Notice of Interest
We have covered the basics of the Builders Lien Act [SBC 1997] Chapter 45 (the “Builders Lien Act”) in a previous post, discussed the importance for property owners of understanding the liabilities they face under the Builders Lien Act, and the importance of having a contract with a reputable contractor. There is, however, another shield provided to property owners under the Builders Lien Act that only the most astute or well advised take advantage of, even though the protection is easy to put into place. This is the Notice of Interest.
The Notice of Interest allows property owners to protect themselves from lien claims with contractors carrying out work that the property owner did not authorize – in other words, it protects owners from the lien claims of contractors hired by tenants. Generally this is relied upon in commercial tenancy situations, but provided that the basic criteria are met, a Notice of Interest could be used in a residential tenancy scenario as well.
The Builders Lien Act (sections 3(1) and 3(2)) provides that any work done on the property will be deemed to have been done at the request of the property owner where the property owner did not request the work but merely had knowledge of it – that is unless a Notice of Interest has been filed prior to the work being commenced. A Notice of Interest is a notice made by way of a specific form filed on the title to the property “warning other persons that the owner’s interest in the land described in the notice is not bound by a lien claimed under this Act in respect of an improvement on the land unless that improvement is undertaken at the express request of the owner” (Builders Lien Act, section 1).
In practical terms, what this means is that if you own a house that you lease out and at some point you told the tenant it would be ok if they spruced the place up or built a gazebo in the backyard and your tenant hired someone to do the sprucing and gazebo building but then failed to pay them, the fact that you had generally approved the notion of the work (even though you did not hire the contractors or even know that the work was being carried out) means that you are liable under the Builders Lien Act if the bills go unpaid because it constitutes an improvement on the property. The contractors would be free to file a lien against your property and demand payment or sue you and that would be a valid action, unless you had previously filed a Notice of Interest against title.
This scenario often arises in commercial lease situations where the property owner leases out a commercial space and the lease (often, in commercial situations, a simultaneously voluminous and dense document that few enjoy reading) contains a clause that allows the tenant to carry out improvements. Under the Builders Lien Act this would be sufficient knowledge by the property owner to make it liable for the tenant’s debt to the contractors that the tenant hires. And where a tenant is carrying out extensive renovations and becomes unable to pay its contractors, this can expose the property owner to liability from a significant amount of unpaid bills from numerous contractors all at once.
The good news is, provided that you, the property owner, do not actually approve of the work, you can protect yourself from the liability that follows the deemed approval by filing a Notice of Interest with the Land Title Office. If one of your tenants does default against their contractors, you will have a strong defense against any action they bring and can likely swiftly pressure them into removing any liens filed. It is one of those very simple and relative inexpensive things that you can do now to protect yourself from future liability.
As for the contractors that are hired by tenants, before doing the work they may wish to see if the property owner has filed a Notice of Interest against title. Right from the beginning, this will give the contractor an idea of what remedies are available to him if the person or business hiring him goes under. If there is already a Notice of Interest on title and the contractor is especially concerned, it may worthwhile attempting to get the property owner to specifically authorize the work to be carried out (in writing) so that if problems do arise the contractor can challenge the protection provided by the Notice of Interest.