Construction Liens – Who should pay?
As unfortunate as it may be, contractors and material suppliers sometimes do not get paid for supplying services or materials to an improvement for an owner, or contractor, or subcontractor.
In case of non payment, the unpaid contractor or material supplier has a lien upon the interest of the owner of the premises. It is crucial that the unpaid contractor or material supplier seeks legal advice in preserving the lien as soon as possible. The rules for preserving and perfecting liens will be the subject of a future discussion.
Here, we discuss the meaning of owner pursuant to the Construction Lien Act. Most people would instinctively think the owner of an improvement is the person who holds legal title of the land on which an improvement is made. This is a mistake. The legal definition of an owner under the Construction Lien Act is very different from the common sense definition of owner, and is found at s. 1 of the Construction Lien Act:
“owner” means any person, including the Crown, having an interest in a premises at whose request and,
(a) upon whose credit, or
(b) on whose behalf, or
(c) with whose privity or consent, or
(d) for whose direct benefit,
an improvement is made to the premises but does not include a home buyer; (“propriétaire”)
A trained jurist will immediately pay attention to the words “and” and “or” found in the definition. The word “and” implies a conjunction or combination of two concepts or obligations. This is not great for an unpaid contractor or material supplier because it means at least two or more criteria must be met for a person to be considered an owner. On the other hand, “or” implies a disjunction, which is good because it means not all criteria have to be met. As such, it is clear that an owner is:
1. Any person;
2. That has an interest in a premises;
3. At whose request an improvement is made to the premises;
So, once we have a person that has an interest in the premises and a request for an improvement, we almost have an owner. What we then need is this potential owner to be or do only one of the following:
1. Upon whose credit; or
2. On whose behalf; or
3. With whose privity or consent; or
4. For whose direct benefit,
An improvement is made to the premises but does not include a home buyer.
This statutory definition of owner is not easy to understand, but it was drafted in this manner to help the unpaid contractor or material supplier in case of non payment for their work.
The concept of owner in the Construction Lien Act is intentionally drafted this way to take into account the uniqueness of the construction industry. Often, construction workers and material suppliers are working under a contract following the request, and upon the credit, or on behalf of, or with the consent of:
· A tenant;
· A landlord;
· A mortgagor;
· A mortgagee;
· A purchaser of an interest in property;
· A condominium.
If we only applied the common sense definition of owner (he who holds title of the land), then the unpaid contractor or material supplier could not claim a lien against the interest of one or many of the above mentioned statutory owner/s.
As such, when commencing an action pursuant to the Construction Lien Act, one must be mindful of the statutory definition of owner. When one understands who the owner/s are, they may charge a lien upon the owner/s interest in the land. Then, the unpaid contractor or material supplier can perfect its lien by commencing an action not only against the entity that breached the contract by not paying for the work, but also for the holdback obligation of the owner/s.
The lien is an excellent security for payment specifically designed to help the unpaid worker or supplier, but is easily lost if not preserved and perfected. If you are a contractor, subcontractor, or material supplier, and you have not been paid for your work on an improvement, the lawyers at Vice & Hunter can help you secure your rights, preserve your lien, and get your heard earned money.
Please contact info@viceandhunter.ca for more information.
