Note: The rules and law may have changed since this article was first published. It is provided for archival purposes but you should consult with your lawyer for the current state of the law
On a recent run through the majestic Nutana and Beuna Vista neighbourhoods in Saskatoon, the effects of the Saskaboom were vivid. It seemed every third property was either under renovation or was a completely new “in-fill”.
A later trip to the freshly minted Stonebridge neighbourhood on the southern edge of Saskatoon presented an entirely different vision: wholesale development of three-story condo units and suburban homes. Moving further to the edges of the city, there continues to be commercial and industrial growth – massive retail spaces, mechanical shops and manufacturing structures. We celebrate the results of this development boom, but the pace and scope of development has resulted in some “lien times” for owners and contractors.
Despite the narrow scope suggested by its name, The Builders’ Lien Act protects property owners, contractors and subcontractors alike. The Act provides some measure of protection to each party involved in a construction project, so long as they fulfill their responsibilities.
For property owners, the Act includes detailed “holdback” provisions. If you retain, in trust, a portion of the payments made to your general contractor, and only release that holdback money when permitted by the Act, you can ensure any liens issued or registered against your property by the contractor or sub-contractors will be removed from your property when the project is completed.
The Act helps subcontractors overcome the lack of “privity”. A lack of privity means the subcontractor is not a party to the agreement between the property owner and the general contractor. In other words, the subcontractor has no legal relationship with the actual property owner. If the general contractor fails to pay the subcontractor for its goods or services, the subcontractor has few legal remedies against the owner. The Act, however, gives the subcontractor a direct interest in the owner’s property through a lien if the general contractor fails to pay. The owner must address the subcontractor’s lien through one of the methods provided by the Act in order to clear the title.
The contractor deals directly with the property owner and subcontractors. Therefore, the contractor needs to ensure that it is paid by the property owner for its work, and for the work of its subcontractors. The contractor must also ensure that subcontractors and sub-sub-contractors have no outstanding claims which might cause a lien. A contractor has the benefit of both a lien against the property to ensure it is paid by the owner and the holdback provisions against subcontractors to rid itself of any claims from subcontractors.
Registering a lien is relatively straightforward under the Act, but navigating the consequences is often complicated and usually requires court applications. For example, the issue or registration of a lien does not result in immediate or direct payment. Liens are frequently vacated from title by the payment of money into Court. The lien is removed from the land title but the party seeking payment must apply to court for payment. What may have started as a quick and inexpensive action to get paid may turn into long, costly litigation.
Successfully employing the various holdback provisions of the Act can also be confounding for property owners and contractors. If the right sum of money is not held for the proper duration under the correct conditions, you may not enjoy the protection from liens that the Act provides.
While the Act provides some provisions to resolve payment disputes between parties, its rules are often difficult to negotiate, and the easy result you might expect is not always available.
When starting a construction project of any reasonable size – even the construction of a residential home – it may be worth paying a lawyer to ensure you will enjoy all the protection the Act enjoys. Furthermore, the legal basics, such as making sure you have a solid written contract respecting the goods and services being offered, or ensuring appropriate financing and security documents are in place, may be more helpful in guaranteeing prompt payment and resolving disputes than anything the Act has to offer.