Canada: Construction Liens' Applicability To Prefabricated Modular Buildings

( Disponible en anglais seulement )

Construction liens are charges against interests in land and premises, and are governed by the Construction Act, RSO 1990, c. C30.¹ Construction liens provide contractors and other parties to the contract protection for payment for materials and/or services provided on a construction project. However, there remains uncertainty as to the applicability of construction liens on modular prefabricated structures. With the growing presence and use of modular prefabricated structures in construction projects across Canada, it is becoming increasingly important for parties involved in a construction project to understand how lien rights apply to these structures.

What are modular prefabricated structures?

Modular prefabricated structures are structures that are manufactured off-site in a factory and are subsequently delivered and installed on-site. These structures provide a cost-effective form of construction, while also minimizing site disruption. Types of modular prefabricated structures can range from fully constructed roofs to portable schoolrooms and housing.

The lienability of modular prefabricated buildings are fact-specific

The case law surrounding modular prefabrication structures suggests that the applicability of construction liens is a highly fact driven analysis that turns on the structure's connection to the land in question.

In the 1978 case, Hank's Plumbing and Gas Fitting Ltd. v Stanhope Construction Ltd., the Plaintiff constructed the majority of the modular homes off-site, and the modular homes were to be delivered in two pieces and assembled at their ultimate destination. The Alberta District Court held that the Plaintiff's services were not lienable because it had "all the attributes of a chattel, and no 'interest in land' could be passed to a purported lienor under the Builders' Lien Act."² The same conclusion was reached by the Ontario Supreme Court's bankruptcy division in the 1986 case of Inseco Ltd (Trustee of), Re., with respect to portable schoolrooms which were fully constructed off-site and delivered completely finished to the site.³ The portable schoolrooms were found to be self-contained units capable of being moved from place to place and thus, resembled chattels.

In contrast, the Alberta Court of Queen's Bench in the 1980 case of Aspen Lumber Co. v Depner seems to suggest that "services performed off the lands can be the subject of a lien."⁴ The Court held that the contractor of the prefabricated framing sections of the building was entitled to a lien because the frames were not chattel themselves. Rather, the Court found that the structures were manufactured specifically for the land and that had the sections been assembled on the lands, the contractor would have been entitled to a lien.⁵

Conclusion

Ultimately, the case law on modular prefabricated structures, albeit slightly dated, suggests that the availability of lien rights on prefabricated modular buildings turns on the nexus between the structure and its connection to the specific lands. Specifically, a trier of fact will likely consider a modular prefabricated structure that was built with no particular end destination in mind and/or that can be moved around at will to be chattel. In contrast, a structure made specially for a specific land or in relation to a specific construction project will more likely be subject to lien rights.

Given the complexity of lien rights under the Construction Act and their applicability to modular prefabricated structures, consulting engineers and contractors are encouraged to seek legal counsel to understand the nature and scope of lien rights available to them. Our Miller Thomson Construction Law Team is here to assist in drafting, negotiating and litigating construction contracts and lien rights.

Footnotes

1. Construction Act, RSO 1990, c. C30, Part III.

2. Hank's Plumbing and Gas Fitting Ltd. v Stanhope Construction Ltd., 7 Alta LR (2d) 106, at para 17.

3. Inseco Ltd. (Trustee of), Re., 1986. OJ No 2153, at para 3.

4. Aspen Lumber Co v Depner, 1980 CarswellAlta 207, 16 RPR 109, at para 6.

5. Aspen Lumber Co v Depner, at para 6-8.

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.