In Chandos Construction Ltd. v. Twin Peaks Construction Ltd., a Master of the Alberta Court of Queen’s Bench has held that a lien for work done prior to the filing of a certificate of substantial completion and payment of the major lien fund does not attach to the minor lien fund.
Chandos was the general contractor and Twin Peaks was the structural steel supplier and installer on the project. Chandos posted a certificate of substantial performance and delivered it to the owner. At that time, and within 45 days afterwards, no relevant lien was registered. The owner paid to Chandos the 10% holdback up to the date of the issuance of the certificate of substantial performance. The owner retained $45,000 being 10 % of the remaining final cost of construction, which under the Alberta lien statute is the minor lien fund.
After that, Twin Peaks registered a builders’ lien. Almost all of the work referred to in the lien related to work done prior to the date of substantial performance.
Chandos asserted that Twin Peaks no longer had a valid lien claim. It said that Twin Peaks failed to file a lien claim referable to its work done before the issuance of the certificate of substantial completion, and accordingly its lien claim for that work no longer existed. It asserted that Twin Peak’s lien claim for that work did not “migrate” to the minor lien fund.
The Alberta Builders’ Lien Act
Sections 18 to 27 of the Alberta Builders’ Lien Act (the Act) create a major and minor fund regime. Under section 18, the major lien fund provides security for the payment of liens up to the date of substantial completion by requiring the owner to withhold 10% of the value of the work and materials provided to the lands in question. Under section 23, the minor lien fund provides security for the payment for work done after that date by requiring the owner to retain 10% of the value of the work and materials after the date of the issuance of the certificate of substantial completion. .
In sections 34 and following, the Alberta Act contains the normal regime for the registration of builders’ liens. Section 41 provides that the time for the registration of the lien expires 45 days after the last material or work is furnished or completed or the contract is abandoned.
Decision Of The Alberta Queen’s Bench
Master Robertson of the Alberta Queen’s Bench held that Chandos’ view of the operation of the Act was correct. He held that:
- “A builder’s lien is initially against the interest of the owner in the land, but if the owner pays the lien funds the owner is required to retain into court, then there is a claim against the funds, which stand in place of the land.”
- “Pursuant to section 25, an owner is not liable for more than the total of the major lien fund and the minor lien fund. If the owner follows the requirements of the Act, there is no further claim to be had against the owner’s land or the fund.”
- The Act deals “with the major lien fund and the minor lien fund as two separate funds, but the basic concept remains the same: once the owner has paid the major lien fund properly to the general contractor, no liens having been filed within 45 days of the applicable date, then the major lien fund is gone. So long as the owner still has that money in his hands, the liens attach the land until funds are paid into court in place of the land.”
- “Therefore, a lien properly registered within 45 days of completion or abandonment is properly registered, and if it is done after the 45 days following the date of the certificate of substantial performance, but the owner has not yet paid the major lien fund to the general contractor, then it still attaches it. That is the effect of section 18(3)(b), section 23(2) and section 23(5). But if the money has been paid, there is nothing to attach.” (emphasis added)
- While the subcontractor may no longer have a lien claim, it still has its contractual claim against the contractor and, possibly, a trust claim under Section 22 of the Act.
The Master made the following declaration:
Accordingly, I declare that the lien claimed by Twin Peaks is not a valid claim against the minor lien fund to the extent that it claims for work done and material supplied before the date of issuance of the certificate of substantial performance.
This decision is a helpful clarification of the operation of the Alberta Act. That Act does not expressly resolve the timing issue between the two regimes: the major and minor fund regime, and the regime relating to the registration of liens against the land.
The Master effectively held that the proper interpretation of the Act must coordinate the two regimes. The Act must mean that, even though a claim is registered in a timely fashion in relation to the completion or abandonment of the contract, a claim against the major lien fund comes to an end when the 45 day period expires after the issuance, posting and deliverance of a certificate of substantial performance, and the owner pays the monies held by it in the major lien fund. The only sensible interpretation is that the lien claim against the land for work done to that date must also expire at the same time. Otherwise, the whole purpose and operation of the major lien fund would be frustrated. In these circumstances, a lien for that work cannot survive and attach to the minor lien fund. That fund exists to deal with lien claims after that date.
Chandos Construction Ltd. v. Twin Peaks Construction Ltd., 2016 CarswellAlta 987, 2016 ABQB 296
Construction and builders’ liens – major and minor lien funds –expiry of liens against the land
Thomas G. Heintzman O.C., Q.C., FCIArb September 11, 2016
This article contains Mr. Heintzman’s personal views and does not constitute legal advice. For legal advice, legal counsel should be consulted.