On March 31, 2022, British Columbia passed new legislation that will reform and consolidate the law on commercial liens in British Columbia. Bill 11 – 2022: Commercial Liens Act (the "CLA") will modernize this area of the law and establish a framework for commercial liens that aims to be more consistent with other jurisdictions in Canada. While the CLA has received royal assent, the act will be brought into force by regulation at a yet to be determined date (likely 2023 at the earliest).
Liens are an important tool used by business owners to ensure that they receive payment for the services they provide. Generally, liens grant service providers (such as repairers, warehousers and common carriers) a legal right to retain a customer's property to secure payment or performance of an obligation.
The current commercial lien regime in British Columbia is governed by a collection of outdated legislation and common law principles that are criticized as being difficult to follow, inconsistent, inflexible and inefficient. The CLA will repeal the current legislation and common law liens and replace them with a single comprehensive framework that is integrated with the Personal Property Security Act (the "PPSA"). In particular, the CLA will repeal and replace the Repairers Lien Act, Warehouse Lien Act, Livestock Lien Act, Tugboat Worker Lien Act, Woodworker Lien Act, and the common law possessory liens which establish a lien for services. The CLA will not affect liens under the Builders Lien Act and the Forestry Service Providers Protection Act.
The CLA will create a single type of commercial lien on goods for the services that have been provided in relation to those goods. The lien will secure the amount agreed to between the parties for the services, or if no amount was agreed to, the market value of the services provided.
The new lien will attach to the goods immediately upon the commencement of the services and will be enforceable if the goods are in the possession of the service provider or if the service provider has obtained a written authorization for the services or an acknowledgement of the customer's obligation to pay for the services. Notably, an initial period of possession will no longer be required. This is of particular importance to service providers who provide on-site services for large or immovable commercial goods.
Another welcome change is with respect to how commercial liens are perfected. Under the current regime, a service provider must retain possession of the goods in order to maintain a lien. The only exception is with respect to liens on serial number goods, such as motor vehicles, aircrafts and boats, which can be registered in the Personal Property Registry (the "PPR") in lieu of possession. This approach is commercially impractical and creates a burden on lien holders to store goods until payment is received. The CLA simplifies this and provides a framework that allows for all commercial liens to be perfected by either maintaining possession of the goods or registering the lien in the PPR.
The CLA also overhauls the current archaic provisions for selling liened goods, and provides for a more commercially sensible approach that is consistent with modern sale and notice provisions, such as those set out in the PPSA. For example, there are no longer different methods of sale depending on how the lien arises. Instead, the CLA provides that liened goods may be disposed of: (a) by private sale, (b) by public sale, including public auction or closed tender, (c) as a whole or in commercial units or parts, and (d) by lease (if the owner consents in writing).
This article discusses but a sample of the many changes contained in the new CLA. Additional changes include new responsibilities of lien holders to care for liened goods in their possession, the inclusion of explicit provisions from the PPSA, and new notice periods contained in the registration and sale provisions.
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.
