By: Anna Esposito (Lumberman's Ontario Bulletin – November 2010)
A lien claimant has a lien on the interest of the owner in the premises improved for the price of the services or materials supplied. The correct owner must be identified in a Claim for Lien. Naming the wrong owner may result in the lien being invalid.
An “owner” within the meaning of the Construction Lien Act (“CLA”) means any person having an interest in premises at whose request and (a) upon whose credit, or (b) on whose behalf, or (c) with whose priority or consent or (d) for whose direct benefit the improvement is made.
The definition of “owner” in the CLA is expansive enough to include a tenant or subtenant who has work done on leased premises. In a few cases, mortgagees have been found to be owners within the meaning of the CLA.
The case of Williams & Prior involved improvements to a retail store which was subleased to a numbered company carrying on business as Hugo Boss. The lien claimants were subcontractors hired to provide labour and materials to renovate the store. The lien claimants did not make reference to Hugo Boss anywhere on their Claims for Lien. Instead, the liens named the landlord of the building as the only owner. Their liens were found to be invalid. The court held that,
In the event that a lien is claimed against a leasehold interest, it is fundamental to the survival of the lien that the name of the tenant against whom the lien is claimed be named in the Claim for Lien itself. The total omission to do so is a fundamental error in the assertion of a valid claim for lien against a subtenant’s interest in the premises.
In this case, Master Sandler distinguished between a “misnomer”, which may be cured, and the total omission of the owner’s name, which cannot be cured. Master Sandler went on to recommend that, if the exact name of the owner of the leasehold interest is not known, the best description possible should be used (for example: “Any person or entity having an interest in the premises known as the Hugo Boss store”) to increase the likelihood of the curative provisions of the CLA being successfully used to correct the error later.
However, Master Sandler reached a different conclusion in Petroff Partnership Architects v. Mobius Corp on almost identical facts. In Petroff, the lien claimant failed to list the tenant in the “Owner” section of an electronic Claim for Lien and only named the landlord. However, the electronic registration included the following ‘statement’: “The lien claimant claims a lien against the interest of very person identified as an owner of the premises described in said PIN to this lien”. If one were to look at the parcel abstract for that land, one would have found that notice of the 25 year lease was registered on title. Master Sandler, on these particular facts, concluded that the information contained in the balance of the Claim for Lien made it sufficiently clear that the lien was also being claimed against the tenant, and he ‘saved’ the lien. However, not all leasehold interests are registered on title. Therefore, it is foolish to assume that every electronically registered lien will permit a Petrofftype cure. Naming the correct owner is critical to the validity of a lien.