Use It Or Lose It! Builders Lien Claimants Must Prosecute Claims Diligently or Risk Losing Their Security
Our courts regard claims for builders liens (“CBLs”) as extraordinary remedies because they allow one to encumber another’s land before proving, in court, that person owes them money. Accordingly, our courts require that lien claims be diligently prosecuted after being registered against the debtor’s land, particularly where the delay may prejudice other creditors. When CBLs are filed there are often other creditors looking to recover from the same debtor, and our courts do not expect them to wait indefinitely for a lien claimant to prove its builders lien.
The potential hazard of waiting to prove a builders lien is shown in Vancouver City Savings Credit Union v. Avicenna Group Holdings (Chilliwack) Ltd., 2015 BCSC 31. In that case, several creditors fought over the residual proceeds of a foreclosure sale of the debtor’s land (the “Funds”). The creditors included, among others, two lien claimants and the Director of Employment Standards (the “Director”). One of the lien claimants had barely advanced its claim since filing its CBL many years earlier, while the other had almost advanced its claim to trial, albeit slowly. The Director argued that it was entitled to the Funds because the lien claimants had advanced their claims too slowly, notwithstanding that the lien claimants would otherwise be entitled to the Funds if they proved their builders liens in court.
The court held that, as a result the “slower” lien claimant’s failure to advance its claim more swiftly, its CBL would not preclude release of Funds to the Director. The court held that while the “quicker” lien claimant had exhibited a “pattern of foot dragging”, it should have a final chance to prove its lien. The court held that if the lien claimant did not prove its builder lien by August 2015, the Director would be entitled to the balance of the Funds.
The court remarked that “[t]he lien claimants could have no reasonable expectation that the Court would permit them to sit on their rights indefinitely, thereby frustrating the ability of other parties with subordinate interests to pursue their lawful remedies”. The decision shows how lien claimants must remain cognizant of the rights of other creditors when merely filing (and not prosecuting) a CBL with a view to preserving one’s priority over other creditors.