Application of the Builders Lien Act to Improvements on Unregistered Land
|18.1||What about improvements on unregistered land?|
Registered and unregistered land
|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 existance?|
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?|
|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.