A builders’ lien can arise when you supply goods or services in connection with an improvement to real property. Whether you are the supplier of such goods or services, of the owner or financier of the property being improved, it is important to understand your legal rights and responsibilities pursuant to The Builders’ Lien Act SS 1984-85-86, c B-7.1(“BLA”).
From the outset, it is important to recognize that the BLA is complex. It has many features designed to protect the interests of persons who supply goods or services in regard to an improvement to real property. Due to such complexities, the purpose of this article is to provide only a basic review of the purpose of the BLA and its three main remedies.
The purpose of the BLA
The Saskatchewan Courts have consistently emphasized that the principal objective of the BLA is to better ensure that those who contribute work and material to the improvement of real property are paid for doing so.
The Saskatchewan Court of Appeal recently considered the purpose of the BLA in PCL Construction Management Inc v Saskatoon (City), 2020 SKCA 12 and confirmed that the BLA has two main purposes:
- the protection of those who provide services and materials on credit, and
- the protection of the commercial interests of other, including the owener and financier of the improvements
The BLA facilitates recovery of amounts owing to persons who have provided materials or services to an owner, a contractor, or a subcontractor in relation to an improvement made to land. The remedies involve: a trust, a holdback, and a lien
1. The Trust
The BLA trust provisions create three levels of trusts: the owner’s trust, the contractor’s trust, and the subcontractor’s trust. The responsibilities of an owner, contractor, and subcontractor are set out in ss. 6, 7 and 8 of the BLA, respectively. The trust provisions are designed to ensure that moneys intended to be used for the improvement are so used.
In the case of an owner’s trust, for example, all amounts received by an owner, other than the Crown, that are to be used in the financing of an improvement, constitute a trust for the benefit of the contractor (BLA, s. 6(1)). The owner is the trustee of the trust fund and is not to appropriate or convert any part of the trust fund until the contractor is paid all amounts related to the improvement owed to him by the owner (s. 6(4)). Contractors and subcontractors must adhere to similar requirements in regard to monies they receive as set out in ss. 7 and 8 of the BLA.
A claimant under the trust provisions does not need to have a registered lien.
2. The Holdback
The BLA provides that a holdback must be maintained by a person (e.g. the owner of the land being improved, a contractor, and/or a subcontractor) of ten (10) percent of the greater of the value of the services or materials (as they are actually provided under a contract or subcontract) or the amount of any payment made on account of the contract or subcontract (BLA, s. 34(1)). The amount of the holdback is to be calculated based on the contract price, or if there is no specific price, based on the actual value of the services or materials provided (BLA, s. 34(3)).
The holdback is to remain in place until it is releasable pursuant to sections 41-45 of the BLA. Each of the sections concerning release of the holdback are subject to the provision concerning a holdback trust account (see BLA, s. 38) and are subject to a claim of lien not being registered. If a claim of lien is registered, then the holdback is not to be released.
The BLA allows a payer to make payments on a contract or subcontract up to 90% of the contract or subcontract price unless, prior to making payment, the payer receives written notice of a lien. In that event, the payer may make such payments provided it retains, in addition to the holdback, an amount sufficient to satisfy the lien (BLA, s. 40).
3. The Lien
A party who provides services or materials to an improvement for an owner, contractor, or subcontractor has a lien on the estate or interest of the owner in the land occupied by the improvement, or enjoyed therewith, and on the materials provided to the improvement for the price of the services or materials owing.
The lien claim is an in rem remedy (i.e. it runs with the land) and if the lien is proven a lien claimant can have the land sold to satisfy its claim.
Where there is a single contract for improvements on more than one parcel, the claimant may claim each parcel for the price of all services or materials provided to all of the parcels (BLA, s. 29). The BLA also permits claimants to charge other kinds of interests in land including, but not limited to, joint interests or interests in common, a landlord’s or tenant’s interest, and a condominium unit.
After a lien arises, the lien claimant must protect the lien claim through registration with the Land Titles Registry and by providing written notice of a lien. A Claim of Lien (Form E) is a claim upon the holdback. A Written Notice of a Lien (Form A) is a claim upon any additional amount owed in relation to the improvement as well as upon the holdback. Accordingly, while the Claim of Lien is registered against the land, a Written Notice of a Lien is given to the payer on the contract or subcontract in order to be a charge on any additional amount owed in relation to the improvement and to stop a payer from making payments to the payee. As a result, a payer must retain the amount set out in the Written Notice of Lien if it wants to make any further payments to the payee (BLA, s. 40).
STEVENSON HOOD THORNTON BEAUBIER LLP
500 – 123 2nd Avenue South, Saskatoon, SK S7K 7E6
The information in this article is not legal advice. We encourage you to consult with your legal advisor for specific advice.