During this time of economic uncertainty, it has become increasingly important for companies across Alberta and the Northwest Territories to remain informed about methods for safeguarding their claims for payment. One such method is through the use of statutory liens. Contractors, subcontractors, suppliers and labourers who have not been paid for their work or materials may be able to register liens against the property where they supplied the work or materials may be able to register liens against the property where they supplied the work or materials. Liens secure the unpaid party's claim against the property and may ultimately result in a forced sale of the property to have the debt paid.
Based on questions we have received from a number of clients, we have prepared a brief primer on Builders' Liens including mineral liens (under Alberta's Builders' Lien Act) in Alberta, and Mechanics Liens (under NWT's Mechanics Lien Act) and Miners Liens (under NWT's Miners Lien Act) in Northwest Territories.
Builders' Liens: Overview
Builders' Liens are created by the Builders' Lien Act. This type of lien is available to persons who have not been paid for their supply of work or materials in respect of an improvement associated with lands or the recovery of minerals. The value of a Builders' Lien is limited to the price of the unpaid work or materials.
"Work" includes the performance of services. For
example, a supplier of rental equipment for a construction project
is often providing a "service" that entitles the supplier
to register a lien. However, there has been extensive judicial
consideration of the question of whether or not any particular
activity allows for lien registration. The answer to that question
will ultimately depend on the nature of the activity and the manner
in which the activity relates to the lands.
Builders' Liens must be registered within 45 days (or 90 days in the case of work or materials supplied to an oil or gas well site) from the date the last work or materials were supplied or the contract for the work or materials was abandoned.
Builders' Liens expire 180 days after being registered, unless the lienholder has commenced an action to realize the claim of lien and a Certificate of Lis Pendens is registered with the Land Titles Office.
A registered Builders' Lien secures the unpaid party's claim against the property to which the lien is attached. If funds are paid to the lienholder or the court to satisfy the debt, then the Builders Lien may be cancelled. If the court orders the sale of lands to which a lien is attached, then the proceeds from the sale would be distributed among all creditors with claims registered against the lands, in order of priority.
A Builders' Lien attaches to the "owner's" interest in the lands. The definition of an "owner" under Alberta's Builders' Lien Act is broader than the common sense meaning of "owner"; as a result, in some cases liens may be registered against interests other than those of the actual registered land owner. For example, a lien may be registered against a tenant's interest if the work is done for the tenant.
A Builders' Lien associated with work or materials supplied in respect of the surface of the lands (as opposed to work or materials supplied in respect of minerals – discussed below) must be registered with the Land Titles Office.
Recovery of Minerals
When a person supplies work or materials in relation to an improvement associated with the recovery of minerals, then a Builders' Lien may be registered in respect of those minerals. In such a case, the Builders' Lien would attach to an interest in the minerals.
If the minerals are privately owned, then the Builders' Lien must be registered as usual, at the Land Titles Office. If the minerals are owned by the Crown, which is the case with most minerals in Alberta, then the Builders' Lien must be registered with the Minister of Energy, as opposed to at the Land Titles Office. The same deadlines apply to the Builders' Liens, regardless of whether they are registered with the Minister of Energy or the Land Titles Office.
A Builders' Lien in respect of minerals also attaches to the minerals after they are severed from the land.
Notably, it is possible for the supply of work or materials to entitle a lien claimant to register liens against interests in both lands and minerals (for example, where the project relates to an improvement to the surface and the recovery of minerals).
Mechanics Liens are created by the Mechanics Lien Act. This type of lien is available to contractors, subcontractors, and labourers who have not been paid for work done, materials or machinery supplied, or labour performed in connection with the owner's building or land. Mechanics Liens attach to the estate and the owner's interest in the building and land. They are registered against the title of the owner's property at the Land Titles Office. An "owner" includes a tenant with a leasehold interest in the land.
The value of the Mechanics Lien is limited to the value of the unpaid work, materials, machinery, or 30 days of wages. Subcontractors may register Mechanics Liens against the owner's property when they have not been paid by the general contractor or another subcontractor.
Mechanics Liens must be registered within 45 days after the last day that the work/labour was performed or the materials/machinery were supplied, or 45 days after the contract was terminated or abandoned.
While the Mechanics Lien is in place, the owner cannot remove property or machinery from the property if it would prejudice the lienholder's claim.
Mechanics Liens expire 45 days after being registered, unless the lienholder commences court proceedings to realize the claim of lien and a certificate of proceedings is registered with the Land Titles Office.
If the funds are paid to the lienholder or the court to satisfy the debt, then the Mechanics Lien may be cancelled. If the court orders the land or machinery to be sold, then the proceeds from the sale would be distributed among all creditors with claims registered against the lands, in order of priority.
Miners Liens are similar to Mechanics Liens in some respects, but different in others. The key difference is that Miners Liens attach to the production from a mine, meaning that the value of the ore produced and sold forms part of the security.
Miners Liens are also available to contractors, subcontractors, and labourers who have not been paid by an owner or contractor for work done, materials supplied, or labour performed. The work or materials must be connected to the operation of a mine.
Miners Liens cast a wider net than Mechanics Lien. Not only does a Miners Lien attach to the owner's interest in the land and the mine, it also attaches to the owner's interest the minerals or ores produce from the mine, as well as the chattels, equipment, and machinery used in connection with the mine or land.
Another difference is that the underlying title for mining properties is usually held by the Crown, with the owner holding a leasehold interest in the surface and subsurface minerals. For that reason, leases for mines are registered with the NWT Mining Recorder rather than the Land Titles Office. Miner Liens can be registered against the owner's mining leases through the Mining Recorder.
Miners Liens must be registered within 6 months after the last day that the work/labour was performed or the materials were supplied. After the lien is filed, the lienholder has 90 days to both commence a court action to realize on their claim and register a lis pendens with the Mining Recorder.
Choosing Between Miners Liens and Mechanics Liens
Mechanics Liens are appropriate for claims involving commercial or residential properties that are registered with the Land Titles Office. Most claims will use Mechanics Liens.
Miners Liens are appropriate when the owner is operating an oil sands mine or a traditional mine.
Selecting the right type of lien is critical due to the significant differences in filing deadlines and the expiration dates.
Registering liens can sometimes be a complicated process, as there are specific restrictions, deadlines and procedural requirements. For that reason, we recommend consulting legal counsel to ensure that lien rights are properly protected.
Originally published 14 May 2020
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.