What If Company Name On Lien Is Different Than Name On Construction Contract?

A situation recently arose in Alberta, Canada requiring the Canadian courts to analyze a basic and usually non-controversial component of every mechanics lien: the name of the claimant.

Since the claimant is filing the lien, the identification of the claimant should really be a no-brainier. For this reason, there’s very little jurisprudence in the United States and elsewhere about what happens when the lien mis-identifies the claimant. Case law does exist when other parties are mis-identified — the owner, for example — and the effect of the mistake varies depending on state law and circumstance.

The circumstances before the court in Alberta is discussed by Thomas Heintzman on his Construction Law Canada blog in this post:  Can A Construction Lien Be Based On A Pre-Incorporation Contract?

In the case Canbar West Projects Ltd v. Sure Shot Sandblasting & Painting Ltd., the court was confronted with a situation where the lien claimant – Can-West Projects Ltd – entered into a construction contract before it was incorporated. So, while the postfix “Ltd” was used in the contract, that company didn’t actually exist at that time. Therefore, the company who entered into the contract was simple “Can-West Projects.”

When the lien was filed in the name of Can-West Projects, Ltd., the adverse parties simply argued that this wasn’t the name of the company who entered into the contract.

Mr. Heintzman very nicely summarizes the nuts and bolts of the appeal court’s decision upholding the lien’s validity with the following:

[T]he Court of Appeal held that, so far as the lien was concerned, it did not matter that the contract was not in the name of Canbar. The entitlement to a lien arises from three elements:

– the owner requests the work

– the claimant does the work

– and the work improves the value of the land

I think it’s a good decision, and one that would very likely be copied by courts in the United States. A mechanic’s lien does not arise when the claimant files a document with the recorder. Under the law, the lien forms immediately when the work or materials is incorporated into the project. The filing of the lien with a recorder merely “perfects” the rights. It’s required, of course, but it is merely a notice and perfection issue.

When the claimant is named incorrectly, it doesn’t change whether the lien itself ever actually arose. It certainly did. The question is whether the lien was perfected, and with such a tiny difference in naming  the claimant, the court would essentially need to dismiss the lien based on an insignificant and harmless technicality. This, the courts are hesitant to do, even with mechanic lien statutes that require strict construction.

, , , , ,