Stewart McKelvey

4 Spring 2014 Doing Business in AtlAntic cAnADA By Hugh Cameron and Lara MacDougall C anadian provinces have enacted legislation, generally known as Builders' Lien or Mechanics' Lien Acts that allow a claim for a lien against real property. A contractor, doing work for a tenant, is given an opportunity to make the landlord's interest in the property subject to the lien in addition to the ten- ant's interest. At the same time, the legislation pro- vides protection to landlords and owners from being unwittingly bound by liens against their property for work commissioned by their tenants. This protection can be found in section 12(1) of New Brunswick's Mechanics' Lien Act, RSNB 1973, c M-6 which was recently considered by Justice McNally of the New Brunswick Court of Queen's Bench in Penniac Construction Limited v. Cominar Real Estate Investment Trust et al., 2013 NBQB 232 and wherein McNally J. followed Ontario judicial interpretations of what constitutes "notice to land- lords", which could bind their property and make them liable to pay such a lien, under the Act. background The Plaintiff, Penniac Construc- tion Limited ("Penniac") completed a number of leasehold improvements on a warehouse property, owned by the defendant, Cominar Real Estate In- vestment Trust ("Cominar") and leased to the De- fendant, Focus Logistics Ltd. ("Focus"). Following the formation of the lease, Cominar and Focus met with Penniac to discuss the upcoming construction work on the property which would be required to meet the tenant's needs. Two contracts were discussed and formed. The fi rst was between Cominar and Penniac, exclusively, and was for work needed to accommodate the new ten- ancy. The bill for this contract was paid for in full by Cominar. The second contract dealt with leasehold improvements requested specifi cally by Focus and the quotation provided was titled, "Tenant Fit-Up for Focus Logistics" (the "Fit-up"). The estimate and plans for the Fit-up were sent to Cominar, who ad- vised Penniac that a clause should be included in the estimate for Focus to authorize and accept the quote. The bill for the Fit-up came to $54,241.13 which was never paid and for which Penniac brought its claim against Focus, added Cominar to their lien claim and sought a declaration that it was entitled to a mechanics' lien on the real property. the court's decision The Court quickly found Focus liable for the cost of the Fit-up. With regard to the claim against Cominar, Penniac argued that as owner of the property, their interest in the property was subject to the mechanics' lien. Although Comin- ar did own the property, the Court found it was not an "owner", in this case, as defi ned by the Mechan- ics' Lien Act, which defi nition would have required Cominar to have requested the work and materials for the Fit-up from Penniac. The Court then examined section 12(1) of the New Brunswick Mechanics' Lien Act which pro- vides where the real property upon which the lien attaches is leasehold, the fee simple may also be sub- ject to the lien if the person doing the work or sup- plying the material, such as Penniac, gives notice in writing by registered letter or personal service to the owner or his agent, such as Cominar. If the owner or his agent fails, within 10 days, to return notice that he will not be responsible for the work or materials, the owner may be bound by a lien for the work and materials provided by the contractor. Penniac argued that it put Cominar on notice when it forwarded Cominar a copy of its quotation to Focus and the plans for the Fit-up. Penniac relied upon a 1985 New Brunswick Court of Queen's Bench deci- sion in which the Judge found the defendant prop- erty owner received suffi cient notice when they were aware of the nature of the work being done. landlords' protection from mechanics' (builders') liens

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