Casual Legal: Builders' Liens & Reserve Lands

By Sean Ward
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider 

Generally, land owned by municipalities is subject to having a builders’ lien registered against it, just like any other land. There is an explicit exception in the Builders’ Lien Act providing that no lien exists with respect to a public highway or for any work or improvement caused to be done on it by a municipality. That exception will be carried forward in the new Prompt Payment and Construction Lien Act set to replace the current builders’ lien legislation on August 29, 2022.

However, there is also another exception which is not set out in the legislation, but arises from previous court decisions in Alberta. Those decisions have suggested builders’ liens cannot validly be enforced against reserve lands held by municipalities.

The Court of Appeal considered the issue some time ago in a case where a contractor had registered a lien against two lots; one designated as environmental reserve and the other as municipal reserve. The municipality that owned the reserve lands argued the liens should be dismissed based on the relevant provisions of the Planning Act (the predecessor to the Municipal Government Act).

The Court noted that ultimately, the recourse for a party that establishes a valid builders’ lien is the ability to require a sale of the land which is the subject of the lien, and use the proceeds of that sale to satisfy the amounts owing under the lien. However, the Planning Act (like the Municipal Government Act today), imposes strict limits on the disposal of reserve lands by a municipality. Although the statute does not ban a sale of reserve lands, it requires a public process before disposal of the lands which is under the control of council for the municipality, and also mandates certain enumerated uses for any sale proceeds from those lands.

In light of those factors, it is not possible for a lien claimant to require the sale of reserve lands and recover those proceeds to apply against the lien. As a result, the court found the builders’ lien registered against the reserve lands was unenforceable and should be removed from the titles.

Because these principles are not set out in legislation, they are not well known, and Land Titles will not prevent parties from registering a builders’ lien against reserve lands. That means municipalities must be cognizant of these rules and may, in some cases, be forced to bring legal action to get liens discharged from reserve lands.

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or email casuallegal [at] abmunis.ca and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca, or call 310-MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.