In the bustling construction industry of Alberta, new buildings and infrastructure projects are reshaping the landscape. As such, it is important that the involved parties have a thorough understanding of the concept of a “builders’ lien.” Whether you are a property owner, a contractor, or a subcontractor, understanding the intricacies of builders’ liens is essential to protect your interests and navigate the complex web of construction projects and prompt payment.
However, navigating the process of properly registering a builders’ lien can be labyrinthine that is filled with regulations, strict deadlines, and unfamiliar legal jargon. To demystify this aspect of construction projects, this blog will explore the ins and outs of builders’ liens by clarifying the terminology and providing valuable insights into the legal processes that govern this vital aspect of the construction world.
A builders’ lien, also known as a construction lien, construction claim, or mechanic’s lien, is a legal instrument that plays a pivotal role in ensuring that every party involved in a construction project is treated fairly and receives prompt payment for their contributions. This legal safeguard is a fundamental aspect of the construction industry as it provides protection and recourse for those who provide labor, services, or materials on a project.
In Alberta, the Prompt Payment and Construction Lien Act (also referred to as the “PPCLA”) sets out the procedure for those who have not been paid for their services on a construction project to make a claim to ensure their payment. A large construction project can be thought of as a pyramid, with the developer or property owner at the top. The owner or developer may then hire a general contractor, who may hire several subcontractors to complete various work on the job. The subcontractors may then hire workers and material suppliers in order to complete their work on the project. Therefore, it is easy to see that somewhere along the line, payment may not be fulfilled.
If a party to a construction project is seeking to register a builders’ lien, they must provide full and detailed information regarding their claim, including:
- the address of the property or land;
- correct identification of the property or land owner;
- a legal description of the property or land; and
- the outstanding amount of payment they’re seeking to recover.
The party seeking to register a builders’ lien will also be required to provide an affidavit swearing that the information contained within the claim is true.
Recent legislative changes have imposed strict deadlines for payment in construction projects. Fees billed for services rendered must be listed on an invoice in accordance with the requirements set out in the Prompt Payment and Construction Lien Act every 31 days. The invoice must include a description of the payment terms or materials provided, as well as other necessary components.
Project owners must pay the contractors within 28 days of receiving the invoice. If they do not agree with the invoice, the owner must issue a “Notice of Non-Payment” within 14 days. The owner may hold back some or all of the payment, however, particular reasons must be provided for doing so. Moving down the hierarchy of parties involved in a project, the contractor must pay each sub-contractor within 7 days of receiving payment from the owner. If a sub-contractor does not receive prompt payment, legal recourse is available.
Of course, there may be exceptions, for example, a dispute as to what proportionate amount a sub-contractor may be owed. In some cases an extension may be possible when there is time needed for concrete to cure. In cases where the lien pertains to an oil or gas, the deadline to register a lien is 90 days.
“Lis Pendens” means “pending suit” in Latin. A Certificate of Lis Pendens (also referred to as a “CLP”) is a registration on the title of a piece of real estate that serves as notice that there is pending litigation related to the property. In essence, to perfect the registration, a lienholder must commence enforcement proceedings by filing both a Statement of Claim and a Certificate of Lis Pendens within 180 days of registering the builders’ lien on title. If a lienholder fails to do so, the lien will cease to exist.
If a lien or Certificate of Lis Pendens has been registered against a property and has not been resolved and removed, it can complicate future ordinary transactions regarding the property, such as a simple sale.
In addition to builders’ liens, there are several other types of liens that may be made in cases of non-payment by one party to another. Often, these claims are made against someone’s personal property as collateral for money borrowed, such as jewelry or vehicles. As such, if a debtor is unable to satisfy their payment obligations under the terms of a contract, the creditor can use a lien to protect their rights and collect the funds owing to them. Some common types of liens include Garage Keepers’ Liens and Personal Property Liens.
Given the recently amended legislative processes and the strict filing deadlines with harsh consequences, registering a builders’ lien can be an intimidating task. It is vital that lienholders carefully complete and review their documents to ensure that the information contained within them are correct. To make this process easier and avoid potentially detrimental mistakes, it is helpful to work with a trusted construction lawyer who is familiar with the processes, documents, and deadlines, to ensure that you do not make any costly mistakes.
The experienced construction litigation lawyers at DBB Law in Calgary regularly advise clients on various construction project issues, including contract negotiation and drafting. In the event of a dispute between parties, our lawyers represent clients in construction litigation as well as builders’ lien matters. We ensure that clients have an understanding of how the law applies to their situation, what their rights are, and ensure that they are positioned for the best possible outcome. To speak with a member of our construction law team regarding your builders’ lien questions, contact us at 403-265-7777 or online.