Canada: Alberta Decision May Make Builders' Lien Filing Deadline Less Certain, More Litigated

In Boulevard Real Estate Equities Ltd. v. 1851514 Alberta Ltd. (Boulevard Real Estate Equities), a master of the Alberta Court of Queen's Bench held that if an owner makes a representation to a contractor that causes the contractor to file a builders' lien after the deadline set in the Builders' Lien Act (BLA), the owner may be estopped from having the builders' lien discharged on the basis that it was not filed in time. Boulevard has appealed Master Prowse's decision to a justice of the Alberta Court of Queen's Bench. We will monitor the appeal and report on its outcome.

BACKGROUND

The defendant contractor, 1851514 Alberta Ltd. (185), provided work and materials for two construction projects owned by the plaintiff, Boulevard Real Estate Equities Ltd. (Boulevard). 185 claimed that it was not paid for its work and filed builders' liens against the projects. A representative of Boulevard contacted a representative of 185 after the liens were filed. The representative of 185 summarized that conversation in his affidavit as follows:

After the liens were filed, I was then contacted by [representatives of Boulevard] who initially said to me words to the effect that they would ruin 185. However, shortly after that I was called again and they spoke in an apologetic tone and indicated that all they really needed to do was sit down and reconcile all of the accounts as to what work and materials 185 had supplied, to each of the projects, and that the company 185 would be paid. They requested that I remove the builder's liens because they were desperate to do financing on the projects. Accordingly, upon reliance on their representations that they were now going to pay for the materials supplied, and would reconcile in good faith what they owed to me, I discharged the builder's liens. [emphasis added]

Boulevard did not pay 185, however, so 185 registered new builders' liens against the projects. The new builders' liens were registered after the BLA's deadline for filing a builders' lien had elapsed. Boulevard applied to have the new builders' liens discharged on that basis.

RELEVANT LAW

Section 41 of the BLA provides that a builders' lien must be registered within 45 days (or in the case of oil or gas wells, 90 days) of the date on which the contractor last furnished materials for a project, last performed services for a project, completed its contract, or abandoned its contract, as applicable.

Contractors may file more than one lien in respect of the same work, as the Alberta Court of Appeal held in Tervita Corporation v. ConCreate USL (GP) Inc. In that case, however, the Alberta Court of Appeal found that the contractor filed its second lien before the deadline set by section 41 of the BLA elapsed. For more information, see our April 2015 Blakes Bulletin: Alberta Court Clarifies Builders' Lien Registration When Contract Abandoned.

MASTER'S DECISION

Boulevard's application to have the builders' liens discharged was dismissed. The master held that the doctrine of promissory estoppel should be applied to prevent Boulevard from arguing that the builders' liens had been filed out of time, because of the conversation Boulevard's representative had with 185's representative after 185 filed the first builders' liens.

Under the doctrine of promissory estoppel, Party A may be barred from enforcing a legal right Party A would otherwise have against Party B if all of the following elements are present:

  • Party A made a clear promise or representation
  • Party A intended that Party B would rely on its promise or representation, and that its promise or representation would change the legal relationship between Party A and Party B
  • Party B relied on Party A's promise or representation to Party B's detriment.

The master did not provide a detailed analysis of the application of the doctrine of promissory estoppel to the facts in this case, instead he simply stated, "[I]t is my conclusion that, pursuant to the doctrine of promissory estoppel, Boulevard is prevented from asserting that the re-registered liens were filed out of time. . . ." Based on his conclusion, one can assume the master found that Boulevard had represented that it would pay 185, and intended that 185 would rely on that representation to discharge its builders' liens, and that 185 did in fact rely on that representation to discharge its liens.

Notably, the master stressed that it was appropriate to apply the doctrine of promissory estoppel in this situation because he found that this was a relatively simple two-party builders' lien case; there were no third parties who would be affected by his decision.

PRACTICAL IMPLICATIONS OF THIS DECISION

Owners

Owners must be wary when having discussions with contractors who have or may file builders' liens that if they make promises or representations that the contractor could rely on to discharge a builders' lien or delay filing a builders' lien. In such situations, owners may lose their right to later argue that the builders' lien was registered out of time. Owners wanting to negotiate business-minded solutions in good faith with unpaid contractors should be very cautious when doing so in the wake of this decision.

