Builders Liens: Abuse of Process, 21-Day Notices and Strict Compliance
As discussed in my previous articles, Builders Liens: The Consequences of Less than Strict Compliance and Builders Liens: Strict Compliance or Lose Your Lien, the Builders Lien Act (“BLA”) creates extraordinary remedies and, as such, requires extraordinary attention be paid to complying with its requirements. Issues about the strict procedural requirements of BLA were at the center of the recent decision of Toska Woodworking Inc. v Balazadeh-Nayeri, 2020 BCSC 1378 (CanLII).
In Toska the plaintiff was a contractor was retained to supply and install custom cabinetry and millwork in the defendants’ home. The parties fell into dispute and a builders’ lien for a little over $92,000 was filed against the homeowners’ property on February 22, 2020. The parties continued to try to resolve their differences unsuccessfully. Eventually, the homeowners served a 21-day notice on the contractor.
Under s. 33(1) of the BLA, a party with a builders’ lien is required to commence an action in the Supreme Court and file a certificate of pending litigation (“CPL”) within one year from the date of the filing of a builders’ lien to maintain the right to claim the lien. This process is known as “perfecting” a lien. Under s. 33(2), a property owner or another lien claimant can serve a 21-day notice shortening the time in which a lien needs to be perfected to 21 days after the effective service date of such a notice. Failing to perfect a lien within the applicable time limit extinguishes the right to maintain a builders’ lien although the underlying debt claim still exists without the additional relief and benefits that flow from a lien.
In Toska after the 21-day notice was served the contractor filed a Supreme Court action in time but did not file a CPL in time due to confusion created with the Land Title Office and COVID-19 protocols put in place. As part of an apparent effort to protect its lien claim, the contractor filed a second lien in July 2020.
In analyzing its analysis, the court noted that there was not good evidence before it about the underlying project costs and details. The issuance of the occupancy permit did not determine whether the first lien was filed within the time requirements of the BLA and the parties continued to negotiate about the project through to April, 2020. In the circumstances, the Court found that the first lien was filed in time.
In analyzing the failure of the contractor to perfect its claims per the 21-day notice, the Court held that the first lien remained valid because the service address for the 21-day notice did not match address for service in the first lien. As such, the first lien would have been struck for failing to file a CPL in time, but the 21-day notice was defective and did not trigger the requirement to perfect the builders’ lien early. Since there was no effective 21-day notice and the one-year ordinary perfection period had not passed, the first lien remained valid.
On the second lien, the court found that, whether nor not the period in which a valid builders’ lien could be filed had expired, the filing of a second lien to attempt to recover from a failure to perfect another lien was not tolerable. The filing of a second lien was found to be an abuse of process and was ordered cancelled along with any CPL filed further to same.
The Toska Woodworking Inc. v Balazadeh-Nayeri is an example of how easy it is for both claimants and defendants in builders’ lien disputes to make minor errors which can have significant impacts on the rights and remedies available to them. Had the owners in the case served a proper 21-day notice, they could have cleared their title from any builders’ lien claim and CPL. Similarly, the builder exposed itself to potentially substantial cost and other consequences for trying to salvage its failure to perfect its lien as required by what it thought was a 21-day notice by filing a second lien. Timely legal advice respecting builders lien concerns is always a prudent course of action.