Engineers & the Law: Builders’ Lien Acts and Engineers
A builder’s lien is a claim for payment for goods or services that have been supplied to improve or undertake construction on real property. The lien must be registered against the title of the property on which the goods or services were...
A builder’s lien is a claim for payment for goods or services that have been supplied to improve or undertake construction on real property. The lien must be registered against the title of the property on which the goods or services were provided. The registration is undertaken by the local land titles office.
Builders’ lien legislation in one form or another exists in all jurisdictions and territories in Canada. However, the lien registration deadlines and registration processes, holdback provisions and other details vary between the jurisdictions.
Moreover, the engineer’s right to claim a lien varies according to the jurisdiction. For example, Quebec does not have specific builders’ lien legislation but does have provisions in the Civil Code providing for construction hypothecs, the equivalent of a builder’s lien. In Quebec the legislation is clear that engineers are entitled to file a construction hypothec. Other jurisdictions like Saskatchewan allow engineers to file builders’ liens by specifically including engineering services in the definition of an “improvement.” In jurisdictions such as Manitoba, the legislation is clear that engineers may not file a builder’s lien. Jurisdictions such as Alberta, Ontario and the Atlantic provinces, have made the decision not to specifically address the lien rights of engineers within their legislation.
Given the differences in builders’ lien legislation across Canada as it relates to engineers, we will focus on Saskatchewan, which has a clear legislative position on this issue.
The Saskatchewan legislation, The Builders’ Lien Act, defines an engineer as a “professional engineer” as defined in the Engineering and Geoscience Professions Act, and it includes the holder of a certificate of authorization granted pursuant to this Act.
Saskatchewan’s Builders’ Lien Act requires that a person claiming a builder’s lien must supply goods or services to an “improvement.” The Act defines “improvement” as a thing actually or intended to be: constructed, erected, built, placed, altered, repaired, improved, added to, dug or drilled on or into, land, except a thing that is not affixed to the land or intended to become part of the land. While not the most elegant legislative drafting, similar definitions of “improvement” are used in other jurisdictions in Canada.
To what extent do engineering services constitute an “improvement”? On the face of things, the definition seems to suggest that there must be some type of physical interaction with the land in order to establish that an improvement has occurred. For large multi-national engineering firms which are often engaged in many phases of large projects (sometimes including construction and construction management), it may not be difficult to establish such physical interaction. However, for consulting engineers who often provide specialized engineering services for a single phase of a project, establishing such physical interaction can be problematic. A further problem for all engineers is that their services often relate to design. While essential to the project, such services are not tangible (beyond the actual diagrams and documents) and are not directly connected to the land on which the project is situated.
Saskatchewan’s Builders’ Lien Act has clarified this point and provides that an “improvement” includes services provided by an engineer. Alberta, Ontario and the Atlantic provinces have not specifically included such a clarification.
The benefit of the Saskatchewan approach is an engineer’s clear entitlement to file a builders’ lien. The disadvantage is that additional administrative costs may be incurred, and the engineer’s invoices will be subject to the deduction of the holdback.
The benefit of the Alberta/Ontario/Atlantic approaches which are not clear in the applicability of the builders’ lien legislation, is that they provide an opportunity in most cases for the owner and engineer to agree to exclude the applicability of the builders’ lien legislation. At the same time, this uncertainty creates a risk: the engineer may incur an additional cost by having to negotiate with an owner, or litigate, to clarify whether a builder’s lien or holdback is available or applicable.
Because of these and other differences in builders’ lien legislation across Canada, advice should be sought from a lawyer familiar with the issues in the specific jurisdiction in which the project is located. cce
Chad Eggerman is a partner with Miller Thomson LLP in Saskatoon. Email firstname.lastname@example.org