Court Finds Notice of Termination of Contract to Subcontractors Not Required to Start Lien Filing Period
The Builders Lien Act, S.B.C. 1997, c. 45 (the “BLA”) establishes mandatory deadlines for the filing of builders liens against title to land in British Columbia. One of the triggers for the commencement of the lien filing period is termination of the “head contract” made between the owner and the “head contractor” for an improvement (that is, a contractor who is engaged to do all or substantially all the work respecting an improvement). If a claim of lien is not filed before the expiry of 45 days from the date of termination of the head contract, then lien is extinguished.
Until recently, the question of whether notice of the termination of the head contract is required to trigger commencement of the lien filing period was unresolved. The BLA does not expressly state that such notice is required, although notice was often given to preclude any arguments about whether the lien filing period had started.
In Hans Demolition & Excavating Ltd. v. Green Oak Development (West 7th) Corp., 2021 BCSC 1472 (“Hans Demolition”), the Supreme Court of British Columbia recently considered whether notice of termination is required to trigger the start of the lien filing period, and the answer is “no”.
In Hans Demolition, the owner terminated the head contract on September 1, 2016. The lien claimant (a subcontractor) did not file its claim of lien until February 9, 2017. The owner argued that the subcontractor’s lien was invalid because it was not filed within 45 days of the head contract being terminated. The subcontractor argued that it was not advised that the head contract had been terminated, but rather advised that a replacement head contractor would be “awarded the rest of the work”. The subcontractor argued that constituted notice of an “assignment” of the head contract to a new contractor, not notice that the head contract had been “terminated”.
The court held that plain language of s. 20(2) of the BLA contains no provision that requires that subcontractors be notified when a head contract is terminated (at para. 93). The court held that if the legislature had intended for such requirement, the BLA would have expressly set out and required such notification (at para. 94). The court noted that the BLA does not contain a provision that requires the owner to publish notice of termination of a contract in a prescribed form (as does Ontario’s Construction Act, R.S.O. 1990 c. C30) and held that “unless and until the [BLA] is also amended, no such notice is required”.
The result in Hans Demolition does not necessarily mean that owners should absolutely stop notifying subcontractors about the termination of a head contract. It may be advantageous to have the termination clearly communicated to subcontractors to (a) bring certainty to the resolution of builders lien issues, and (b) eliminate the opportunity for argument about the termination date.
Conversely, it may be advantageous to the owner not to publicize the termination so that any liens filed more than 45 days after the termination date would be invalid. Another consideration may be that the continued participation of subcontractors may be required for completion of the project. A lack of transparency about the status of the head contract may not be appreciated. The most suitable strategy depends on the facts of the case, and legal advice should be sought before terminating a head contact and determining how and when to give notice of the termination, if at all.