Lien Out: Arbitrary Protection for Pre-Construction Consultants

Those who claim a builders lien must comply strictly with the requirements of the Builders Lien Act, and owners (or at least their counsel) are frequently on the lookout for liens that can be extinguished for a failure to satisfy such requirements. The recent BC Supreme Court decision in Stanley Paulus Architect Inc. v. Windmill Holdings Ltd., 2014 BCSC 1816 serves as a reminder of one fundamental requirement: in order to claim a lien there must be an “improvement” within the meaning of the Act.  More particularly, there is no “improvement” where construction has not yet commenced even though considerable pre-construction work may have been undertaken.

In Stanley Paulus, an architectural consulting firm sought a declaration of builders lien in respect of amounts unpaid under its contract with the owner.  The consultant was retained to prepare plans for the project site, apply for a development permit, and provide construction administration for certain aspects of the project.  Work commenced and continued over a series of months, with many changes to the project being made, but the necessary approvals were not obtained. The owner purported to terminate the consulting agreement on the ground that the consultant failed to perform in a timely manner, and the consultant filed a claim of lien against the project property. The owner argued that the consultant was not entitled to a lien because construction on the project had never commenced, and in fact, a development permit had not been issued.

The Court concluded that the builders lien could not be enforced because there was no “improvement” to which the lien could attach.

For a consultant like an architect or engineer to claim a lien, there must have been “work” performed on an “improvement”.  As noted by the Court in Stanley Paulus, the definition of “work” in the Act includes “services”, which in turn expressly includes the services of an architect (or engineer) that are provided before construction of an improvement has begun.  At the same time, however, the BC Court of Appeal has determined that the definition of “improvement” does not incorporate projects that were intended to have been built, but ultimately were not (see Chaston Construction Corp. v. Hendereson Land Holdings (Canada) Ltd., 2002 BCCA 357).  The result is that consultants may be able to lien for pre-construction services in circumstances where a project proceeds, but not where the project never gets off the ground.  Such was the case for the consultant in Stanley Paulus.

While the Court in Stanley Paulus was bound by the BC Court of Appeal’s decision in Chaston, it appears to have followed that decision somewhat reluctantly, noting the risk that construction professionals face at the early stages of a project and the value they typically add to project property.

As with many aspects of builders lien law in British Columbia, Stanley Paulus illustrates the complexities that can arise in claiming and disputing liens, and how matters that may initially appear to be a black and white are, in fact, not.  Legal advice concerning builders lien matters is always recommended.

Architect BC court of appeal BC Supreme Court builders lien Builders Lien Act Chaston Construction Corp. v. Hendereson Land Holdings (Canada) Ltd. claim of lien commence construction consultant Declaration engineer failure to satisfy improvement pre-construction services Stanley Paulus Architect Inc. v. Windmill Holdings Ltd.



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