When work is completed on rented premises, but the account for that work goes unpaid, a lien may be registered against the real property. This can put pressure on the owner to pay the debt in order to remove the lien. Alternatively, rather than satisfying the debt owed, an owner may choose to vacate the lien. A lien can be vacated in several ways, but one way is to pay funds into Court under sections 56 or 57 of The Builders' Lien Act.
In some cases, lien claimants may also choose to enforce against the landlord of the rented premises on which the work was performed. The Builders' Lien Act provides two avenues to resist an application to vacate a lien against a landlord's interest:
- If lien claimants comply with the strict notification requirements set out in section 31 of The Builders' Lien Act, the landlord's interest may be subject to the lien;
- If the landlord is considered an owner under the Act and expressly or implicitly requested the improvement for their direct benefit, the landlord's interest may be subject to the lien.
Notification Requirements
Lien claimants can enforce against the landlord of rented premises they worked on if they previously complied with the notification requirements set out in The Builders' Lien Act. In circumstances where the lien attaches to the interest of a tenant, i.e. the leasehold interest, and the landlord is served by the contractor with written notice before the first lien arises, the landlord's interest will also be subject to a lien. A written notice must contain:
(a) the general nature of the contract;
(b) particulars of the improvement to be made;
(c) the name of the person with whom the contractor is contracting
in relation to the improvement;
(d) the legal description or civic address of the land to which the
improvement is to be made; and
(e) an address for service.
If, however, within 10 days of the notice being given, the landlord responds stating it assumes no responsibility for the improvement, the landlord's interest will not be subject to a lien.
The Saskatchewan Court of Queen's Bench echoed this reasoning in Warneke v 101218236 Saskatchewan Ltd. 2016 SKQB 316, and found that, in the event no notice has been given, a landlord will generally not be subject to any lien.
As such, if the landlord is given notice of the work as set out in The Builders' Lien Act, then to avoid responsibility the landlord must respond to the lien claimant advising it assumes no responsibility for the work. If the landlord fails to respond, the lien may attach to its interest in the land.
Landlord as Owner
A contractor who receives a response to its notice advising the landlord assumes no responsibility, or a contractor who does not provide a landlord with written notice prior to the first lien arising, may not be out of options, though. A lien can also be established against a landlord, without using the notice scheme, if the landlord is determined to be an owner for the purposes of The Builders' Lien Act.
"Owner" is defined in section 2(1)(k) of The Builders' Lien Act to include a person having an estate or interest in land, other than an encumbrance, at whose request, express or implied, and on whose credit, on whose behalf, with whose privity and consent, or for whose direct benefit, an improvement is made to the land. In determining whether a landlord is an owner within the meaning of The Builders' Lien Act, the Court in Blazer's Canada Inc. v Atco Power Canada Ltd placed the onus on the lien claimant to establish this is the case. The Court case also emphasized that a "direct benefit" is distinct from just any benefit or a possibility of benefit in the future. Mere knowledge of the work on the part of the landlord will generally not be sufficient to have the lien attach to its interest.
The Takeaway
If a contractor is working on leased premises, it may be prudent to provide a landlord with a written notice when they commence the work as not doing so closes a door to one option to enforce a lien.
In the event a contractor fails to adhere to the notice requirements, or a landlord assumes no responsibility for the improvement, a lien claimant may still be able to enforce against a landlord by attempting to prove the landlord fits within the definition of an "owner" under The Builders' Lien Act. This determination will, however, depend very much on the circumstances of each case.
David was assisted by Regina student at law, Janelle, in compiling this article.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
