Subcontractor Disputes under $50,000: Should I file a Builders’ Lien or Sue in Small Claims?

Subcontractor Disputes under $50,000: Should I file a Builders’ Lien or Sue in Small Claims?

Builder's Lien

When it comes to construction projects, things don’t always go according to plan. This is especially true for residential property renovations. Unhappy customers often withhold payment, which is why contractors, subcontractors, suppliers and labourers can file a builders’ lien to get paid for the work they have done. By registering a builders’ lien, you register a legal interest against the property where the work was done or where the materials were supplied. The lien is a powerful tool to collect what is owed because the lien can interfere with progress payments for other contractors or prevent the owner from selling their property. In short, filing a builders’ lien forces the general contractor or owner to pay attention to your claim.

But: If you register a builders’ lien, you must fight your case in the Court of Queen’s Bench. Queen’s Bench is expensive, has many deadlines you must meet, and if the subcontractor operates the business as a corporation, they will need a lawyer to represent the corporation in Court.

Fighting disputes in Provincial Court (Small Claims court) is much cheaper and easier. There are fewer technical rules, you can obtain a trial date in a much shorter time, and if the subcontractor operates the business as a corporation, they can represent the corporation in Court themselves.

 

Here’s the tricky part

You cannot file a builders’ lien and then fight in Provincial Court. By filing a builders’ lien, you are forcing your dispute to proceed in Queen’s Bench. You need to choose which court you want to fight your dispute in, before you file a builders’ lien. Subcontractors need to carefully compare the benefits of the builders’ lien against the additional costs of fighting the dispute in Queen’s Bench. That additional time and money could easily outweigh the value of a smaller claim.

One recent case shows the downside of filing a builders’ lien for smaller projects ($20,000 or less). In this case, a contractor completed a home renovation project but the owner was unhappy with the work. The contractor filed a builders’ lien and chased the owner for payment in Queen’s Bench. The process was very expensive and very slow. After several years, the contractor tried to move the dispute the Provincial Court. The owners refused to consent and the Court would not force the parties to move to Provincial Court, even though it would be cheaper and easier for all parties. By denying their consent, the owners forced the contractor to fight them in the slower and more expensive Court.

 

The takeaway is this

Registering a builders’ lien is a powerful tool a subcontractor can use to get paid. But, it may have the unintended consequence of locking a party into a more expensive and more complicated lawsuit. Contractors must choose carefully between filing a builders’ lien or suing in Provincial Court without filing a builders’ lien.

Here are a few questions to ask to help decide whether to file a builders’ lien or not:

  1. How large is the claim?
    • If the claim is for close to $50,000, the value of the claim may be worth the extra costs of Queen’s Bench. If not, the better option may be to proceed in Provincial Court;
  2. Is the subcontractor operating as a corporation?
    • If yes, the subcontractor will need to hire a lawyer to represent the corporation in Queen’s Bench. The subcontractor can represent the corporation by themselves in Provincial Court.
  3. Will the owner / general contractor be able to pay?
    • If the owner / general contractor likely has the money to pay, but is choosing not to pay, fighting in Provincial Court may be the better option;
    • If the owner / general contractor likely cannot pay, filing a builders’ lien may be the better option.
  4. Are you working as a subcontractor for a larger construction project with progress payments?
    • If yes, your builders’ lien could interrupt or interfere with the rest of the project, meaning your claim may get more attention from the owner / general contractor and may result in a faster settlement.

 

Summary

  1. If you file a builders’ lien, you must fight your dispute in Queen’s Bench. This is a more expensive and complicated Court, and you may be forced to hire a lawyer.
  2. If you want to fight your dispute in Provincial Court (Small Claims), you should not file a builders’ lien.
  3. It is very difficult to change Courts once you have made your decision. You need to choose wisely, and make your choice before filing a builders’ lien.

If you are a contractor, subcontractor, supplier or labourer involved in a dispute over payment, and would like assistance deciding how to fight for payment, please contact any of the construction lawyers at Carbert Waite.



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