In Chandos Construction Ltd. v. Twin Peaks
Construction Ltd. (Chandos
Construction), the Court of Queen's Bench of Alberta
(Court) held that once the certificate of substantial performance
(Certificate) is issued and major lien fund is paid out,
subcontractors and suppliers can no longer claim a lien under the
Alberta Builders' Lien Act (Act)
for work done or materials supplied before the Certificate was
issued. Chandos Construction limits owners' liability
and is the first reported decision in Alberta dealing directly with
Owners should therefore ask contractors to issue Certificates as
they can significantly limit their liability under the
Act. Subcontractors and suppliers should be aware that
they have 45 days (or in the case of an oil or gas well, 90 days)
from the date on which a Certificate is issued to register a lien
for work done or materials supplied prior to issuance of the
MAJOR VS. MINOR LIEN FUNDS
Sections 18 and 23 of the Act require an owner to hold
back 10 per cent of each payment due to any contractor or supplier
hired to improve its land. This is commonly referred to as the
If a Certificate is issued:
A "major lien fund" is formed by the holdback on
payments for work done or materials supplied before the
Certificate is issued
A "minor lien fund" is formed by the holdback on
payments for work done or materials supplied after the
Certificate is issued
If no Certificate is issued, no minor lien fund arises, and all
holdback forms the major lien fund.
If no liens have been registered, the owner may pay the major
lien fund to the contractor 45 days (or in the case of an oil or
gas well, 90 days) from the date on which the Certificate is
issued, or if no Certificate is issued, the contract is
An owner is liable under the Act for no more than the
major lien fund and, if it arises, the minor lien fund. An owner
may discharge a lien registered by a party it did not contract with
directly by paying some or the entire appropriate lien fund into
court. Chandos Construction incentivizes owners to ensure
that a Certificate is issued and to release the major lien fund as
soon as possible.
In Chandos Construction, a Certificate was issued and
posted, and the owner paid the major lien fund to the general
contractor, Chandos Construction Ltd. (Chandos). One of
Chandos's subcontractors, Twin Peaks Construction Ltd. (Twin
Peaks), then registered a lien. The majority of the work that Twin
Peaks claimed under its lien was performed before the Certificate
Master A. R. Robertson, Q.C. held that a lien registered for
work done before the Certificate was issued can only attach against
the major lien fund, not the minor lien fund. As the major lien
fund had been paid to Chandos, there was nothing that portion of
the lien relating to the work done prior to the issuance of the
Certificate could attach to. The Court directed that Twin Peaks
discharge its lien on the condition that the owner pay into court
only the amount Twin Peaks claimed for work done after the
Certificate was issued.
Master Robertson noted that while Twin Peaks did not have a
valid lien for work done before the Certificate was issued, it had
Twin Peaks could make a breach of contract claim against
Twin Peaks could claim against Chandos under section 22 of the
Act, which provides that when a contractor receives
payment from the owner after a Certificate is issued, it holds that
payment in trust for any subcontractors or suppliers on the project
to whom the contractor owes money
Twin Peaks has not yet appealed this decision.
Pursuant to Chandos Construction, subcontractors and
suppliers have 45 days (or in the case of an oil or gas well, 90
days) from the date on which a Certificate is issued to register a
lien for work done or materials supplied prior to issuance of the
Certificate, even if their work is not yet complete. If this is not
done, and the owner pays out the major lien fund, any lien
subsequently registered for such work will be invalid.
Owners should therefore consider requiring contractors to issue
Certificates, as they can significantly limit owners' liability
under the Act. Additionally, owners (or contractors
required to remove liens on owners' behalf) should ensure that
when they apply to pay money into court to remove a lien registered
after the Certificate was issued, there is evidence before the
court on when the work was performed or materials supplied to
ensure that they do not pay more than necessary into court.
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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