A decision by what was then the
Issue and decision
In
Analysis
Is the landlord an "owner" per the BLA?
The BLA defines "owner" as a person having an estate or interest in land at whose request, express or implied, and (i) on whose credit, (ii) on whose behalf, (iii) with whose privity and consent, or (iv) for whose direct benefit work is done for an improvement in the land.4
No express or implied request
All of the parties agreed that 718 had an estate or interest in the land, so the first issue to be decided was whether 718 requested, expressly or implicitly, that work be done for an improvement in the land. Smart Grow argued that because the lease between 718 and Destiny obliged Destiny to construct one or more buildings on the leased lands, 718 had expressly or impliedly requested Smart Grow's services to be performed.
In determining whether or not 718 had expressly or impliedly "requested" the work be performed by Smart Grow, the Court considered the facts of the case and specific sections of the lease agreement, including the "Tenant's Work" section which stated that "the tenant shall be responsible for all work and costs with respect to the construction of the building and all related improvements and structures required for the tenant's business operations save and except for the landlord's work." Further, the lease did not oblige Destiny to complete construction by a particular date and the benefit to 718 under the lease was never dependent on whether the construction was completed, or even begun, by any particular date, nor were the rents payable by Destiny tied to the state of construction of the facilities. Indeed, the Court concluded that the lease was binding even if no construction ever took place on the premises. The Court concluded that the relevant facts, and these sections of the lease, amongst others, suggested that the construction on the leased land was within Destiny's full control. The Court then turned to 718's involvement in the project.
The Court focused on the core involvement of 718 with respect to the project.
No direct benefit
According to the definition of "owner" in the BLA, in addition to having an estate or interest in the land and requesting that the work be completed, the person must meet at least one of the other four criteria in the definition. In this regard, Smart Grow argued that 718 had received a "direct benefit" from the leasehold improvements.
In dismissing Smart Grow's arguments, the Court referred to three SCC cases, including
The Court also concluded that there was no reversion-related direct benefit to 718, finding that a landlord's reversion does not qualify as a "direct benefit" because it is not necessarily immediate in the sense that it relies upon some breach or forfeiture by the tenant or eventual termination of the lease. In Synergy, given the focus of the proposed structures (marijuana-cultivation-and-research) and the fact that the lease did not impose any structure specifications, along with the fact that the length of the lease was possibly 25 years, the Court accepted that there was no immediate benefit and no certainty of any future benefit to the landlord in the improvements made by Destiny. The Court concluded that the fact that a landlord may eventually benefit on the happening of some speculative future event if its tenant makes improvements to the leased premises, is not enough to satisfy the requirement of an owner's direct benefit under the BLA. Accordingly, the Court found that 718 did not derive any direct benefit from the construction undertaken by Destiny.
Could Smart Grow's lien against 718 be treated as a lien against Destiny under the BLA?
Key takeaways
-
When a Court is determining whether a party is an "owner" per the BLA (now the PPCLA), the "request" analysis will focus on whether the party was actively involved in the project.
- The fact that a landlord will eventually benefit from its tenant's improvements on leased lands is not, on its own, sufficient to prove that the landlord has experienced a "direct benefit" per the BLA (now the PPCLA).
- If a lien is registered against the wrong party and on the wrong interest, it cannot be treated, by way of curative provision or otherwise, as a substantially compliant lien.
Footnotes
1. Note that at the time of this decision the act in place was the Builders' Lien Act, RSA 2000, c B-7, which has since been replaced with the Prompt Payment and Construction Lien Act, RSA 2000, c P-26.4. The section numbers referenced in this article are identical between the old act and the new act.
2. PPCLA, RSA 2000, c P-26.4 at s 37.
3. Synergy at para 118.
4. PPCLA at s 1(j).
5. Synergy at para 110.
6. Ibid at s 37.
7. Synergy at para 110.
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