The Builders Lien Act is a major cornerstone of construction law. It gives contractors, material suppliers, and workers several forms of security for payment for work done or materials supplied to a building site, most notably a lien on the owner’s land. The Act also lets owners limit their exposure to claims by unpaid subcontractors and workers by maintaining a mandatory 10 per cent holdback.

The Report on the Builders Lien Act is the product of a lengthy review of the Act by the BCLI Builders Lien Act Reform Project Committee, which comprised members drawn from the leading ranks of the construction, banking, and insolvency law Bars. The report was preceded by a consultation paper issued in 2019 to get feedback from stakeholders and the general public on proposed reforms of the Act. BCLI undertook the Builders Lien Act Reform Project at the request of the BC Ministry of Attorney General.

The report recommends numerous changes to the Act to simplify the Act and improve its operation. There are recommendations for easier and faster procedures to clear liens from the owner’s title, and to curb the tendency of the Act to cause interruptions in the flow of funds in a building project. It would also be easier to remove claims of lien that have been filed for improper reasons. Other recommendations would make it easier to determine whether a claim of lien has been, or can be, filed within time. They call for a reduction in the number of separate triggers of the start of the 45-day countdown to the end of the lien filing period.

Two alternatives for periodic release of holdbacks at the owner’s option are proposed to prevent the build-up of unnecessarily large, idle holdback funds in multi-year construction projects. Another recommendation would let owners meet the obligation to maintain a holdback by means of a holdback repayment bond or letter of credit instead of a cash fund. The application of the Act in public-private partnerships would be clarified. The report also addresses the problems that can be caused by obligations imposed by the Act clashing with a Requirement to Pay (RTP) issued by CRA.

Many other long-standing problems with the Act are addressed in this newest report by BCLI. Click here to access the Report on the Builders Lien Act.

The post BCLI issues report on the Builders Lien Act first appeared on British Columbia Law Institute.

The Consultation Paper on the Builders Lien Act contains 80 tentative recommendations for changes to the Act that were developed by BCLI’s Builders Lien Act Reform Project Committee, composed of volunteer experts in construction law. BCLI is asking stakeholders to comment on the specific proposals but also inviting them to raise any concerns with the Act and its application.

BCLI is requesting responses to the consultation paper on or before 15 January 2020. Recommendations will be finalized in light of the feedback and published in a later report. Responses can be provided by e-mail, regular mail, or fax. The consultation paper and an overview aimed at non-legal readership can be found on the project page.

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Facts and issues

Primex involved a strata property with over 100 strata lots located in Vancouver. The strata corporation entered into a contract with a construction company (Primex) to carry out exterior panelling work on the strata’s common property. A dispute arose, Primex wasn’t paid for the work it performed, and Primex launched this proceeding seeking recovery of over $688 000.

Before the court action was commenced, Primex secured its position by filing a builders lien in the land title office. The court detailed the specifics of Primex’s lien as follows:

Primex identified in its Lien Claim document the property identification numbers (“PID”) for each of the units whose title is held by their respective owners. The Lien Claim was filed against 108 PIDs. Even though the work provided by Primex is said to be in respect of common property, it had no other option other than to file the Lien Claim against the PIDs because the common property is not separately identified.

Primex did not file lien claims against the interests of each of the owners. Instead, Primex claimed that [the strata corporation] was the Owner.

Following the requirements of section 33 of the Builders Lien Act, Primex commenced an action in supreme court to enforce its lien claim. The action wasn’t commenced against the individual strata-lot owners, who by virtue of section 66 of the Strata Property Act own the strata’s common property collectively as tenants in common. Instead, Primex named the strata corporation as defendant, as agent for the owners under section 163 of the Strata Property Act.

A final procedural twist cropped up in the judgment and proved to be significant:

Primex advised that it intends to seek to amend the notice of civil claim to show that [the strata corporation] acts as the representative or agent of the Owners who own registered legal title to the Lands. If Primex were to succeed on that application, then it may also be entitled to add the 100 remaining owners as parties to the litigation despite the expiry of the 12-month limitation as a consequence.

