 5.
[See section 1(1), definition of claim of lien]
8.4 | Who must complete Form 5?
Who completes Form 5?
Commentary: Form 5 must be completed by either the claimant personally or an agent of the claimant. Where the claimant is a corporation, Form 5 can only be completed by an agent. An agent may also complete Form 5 on behalf of an individual.
[See section 1(6) as to agents generally]
Where several individuals have similar claims, they may be included in a single form completed by an agent. The Act provides:
15(2) An agent who represents more than one lien claimant may, with respect to a particular improvement, make a single claim of lien on behalf of all of the lien claimants represented, and the prescribed form may be altered accordingly for that purpose.
This feature might be used where a union representative wishes to file lien claims on behalf of a number of unpaid workers.
The address of the person completing Form 5, whether the claimant personally or an agent, must be set out.
8.5 | How is the claimant to be identified in paragraph 1 of Form 5?
Identifying the claimant
Commentary: the proper name of the claimant must be set out in paragraph 1 of Form 5. For an individual, this should be the full name. If the claimant is a company, it should be the full and proper name of the company as it appears in the records of the Register of Companies for the province.
8.6 | How should the property against which the lien is claimed be described?
Description of land
Commentary: it is not sufficient to describe the land in terms of a project name or a street address. What is required is a proper legal description of the land on which the improvement is situated. This legal description must be the one employed by the relevant Land Title Office and the claim cannot be registered without it.
[See section 15(3)]
It is important that this legal description be verified by a recent search in the Land Title Office. Lien claimants should be aware that pending applications for registration of subdivision or strata plans may render the legal description used ineffective.
[See CLE materials paragraph 3.1.03(e)]
Legal advice should be sought in all but the most straightforward cases.
8.7 | Can more than one piece of property be included in a single claim?
Commentary: yes, if the same lien extends over all the parcels of land. Section 16(1) sets out the circumstances when this may occur:
16(1) If an owner enters into a single contract for improvements on more than one parcel of land, a lien claimant providing work or material under that contract, or under a subcontract under that contract, may choose to have the lien follow the form of the contract and be a lien against each parcel for the price of all work and material provided to all of the parcels of land.
Section 16(1) might be used where the owner is creating a housing development and enters into a contract with the head contractor to build houses on 50 different parcels of land in the development. The contractor orders lumber from a material supplier which is delivered to a central storage location at the development where it is to be used for some or all of the houses.
It would create too great a burden to expect that the supplier identify what lumber went into what particular house and to file individually against the land on which each house sits. Section 16(1) permits the material supplier to file against all of the parcels of land simultaneously so long as the contractor is engaged under a single contract for the project.
If there is any doubt as to the contents of the head contract, the Act entitles the material supplier to require that the owner provide that information.
[See section 41(a)(i) and paragraph 21.1]
Where a lien is claimed against two or more parcels of land, the legal description of each must be set out in the claim form, or if there is insufficient space, in a schedule to the form.
8.8 | How must the work or material provided be described in the claim form?
Description of work or material
Commentary: only a brief description of the work or material is necessary. The description should, however, be as accurate as its generality will permit. A form that states the claim is based on the supply of “concrete” when in fact what was supplied was “lumber” will be defective. This defect may or may not be repairable if enforcement of the lien is sought.
[See CLE materials 3.1.06 and 3.1.07]
8.9 | What about describing the person who engaged the lien claimant?
Commentary: paragraph 3 of Form 5 requires that the person who engaged the lien claimant be identified. Again, care should be taken to set out the full and proper name of that person, particularly when it is a company.
8.10 | What value should be inserted as the amount of the claim?
Amount of claim
Commentary: the operative part of the form is paragraph 4:
(4) The sum of $ ______ is or will become due and owing to
______ on ______ [month, day, year].
The amount to be inserted in the appropriate blank must not include any amount for which the lien claimant has received payment. The amount should include the amount of any holdback retained from the claimant and any amounts in dispute.
The reference in paragraph 4 to “will become due and owing” raises a problem of interpretation. It is undoubtedly proper to claim an amount which has been “earned” by the lien claimant even though it is not “due and payable” at the time of the filing. A more difficult question is whether the lien claimant can file a claim for the whole of the contract price whether or not that full amount had been earned by performance by the lien claimant.
Under the previous legislation it was clear that the lien claimant could file with respect to amounts that had no yet been earned. The former Builders Lien Act, R.S.B.C. 1996 c. 40 s. 22(1) provided:
The claim of lien of a contractor or subcontractor may be filed … at any time after the contract or subcontract has been made …
The new 1997 Act does not expressly authorize “early” filing.
Parties are advised to act cautiously.
8.11 | What are the consequences of failing to file a lien claim?
Failure to file
Commentary: the Act requires that lien claims be filed within 45 days of the occurence of specified events.
[See section 20 and chapter 11]
A lien which is not filed within that time is extinguished.
[See section 22]
Even where a lien holder fails to file, that person may still qualify as a beneficiary under the trust provisions of the Act and obtain relief in that way.
[See paragraph 14.6]
8.12 | What are the consequences of providing incorrect information in completing form 5?
Consequences of error
Commentary: providing incorrect information could lead to a loss of the lien, liability to third parties and prosecution for an offence depending on the nature of the error and the surrounding circumstances.
Where the mistake is one that cannot be remedied and the time has run out for filing a further lien, the result will be the loss of the lien. This would be the case where the form contains an erroneous or nonexistent legal description for the land on which the improvement is situated.
Where the form contains the legal description of property that is unrelated to the project, the true owner of that property may have a claim for damages. This might occur, for example, where the property against which the lien claim was erroneously registered was about to be sold and the filing of the lien caused the sale to be delayed or aborted, causing a loss to its owner:
[See section 19]
The Act makes it an offence to deliberately file a lien claim containing a false statement. Where that false statement concerns to the amount of the claim, the penalty will be related to the amount by which the claim is exaggerated.
[See section 45]