Do you repair vehicles or marine vessels? Do you provide labour or materials for home renovations? Do you operate a storage facility? There is good news for you.
On March 31, 2022, the Provincial Government of British Columbia passed new legislation, called the Commercial Liens Act (the “CLA”). Liens are an important tool used by business owners to ensure that they receive payment for the services they provide. The CLA is specifically intended to create a type of lien called a commercial lien. The CLA will apply to the following paid services:
- providing labour or materials for the purposes of restoring, improving, and/or maintaining the condition or properties of goods such as machinery, vehicles, lumber etc.;
- storing goods (but not in your garage);
- transporting, carrying, or towing goods (including livestock); and
- salvaging goods.
The CLA will provide one set of rules for these types of liens and seeks to make it easier for service providers to keep liens to secure payment and for their customers to protect their rights. The CLA does not replace the Builders Lien Act, which is still available to contractors and sub-contractors as another tool in their toolbox.
The current commercial lien regime in BC is governed by a collection of outdated legislation that is difficult to follow, inconsistent, and inefficient. The CLA will repeal the current legislation and replace them with a single comprehensive framework.
Under the CLA, commercial liens will attach to the goods immediately upon commencement of the services and will be enforceable if the goods are in the possession of the service provider, or if the service provider has obtained a written authorization for the services or an acknowledgement of the customer’s obligation to pay for the services. Importantly, an initial period of possession will no longer be required. This is of particular importance to service providers who provide on-site services for large or immovable commercial goods.
Another change is with respect to how commercial liens are perfected. Under the current regime, a service provider must retain possession of the goods to maintain a lien. The only current exception to this is with respect to liens on serial number goods, such as motor vehicles, aircraft, and boats, which can be registered in the Personal Property Registry in place of possession. This practice of possession is often impractical in the everyday world of business transactions and creates a burden on lien holders to store goods until payment is received. The CLA simplifies this, and provides a framework that allows for all commercial liens to be perfected by either maintaining possession of the goods or registering the lien in the Personal Property Registry.
The CLA also overhauls the current provisions for selling liened goods and provides for a more sensible approach that is consistent with modern sale and notice conditions. For example, there are no longer different methods of sale depending on how the lien arises. Instead, the CLA provides that liened goods may be disposed of in the following ways:
- by private sale;
- by public sale, including public auction or closed tender;
- as a whole or in commercial units or parts; and
- by lease (if the owner consents in writing).
While the CLA has received royal assent, it is not yet in force and will be implemented by regulation at a yet to be determined date. If you want to know about the proposed Commercial Lien Act, and how it may help you, give us a call and one of our lawyers is here to assist you and your business.