The judgment focussed on two issues in the strata corporation’s “application to cancel the Lien Claim and the CPL per s. 25(1)(a) of the BLA”:

• “Is Primex able to name only [the strata corporation] as a defendant without naming the Owners in the notice of civil claim, in its capacity as agent of, and thus instead of, the Owners?”
• “In the alternative, [the strata corporation] grounds its application on what it claims to be an erroneous claim for declaratory relief in Primex’[s] notice of civil claim. Specifically, [the strata corporation] says that the notice of civil claim is premised on the material and inaccurate statement that [the strata corporation] is the owner of the Lands. As a consequence, [the strata corporation] asserts that the claim for declaratory relief as well as the CPL must be struck since [the strata corporation] has no interest in the Lands.”

Must the owners be named in the action?

The court noted that this issue appeared to be one of first instance, raising some difficult policy considerations:

The hearing of [the strata corporation’s] application was adjourned part way during submissions to allow the parties to search for other cases or guidance from legislative debates that may bear on this issue since counsel advised this was a case of first instance. They were unable to find any and, consequently, advise that the issues raised by Primex on this application concerning the purported effect of s. 163 of the SPA, which designates the strata corporation as agent of the owners of strata property for various purposes, is one of first instance.

Primex’s arguments highlighted its substantial compliance with the Builders Lien Act and the importance of giving that act a liberal interpretation “as to achieve its aim to protect persons who supply work or materials.” The court allowed that “Primex makes a good point when it says that it is cumbersome to name close to 100 individual owners as parties to the litigation, particularly where the SPA defines [the strata corporation] as their agent.” A further point highlighted by the court was that Primex’s actions had not misled the owners.

On the other hand, the framing of the Strata Property Act (most notably the lack of any express authorization in that act for proceeding as Primex did) seemed to favour the strata corporation’s position:

I do not find any language in the SPA that obviates the requirement each of the Owners be separately named in respect of the in rem claim advanced by Primex.

I agree with [the strata corporation] that the obligation to name each Owner as a party, to permit it to defend its own interest, including its proportionate interest in common property, against an in rem claim is not tempered by the provisions of s. 163 of the SPA. The language of that section is general and stands in contrast to s. 90 of the SPA, which specifically addresses builders lien claims in the context of a payment made into court in respect of a lien claim.

***

I also agree with [the strata corporation] that there is nothing in s. 171 of the SPA, which confers on a strata corporation the right to bring an action for injury to common property, that advances Primex’s position.

***

Nor, in my opinion, does s. 166 of the SPA support Primex’[s] position. That section states that a judgment against the strata corporation is a judgment against all of the strata owners. The language is general, however, and does not specifically refer to liens and in rem claims.

I also agree with [the strata corporation] that if Primex’s position is accepted, then an owner may be unduly burdened in defending its property interest where the owner is dissatisfied with the course of action taken (or not, as the case may be) by the strata corporation to defend against an in rem lien claim. In that instance, an owner would have to sue the strata corporation per s. 164 of the SPA, and to succeed, the owner would have to meet a threshold test, as set out in s. 164 of the SPA, that the act or omission of the strata corporation was or would be “significantly unfair.”

These considerations would seem to point to the necessity of Primex naming the individual strata-lot owners in order to sustain its lien. But the court ultimately didn’t give the strata corporation its order cancelling the claim of lien, as it wanted to give Primex an opportunity to proceed with its planned application to amend its notice of civil claim: “In my respectful opinion, Primex should be put to the task of bringing its amendment application to ensure the prosecution of this action proceeds without further delay.”

Inaccurate description of the strata corporation as owner

While the court characterized Primex’s description of the strata corporation as the owner of the common property as not being “fatal” to its application, it also subordinated the resolution of this issue to the determination of “whether an application by Primex to add the Owners as defendants, if brought, succeeds.”

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