In the recent Alberta Court of Appeal decision Avli BRC Developments Inc v BMP Construction Management Ltd, 2023 ABCA 147 ("Avli"), Alberta's appellate court validated the liens of subcontractors – the validity of which was in question because of various flaws in the way the liens were registered.
Background facts
Avli BRC Developments Inc. ("Avli") hired BMP Construction Management Ltd. ("BMP") to construct a condominium complex on lands that it owned in Calgary (the "Project"). BMP in turn hired subcontractors, Desa Glass A Division of Desa Holdings Ltd. ("Desa"), Rimrock Landscaping and Property Management ("Rimrock"), Grant Metal Products Ltd. ("Grant"), and Shanahan's GP Ltd. ("Shanahan's") (collectively, the "Subcontractors").
On October 15, 2019, when construction on the Project was underway, Avli registered its condominium plan (the "Condominium Plan"), after which it became owner of all condominium units, in all of the common property rather than the single parcel as before. Once the Condominium Plan was registered Condominium Corporation No 1912037 was created (the "Condominium Corporation"), although there was no evidence that Avli had set up an interim board of directors as was required by s 101 of the Condominium Property Act, RSA 2000, c C-22.
In October and November of 2019, before Avli had sold any units of the condominium, the Subcontractors registered respective liens. However, Desa and Grant filed their liens against the additional condominium sheet only and Shanahan's and Rimrock filed against one unit only, as opposed to each unit and the additional condominium sheet in accordance with the "standard approach' under Alberta's Builders' Lien Act [BLA]. Additionally, Grant's lien named the Condominium Corporation as the owner of the lands which was held to be an error.
Avli's lien challenges
Avli challenged the validity of the Subcontractors' liens, arguing that the following section was inapplicable to the liens of Desa and Grant because they were only registered against the additional condominium sheet, and the Condominium Corporation did not request the work:
78. Builders' Lien Act
78(1) For the purposes of the Builders' Lien Act,
...
(b) if on the request of a corporation
(i) work is done in or on or in respect of the common property or a unit, or both, or
(ii) material is furnished to be used in or on the common property or a unit, or both,
intended for the benefit of the common property generally, any lien that arises under that Act in consequence of it is on the estates of all the owners in all the units and the common property;
,,,
78(2) Where
(a) a lien referred to in subsection (1)(b) arises, and
(b) a statement of lien is registered against the condominium plan,
that statement of lien, on being registered against the condominium plan,
(c) is deemed to be also registered against the certificate of title for each unit, and
(d) may be enforced against the common property and each unit in the same manner as if the statement of lien were specifically registered against the estate of each owner and that owner's share in the common property.
The argument presented by Avli was that because the Condominium Corporation did not request the work on the Project – rather, it was Avli that had made the request – the Desa and Grant liens were invalid. Avli also challenged Grant's lien on the basis that Grant had named the Condominium Corporation and not Avli as the owner of the lands.
Avli challenged the Rimrock and Shanahan's liens on the basis that they only named one unit each, so Avli argued these two Subcontractors should only be entitled to a fraction of the total amount claimed.
Decision on appeal
The Alberta Court of Appeal dismissed Avli's appeal, thereby upholding the decision of the Applications Judge and validating the Subcontractors' liens. The appellate court validated the liens under a saving provision, section 37 of the BLA:
37(1) A substantial compliance with section 34 is sufficient and a lien shall not be invalidated by failure to comply with any requirements of section 34 unless, in the opinion of the court, the owner, contractor, subcontractor, mortgagee or some other person is prejudiced by the failure.
(2) When, in the opinion of the court, a person is prejudiced by a failure to comply with section 34, the lien shall be invalidated only to the extent that the person is prejudiced by the default.
(3) Nothing in this section dispenses with the requirement of registration of a lien.
The Court of Appeal held there was no prejudice in validating the liens. Prejudice was framed in this context as whether "anyone was misled and did anything to their detriment in consequence." Since no units had been sold, the Condominium Corporation had no board of directors at the time the Subcontractors registered their liens, and Avli remained the owner of all units and was in control of the Project, the court affirmed that no person was prejudiced if the Subcontractors' liens were validated. The Subcontractors' liens were also held to be in substantial compliance with the technical requirements of a valid lien. As such, the Court of Appeal held that the Subcontractors' liens were valid and upheld that part of the Applications Judge's decision.
The more controversial aspects of the lower courts' decisions, adoption of pre-incorporation contracts, was not addressed or affirmed by the Court of Appeal. At first instance in Avli BRC Developments Inc v BMP Construction Management Ltd, 2021 ABQB 412, Applications Judge A.R. Robertson held that the Condominium Corporation must have adopted the pre-incorporation contract between Avli and the general contractor, and deemed it to have ratified Avli's request for work to be performed on the project as a post-incorporation contract. This aspect of the Applications Judge's decision, as upheld by the Court of King's Bench, was not addressed by the Court of Appeal.
Takeaways
When performing work on a new condominium development, or when performing work at the request of a condominium corporation, if the need to lien arises contractors and subcontractors should take care to follow what the Court of Appeal in Avli described as the "standard approach" to liening. That is, despite the inconvenience of doing so, according to the Court of Appeal lien claimants should register their liens against the certificates of title for all condominium units, and potentially the additional condominium plan sheet.
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.
