Tuesday, 18 July 2017

Are Engineering Services Lienable?

Author: Corbin Devlin

Not every person who performs a service in relation to a construction project is entitled to a builders’ lien. Architecture and engineering services frequently give rise to questions about lien rights and holdback requirements. 

It Depends…

Architecture and engineering services give rise to a lien under the Alberta Builders’ Lien Act if those services relate to an “improvement” to land. So, a professional firm is entitled to register a lien for preparing construction drawings. But an architect or engineer providing services with respect to rezoning, subdivision and other development issues does not have lien rights; such services are considered to be not sufficiently connected to the process of construction. Several cases indicate that conceptual or schematic design work is also considered too far removed from the construction process to support a lien.

Some of the reported cases on this issue appear inconsistent, because the nature of engineering services varies project-to-project, and there is frequently some blending of services relating to development and services relating to construction.  The courts struggle sometimes to determine where to draw the line.

If a professional firm is entitled to a builders’ lien, the owner has a corresponding obligation to retain the statutory holdback in relation to the lienable scope of work.

Building Permits and Environmental Approvals

Master Robertson, Q.C. provides an excellent summary of the case law on this issue in J.K. Engineering Ltd v Red Quest Developments Ltd.

In that case, the landowner applied to court to strike out a lien registered by an engineering firm. In particular, the court considered work performed by J.K. Engineering to assist the landowner with obtaining approval of the storm drainage system from Alberta Environment. The necessary approval was not granted by Alberta Environment, giving rise to the payment dispute between the engineering firm and the landowner. The landowner argued that the lien was invalid because this environmental approval work was not directly related to the construction work. The Master compared this work with the work typically required for a builder to obtain a building permit, and concluded that the nature of such work is sufficiently connected to the process of construction to support a builders’ lien. The lien was valid. (However, it is important to note that construction of the development was well underway when J.K. Engineering’s approvals-related work was done. Also, J.K. Engineering was concurrently providing other design and construction services. It seems entirely possible the court would have come to a different conclusion if the environmental approval work stood alone.) This case illustrates the fine line that exists between a valid lien and an invalid lien.