Introduction
The legislative regime governing commercial liens in British Columbia has long been overdue for modernization. Fortunately, these calls for modernization are now being heeded. On June 30th of this year, the Commercial Liens Act,SBC 2022, c 9 (the "CLA") came into force.
The CLA fundamentally consolidates the system of commercial liens by unifying previously disparate statutes into one piece of legislation. This blog will first explain the impetus for these changes, before describing some of the critical new mechanics of commercial liens in British Columbia.
The Genesis and Goals of the Commercial Liens Act
The largest issue with the previous BC commercial lien regime was its structure. Multiple different inconsistent, antiquated lien frameworks used to exist for different types of services, some particularly niche. Examples of these statutes include:
- Livestock Lien Act, RSBC 1996, c 272
- Repairers Lien Act, RSBC 1996, c 404
- Tugboat Worker Lien Act, RSBC 1996, c 466
- Warehouse Lien Act, RSBC 1996, c 480
- Woodworker Lien Act, RSBC 1996, c 491
Now, instead of having prospective lien applicants for tugboats and for warehouses navigate multiple separate pieces of legislation each with different requirements, the CLA repeals all of these statutes and creates a one-stop statute for all such liens. This removes confusion from what used to be a particularly opaque process for service providers to secure payment for their work.
Critically, however, the CLA does not affect either the Builders Lien Act, SBC 1997, c 45 or the Forestry Service Providers Protection Act, SBC 2010, c 16 – these statutes and the liens process under them will remain as it has been and are not affected by the CLA.
Key Differences Under the Commercial Liens Act
With so many different commercial lien statutes being condensed into one, the CLA also seeks to create consistent processes for obtaining, registering, and enforcing liens. The three most critical processes that the CLA addresses are (1) the now instant attachment of commercial liens; (2) the system of perfecting a commercial lien interest by registration; and (3) the improved notice and sale system.
Instant Commercial Lien Attachment
In the commercial lien context, 'attachment' refers to a lien being made effective against (or 'attached' to) the relevant property. For example, under the now repealed Warehouse Lien Act, RSBC 1996, c 480, a warehouser would have a lien interest attach to goods deposited with them for storage. This example is easy to understand in the context of goods being stored in a physical warehouse, though lien attachment is not always so clear. For instance, a lien claimant may claim a lien interest against goods which they do not possess.
Furthermore, some of the old lien legislation also had requirements for a claimant to possess goods for a specified period of time before a lien interest was said to attach. In any case, the previous commercial lien system could lead to significant disagreement over whether a lien interest even existed in the first place, let alone whether it was able to be enforced.
Fortunately, under the CLA, liens now attach automatically to goods as soon as services are commenced. Under Section 7(1) of the CLA, liens become enforceable once "the person who requested the services in relation to the goods, the owner of the goods or another person with an interest in the goods has given the lien holder at any time" either "a written authorization for the services, or a written acknowledgement of the person's obligation to pay for the services." Essentially, as long as the existence of the services is properly documented as described under Section 7(1), the lien attaches as soon as services commence, leading to greater certainty for service providers.
Perfecting Commercial Lien Claims by Registration
Under Section 12, the CLA will now allow all commercial liens to be registered in the BC Personal Property Registry ("PPR") system, which creates a public record of the lien. Formerly, the most common registrations that could be made in the PPR system were related to loans and financing, while commercial liens were unable to be registered.
This registration in the PPR is a form of 'perfection' of a lien interest. Perfection refers to the confirmation that a lien interest exists and is enforceable against other parties, and is imperative for lien holders to be able to pursue their lien claims. Without perfection, other creditors of a party against whom a lien holder has a claim can easily 'jump the queue' over the lien holder to get their money earlier than they would have, had the holder perfected their lien interest.
Without the ability for commercial lien holders to perfect via PPR registration, the only other means of perfection is possession, which requires a holder to have physical possession of the goods over which they are asserting a lien claim. For obvious reasons, perfecting a lien interest by registering that interest in the PPR system is significantly easier than securing possession of the liened goods.
Accordingly, under the CLA, commercial lien holders will have an easier means of perfection, which provides greater certainty of payment for the providers of services to which the CLA applies. This in turn can increase the willingness of parties to provide these commercial services, as bad actors are now less able to abscond without paying. Further increasing this willingness is the improved system for enforcing commercial liens via the enhanced provisions for the sale of liened goods.
Improvements to the Notice and Sale System
Division 3 of the CLA details the means by which lien holders can dispose of or acquire the goods that are subject to their liens. Section 37 states in part that "[if] the amount secured by the lien is not paid within 30 days after the date of default, a lien holder may dispose of the goods, in whole or in part," and that "[goods] may be disposed of by (a) 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." Clear notice requirements for lien holders to effect such dispositions are located in Section 38.
This is a tremendous improvement on the antiquated system of previous commercial lien enforcement, whereunder bits and pieces of the foregoing CLA provisions would exist depending on the statute one was reading. This synthesized collection of sale and notice provisions takes the guesswork out of commercial lien enforcement, significantly increasing accessibility for service providers.
Conclusion and Takeaways
The new Commercial Liens Act creates greater payment certainty for British Columbia service providers by improving their likelihood of being paid; and in the event they are not paid, the likelihood that they can enforce their lien claims. This ultimately reduces the potential cost of doing business, which has a positive impact on overall economic output due to providers being more willing to do business because of these streamlined and improved legal rights.
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.
