File a builder’s lien
By Deryk Coward
Most of you probably think of builder’s liens in the context of construction projects, where a contractor isn’t paid and files a lien to protect its rights. This tool, however, may also be available to you as a rental company. A rental company does not even need to have a direct contract with the owner of the property that is the subject of the lien. In fact, you might not even know the identity of the owner. If available to you, a builder’s lien can be a very effective tool for collection of your bad debts.
By Deryk Coward
Builder’s lien legislation varies from province to province. I practice law in Manitoba and therefore can only provide advice with respect to Manitoba legislation. If you are reading this article outside of Manitoba and want further information and/or legal advice in connection with a potential builder’s lien issue, you should consult with a licensed lawyer in your own province. In other jurisdictions, a builder’s lien can go by a different name, such as a “construction lien.”
In general terms, a builder’s lien can provide those who supply labour, services and/or materials to a property with certain rights that are not otherwise available to general creditors. It can secure a claim for payment on work completed or on materials and labour supplied to a property. A builder’s lien becomes a formal charge against title to the property involved, and thereby allows the lien claimant the ability to secure payment for work done or materials and labour supplied to the property.
Because a builder’s lien is registered against the title to the property, at least the following three things generally occur. The property owner will be notified that there is a lien against its property. The owner quite often does not even know that you haven’t paid, and this triggers immediate positive results. Also, the property owner will not be able to easily sell the land, as a potential purchaser will usually insist on receiving the title free and clear from all liens. Finally, the property owner’s ability to obtain financing using the property as collateral will be severely curtailed, as most financial institutions will insist on the lien being paid prior to advancing loan proceeds.
As noted above, the legislation dealing with builder’s liens varies from province to province. One thing that is common throughout the various provinces, however, is the fact that there are strict timelines that a lien claimant must adhere to in order to ensure the proper registration of a builder’s lien. Failure to adhere to these strict timelines (the actual number of days and technical requirements vary from province to province) can be fatal to a particular claim.
There are additional requirements that must be completed by a lien claimant, both before and after a lien is filed, in order to secure and maintain the proper registration of your builder’s lien. These requirements should be discussed with your lawyer.
Once you know the time deadlines which apply in your province, you should set up a system on your computer which automatically forces you to consider whether you want to file a lien (say, within five days of the expiry of your right to file). One of the factors to consider would necessarily include the amount of money involved.
As builder’s liens are very technical in nature and vary from province to province, I would strongly encourage you to seek out and retain the advice of a lawyer entitled to practice in your jurisdiction. No legal advice in connection with any particular matter was offered in this article.