Contractors

This case gives contractors a powerful argument to raise on an application to discharge builders' liens filed out of time. Contractors should however still adhere to the filing deadlines for builders' liens under the BLA and not make a strategic decision to delay filing a builders' lien or discharge a builders' lien. Promissory estoppel is an equitable remedy. Courts have broad discretion in granting equitable remedies, meaning that it is difficult to predict whether a court will invoke promissory estoppel in any particular situation. Further, a court will not grant an equitable remedy to a party who has "unclean hands" and therefore may refuse to apply the doctrine of promissory estoppel if it believes that a contractor acted strategically rather than in true reliance on an owner's representation.

Third Parties

The master invoked promissory estoppel in this case because he believed that it was a simple two-party case. As those involved in the construction industry know, however, even cases which appear to be simple two-party matters usually are not. For example, many construction projects are financed through construction loans secured against the land. In such cases, lenders depend on land title searches to ensure that their security is not impaired. If a contractor in an apparently simple two-party case is permitted to register a lien after the statutory deadline, its late-filed lien could take lenders — and other third parties who rely on land title searches to identify clouds on title — by surprise.

COURTS ADOPTING LESS-THAN-STRICT APPROACH

Courts have historically taken a strict approach to interpreting the provisions of the BLA that determine whether a contractor is entitled to register and maintain a builders' lien, because a builders' lien is an extraordinarily powerful remedy. A builders' lien can also have wide-ranging effects for not only the owner but other contractors, the owner's creditors, purchasers of the land, etc. It is important that there be predictability in terms of whether a contractor is entitled to register a builders' lien.

This case is not the first released this year in which an Alberta court adopted a less-than-strict approach to the question of whether a contractor was entitled to register or maintain a builders' lien. In TRG Developments Corp. v. Kee Installations Ltd. (TRG Developments), the contractor failed to file a certificate of lis pendens (CLP) within 180 days of filing its builders' lien as required by the BLA. Ordinarily a failure to comply with this requirement entitles an owner to write to the registrar of land titles and request that the builders' lien be discharged. The Alberta Court of Appeal held, however, that the owner in TRG Developments was not entitled to have the builders' lien discharged, as the owner had taken steps to challenge the validity of the lien and may therefore have misled the contractor into believing that it was not necessary to file a CLP. TRG Developments was, like Boulevard Real Estate Equities, supposedly a simple two-party case. For further information, see our July 2015 Blakes Bulletin: Alberta Court of Appeal Finds That Certificate of Lis Pendens to Perfect Builders' Lien May Not Be Required.

CONCLUSION

Boulevard Real Estate Equities, and cases like TRG Developments, may signal a trend among Alberta courts to take a more lenient approach to determining whether a contractor is entitled to register or maintain a builders' lien, at least in cases where the contractor works directly for the owner. Owners and other parties who may be affected by the registration of a builders' lien should therefore proceed with the knowledge that contractors may not be held to the letter of the BLA. This trend decreases the predictability that formerly existed in relation to when contractors were entitled to register and maintain builders' liens.

This trend of taking a lenient approach to the BLA's time limits is also likely to promote more interlocutory applications with respect to the validity of builders' liens and increase their complexity. Before TRG Developments, if a contractor failed to file a CLP within 180 days of filing its builders' lien, the builders' lien could be discharged with a simple letter to the registrar of land titles and the contractor had no grounds on which to challenge the discharge. A contractor may now apply to the court to reverse the discharge, arguing that the owner's conduct made the discharge unfair. An application to discharge a lien on the basis that it was filed out of time formerly centred around one simple question of fact: when the contractor last provided materials or services, or when the contract was completed or abandoned. If Boulevard Real Estate Equities is upheld, such applications may be complicated by extended enquiries into the owner's conduct and the contractor's state of mind.

As builders' lien matters become increasingly complex, it is now more important than ever that owners, contractors and others affected by builders' liens seek legal counsel proactively.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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