Pending Registration Lien Frustration
A new land titles registration process is causing grief for all those involved with builders’ liens.
Effective April 1, 2021 the process for all land titles registrations in Alberta underwent significant changes as part of Provincial government efforts at Red Tape Reduction. Section 14.1 of the Land Titles Act creates a “pending registration queue.” Builders’ liens are no longer registered on the day they are submitted (contrary to past practice). However, registrations are guaranteed priority based on the date of submission; i.e. a lien will apparently be accepted for registration based on the date of submission, even if the lien period expires between submission and registration.
Searches of title show any pending registrations. The Registrar no longer provides confirmation of registration; repeated searches of title are required to determine when registration is completed. There are various publications from the Law Society of Alberta and Service Alberta that provide more detailed background and explanation.
At the time of writing, there is a lag of about a month between submission and registration of an instrument in the queue. The implementation of the pending registration queue is causing unintended problems for lien claimants and those affected by lien claims alike.
- A lien submitted for registration on time might still be “pending” when the lien period expires, leaving lien claimants uncertain if their lien will be accepted for registration. (All those who deal with liens a lot know that rejections occur unexpectedly from time-to-time, for various reasons.)
- In place of a notice of rejection, the Registrar may now issue a notice of deficiency. The lien claimant who receives such a notice has 30 days to correct the deficiency and resubmit the document to retain their priority based on the original date of submission. Sounds good, right? But the Registrar will still reject an instrument submitted for registration if the “defects are such that they cannot reasonably be corrected.” It remains to be seen how this will be interpreted by the Registrar. Will an error in the land description, for example, be considered correctible? We used to get notices of rejection on the same day the lien was submitted, allowing time (in most cases) for a statement of lien to be corrected and resubmitted before the expiry of the lien period.
- These changes undermine our ability to discharge liens on an expedited basis, as required to prevent disruptions in project financing. The normal process to discharge liens quickly is to apply to court pursuant to s. 48 of the Builders’ Lien Act, often with the consent of the lien claimant, for an order permitting alternate security to be paid into court. However, there is no mechanism to discharge a lien while it is in the pending registration queue. Cautious construction owners and lenders may suspend payment based on the fact that a lien is submitted, and now the parties have to await registration to before they can apply to court for an expeditious(?) discharge. This has the potential to significantly disrupt timely payments on construction projects (quite contrary to other Alberta government initiatives to promote prompt payment in the construction industry).
- The above are some of the more obvious problems, but the “pending registration queue” is incompatible with the Builders’ Lien Act in other ways. There are various procedures and requirements – not to mention legal rights - triggered by the registration of a lien. For example, section 21 allows the owner to release the major lien holdback 45 days after a certificate of substantial performance is issued, provided that no lien has been registered. But what if a lien is in the queue?
The recent amendments to the Land Titles Act do not contemplate or integrate with the Builder’s Lien Act. Differing interpretations of the legislative gaps are bound to lead to disputes.
For questions regarding the information included in the post above, please contact Corbin Devlin or any other member of our Construction Industry Group.