What does a Builders’ Lien Do?
A Builders’ Lien is a document filed against a property which claims that a contractor, sub-contractor or supplier has done work or provided materials to the property. The Builders’ Lien generally prevents property owners from selling and can tie up financing or mortgage plans on the property unless the Builders’ Lien is satisfied.
The Builders’ Lien can be a powerful tool to get contractors, sub-contractors or suppliers paid. For example, if renovations are done on a home, a contractor can file a Builders’ Lien which will need to be dealt with as part of finalizing a sale or financing. If a sub-contractor does work on the same home, he can also Lien the property even though he was hired by the general contractor and not the owner. Building or equipment suppliers can lien the owner’s property where their materials or equipment are used by contractors and sub-contractors for work on the property.
How do I file a Builders’ Lien?
Time-limits are very important in making sure the Builders’ Lien sticks. There are two deadlines to remember:
STEP 1: You must file a Claim for Lien within 60 days of the last day of work, service or supply.
STEP 2: You need to sue in the proper court and file the proper type of certificate in the Land Registry within 105 days of the last day of work, service or supply.
What is your “last day” may not be as straightforward as the last day you were on site. Fixing deficiencies at later dates will likely not count, so it is important to make sure you give yourself adequate time.
What happens if I miss the deadlines?
If you miss the deadline in Step 1, your right to lien the property has expired. If you miss the deadline in Step 2, your lien document from Step 1 expires and is no longer effective.
However, just because you miss a deadline does not mean you cannot still sue to collect money owed to you. All it means is that the property is not tied up pending the conclusion of the law suit with a Lien registered against title.
You may also still have “trust” claims, which are touched on below.
What does it cost?
Registering documents with the Land Registry involves a $100 registry fee, per registration. Lawyer fees to prepare documents for Step 1 will generally be inexpensive, but complications may require more time and expense. Lawyers’ fees for documents under Step 2 will typically be more expensive, as it involves preparation of a law suit in the Supreme Court of Nova Scotia. As every situation is unique, ask the lawyer helping you in advance to get a better sense of the costs involved.
Special claims that can make company directors personally liable and which can survive bankruptcy
The Builders’ Lien Act also creates certain “trust” rights and obligations. People who have done work on a project may have entitlements as beneficiaries of trust funds under the Act, even if they have not filed a Lien or have missed deadlines in the steps mentioned above.
A property owner financing a project who receives funds for the project is, by law, holding a certain amount of money in trust for the contractor. Even other funds held by an owner can in some circumstances be considered held in trust for a contractor who is unpaid. Likewise, contractors who are paid by an owner are, by law, holding money in trust that is owed to sub-contractors for their work on the project.
For example: an owner receiving a mortgage draw of $10,000 who owes $5,000 to a contractor is, by law, holding $5,000 in trust for the contractor. Likewise, a contractor who receives that payment from the owner, but owes a sub-contractor who performed work on the project, holds certain amounts in trust for the subcontractor.
This matters because owners and contractors who receive money have an obligation to pay others who they owe money to before they can use the money themselves. Subject to certain exceptions, if they do not and use the trust funds for their own purposes, they are in breach of trust.
If dealing with a company or corporation, the directors or other people responsible for the company can be held personally liable if the company handles funds in breach of trust. This can be a powerful tool, in situations where operators of a company may try to simply “walk away” without paying the company’s sub-trades. Those individual operators could be found personably liable for the company’s debts if there has been a breach of trust.
Breaching trust is serious, so if an owner or contractor is found in breach of trust it is also possible that the debt they owe will survive a bankruptcy. It is also possible to collect debt personally from owners of an incorporated company if the company is in breach of trust.
Breach of trust claims are usually complicated but they can be another tool for collecting money that is owed to you.
Do not risk making it more costly and difficult to get yourself paid. If you are owed money for work, services or material/equipment supplied, contact our firm today to learn more about how a Builders’ Lien can be put to work for you.