Will Changing a Form Make It Easier for Claimants to Register a Lien on Leasehold in Alberta?
Registering a builders’ lien in Alberta? It’s imperative to correctly identify and notify all parties within the ladder of supply, and ensure the form is completed in its entirety.
In Encore on Enforceability of Defective Liens, author Jonathan Martin reviewed an Alberta case where the lien claimant correctly identified the fee simple owner in its lien, but failed to identify the leasehold interest. Subsequently, the court vacated the claimant’s lien for failure to comply with statute.
Alberta Lien Requirements in Tenant/Leasehold Situations
In Alberta, if furnishing to a tenant improvement, the statute provides for a notice prior to the lien.
Where the lien attaches to a leasehold interest, a claimant may serve notice upon the fee owner at least 5 days prior to first furnishing materials or services. This notice will allow a lien against the fee interest unless the fee owner responds with a notice of non-responsibility within 5 days from receipt of the claimant’s notice.
The lien must be filed within 45 days from last furnishing and within 45 days from substantial performance, completion or abandonment of the contract.
The fee simple owner of the property is Albari Holdings Ltd. (Albari) and the leasehold interest is held by Haves Holdings Country Hills Gym Ltd. (Haves), operating as Gold’s Gym.
Haves hired Encore Electric Inc. (Encore) for the improvements to the property. When Haves failed to pay Encore, Encore filed a lien. The lien form completed by Encore contained a space to list the fee owner and space for an interested party other than the fee owner; however, Encore only identified the fee owner.
Among other issues addressed, Encore argued the form it completed was sufficient for a lien on the leasehold interest of Haves. And despite failing to identify the leasehold, Encore claims it should have been given the opportunity to correct the form.
But, as author Martin recaps, the court stated the document can only be amended if the lien was registered against the correct interest (fee simple vs. leasehold).
“…[O]n the basis that a lien that names the incorrect owner can be rectified and upheld because of the substantial compliance provisions of the Act, so long as it is registered against the correct interest.
However, a lien registered against an incorrect interest cannot be rectified. In this case, the lien was registered against the ownership interest instead of the leasehold interest and could therefore not be rectified.”
Is the Solution to Revamp the Existing Lien Form?
Martin suggests perhaps a new form is the answer. Martin states Alberta’s lien form is the only form to indicate the project owner could be someone other than the fee simple owner.
“Alberta’s form is the only one to even mention that the “owner” can be the owner of an interest other than a Fee Simple, but not everyone outside of the legal profession knows what a Fee Simple is.
An obvious solution may be to simply create better forms, which include an easily accessible definition of “owner” under the legislation. The British Columbia form, on the other hand, does not even ask for the owner to be identified. So long as the correct people are given notice and the land is correctly identified, all is well.”
A Better Solution: Don’t Go It Alone
This is another reminder of the dangers associated with completing lien forms without legal guidance. Failing to list the leasehold interest on the lien left one claimant unpaid $686,000. That is a lot of money to lose for a ‘simple’ mistake.