The typical secured creditor is a lender. Frequently, however,
purchasers of real property can also become secured creditors
through the mechanism of a purchaser's lien. These liens are a
boon for purchasers, but can be troublesome for creditors as the
liens will often take priority over other financial charges,
including registered unsecured judgments.
The scope and priority of purchaser's liens were recently
examined in the case of Pan Canadian Mortgage
Group.1 The British Columbia Supreme Court explored
their history, noting that when a purchaser of real property
provides a deposit or other funds to the vendor in part or whole
payment of the purchase price, the purchaser's lien forms an
equitable charge over the property. The purchaser thus becomes a
secured creditor in the property to the extent of the payments
It is simplest to think of the purchaser's lien as a form of
consumer protection. If the vendor fails to perform the contract of
purchase and sale, the purchaser can recover the deposit or other
funds and is entitled to a lien on the property. However, if the
purchaser fails to perform its part of the contract, the lien is
The lien is fairly robust, and can persist even if the
underlying contract of purchase and sale is made invalid or
In Pan Canadian Mortgage Group, an incomplete
residential townhouse development was foreclosed upon. The subject
property was sold and the construction mortgage was fully paid out.
The remaining funds from the sale consisting of approximately $2.5
million were paid into court.
Two groups claimed priority over the funds. The first group were
the purchasers of fully paid prospective townhomes which were to be
constructed on the property. They argued that they each had a
purchaser's lien over the property and the remaining funds from
its sale in order to satisfy their collective advances of
approximately $6.2 million. The second group were certain judgment
creditors of the owner of the property who held judgments
registered against the title of the property. They made
various technical arguments in their favour claiming that their
unsatisfied judgments of approximately $1.4 million had priority
over the claims of the purchasers. The judgment creditors
focussed on deficiencies in the purchase contracts including the
fact that the contracts were initially entered into with a
corporation that did not own the property.
Ultimately the Court held that each of the purchasers did have a
purchaser's lien that arose not as a result of contract but
through equity. The Court found that the purchasers had a secured
charge against the land that was independent of the contract
between the parties. The purchasers had intended that their
purchase funds would be applied to the development. Their purchase
contracts were not completed due to the developer's breach, and
not due to any fault on their part.3 The
purchasers thus had priority over the judgment creditors to the
approximate $2.5 million paid into court.
Why was the construction mortgage paid out first, even before
the lien was? In this case, the purchasers agreed, more or less, in
contracts of purchase and sale, that the construction mortgage
would have priority over any purchaser's lien. (Although not
explicitly ruled upon, were it not for this fact, I would expect
the purchaser's lien to take priority over the construction
The decision is currently under appeal.
1 Pan Canadian Mortgage Group v 679972 BC Ltd,
2013 BCSC 1078 [Pan Canadian Mortgage
2 Pan Canadian Mortgage Group, at para.
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