Releasing a Mechanic’s Lien & You Haven’t Been Paid? Be Careful!
Did you release your mechanic’s lien because the owner promised to pay you, but then failed to pay you, leaving you without money or recourse?
Although it’s not a great position to be in, if you are furnishing to a project in Alberta, all hope may not be lost.
In Promising Payment to a Contractor Can Extend the Contractor’s Lien Rights, the author reviews a recent case decision where the owner promised the contractor payment if the contractor released its lien. Unfortunately, It was an empty promise…the contractor released its lien, but the owner didn’t pay.
Fortunately for the contractor, the Court of Queen’s Bench deemed the empty promise as a reason to extend lien rights to the claimant. According to author, Christopher Stanek, extend isn’t exactly the correct word.
“…the court was careful to state that it was not extending the time to file a lien, but rather refusing to discharge a lien that otherwise would have been statute-barred but for the conduct of the owner. This conduct estopped the owner from receiving the benefit of the legislation limiting the time to lien.”
In other words, if you make a promise, you better keep it! Actually, Stanek summarizes it best when he says, “the law remains that, if an owner promises a contractor that it will get paid as long as it doesn’t lien the property, that owner will not be able to later discharge a lien as out of time if the contractor relied upon that promise.”
In Alberta, the judicial system is doing its part to keep parties honest, but as a best practice, you should not release a mechanic’s lien without receipt and clearance of payment because you may forfeit your security and subsequent recourse on unpaid funds.
This week, Katherine Earley, NCS Marketing Intern, made her NCS Blog debut with Credit Survival Guide: Proof of Claim.
“It’s official. Your customer has filed for bankruptcy protection and their outstanding balance could have a significant impact on your accounts receivable. What now?”
NCS Extra Credit
Pete Pozzuto, NCS Business Development Representative, made his NCS Extra Credit debut this week, in the new revamped format! Check out this 3-minute video to learn more about the perceived obstacles with establishing a mechanic’s lien process.