One way to make ’em pay

Dealing with customers who refuse to pay their bills can be a very frustrating experience for most rental companies.

Fortunately, there is an underrated but powerful tool to assist you with the collection of unpaid accounts. This tool is called a builder’s lien (also known as a construction lien).

A builder’s lien provides those who supply labour, services and/or materials to a construction project certain rights that are typically not available to other creditors. A builder’s lien secures a claim for payment on work completed or materials supplied to a construction project. Typically, when a lien is registered in the applicable land title office, it becomes a charge against the title to the land or property involved in the construction project, thereby allowing the lien claimant the ability to secure payment for work done or materials supplied.

One of the main reasons a builder’s lien remains an effective tool for collecting on an outstanding account is because it is a charge against land. As a result, the lien stands to impede the landowner’s ability to sell the land or obtain additional financing for the project at hand. This alone can persuade a landowner to ensure all outstanding accounts are paid in full.

Suppliers of materials can include renters of equipment, providing the equipment is used on the particular construction project. Therefore, renters of equipment can often be entitled to file a builder’s lien.

It is important to note there are strict timelines that a lien claimant must adhere to, in order to ensure proper registration of a builder’s lien. Failure to adhere to the strict timelines as provided in the applicable provincial lien legislation may 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 registration of a builder’s lien. These requirements should be discussed with your lawyer. In Manitoba, for example, the applicable legislation provides that a lien claimant must proceed with the filing of a Statement of Claim in court within two years of the lien being registered against the property. One of the reasons behind this requirement is to prevent lien claimants from being able to endlessly tie up properties without ever suing to recover the monies they allege are owed.

Please also note that provincial lien legislation differs from province to province, and therefore, in the event that a builder’s lien is required, it is always advisable to discuss the matter as soon as possible with legal counsel entitled to practise law in your province in order to determine the best course of action.

Deryk Coward articled with D’Arcy & Deacon in 1996 and was called to the Manitoba bar in June of 1997. He is a partner with the firm, practising primarily in the area of general civil litigation, personal injury, insurance, debtor-creditor and labour and employment law. Coward is legal counsel for the Canadian Rental Association.