A contractor may register a construction lien (formerly known as a builders’ lien) against the title to the property subject of the improvements in an effort to collect for unpaid services or materials. The legality of doing so is complicated when the unpaid contractor was hired by the tenant of the property in question. The contractor may register its lien against the leasehold interest of the tenant but that is infrequently a fruitful way to collect. A lien against the fee simple interest of the property owner (landlord) must satisfy the requirements of the Prompt Payment and Construction Lien Act to prove that the landlord requested the work, and (i) on whose credit; (ii) on whose behalf; (iii) with whose privity and consent; or (iv) for whose direct benefit, the work was done.

Xemex v Aspen illustrates the challenge to the unpaid contractor of establishing a valid lien claim against the landlord of a leased premises. The underlying facts are nicely summarized at the outset of the recent judgment of the Alberta Court of Appeal:

"This appeal considers the validity of a lien that Xemex filed against the fee simple interest of the landlord Aspen. Aspen's tenant Koor Energy hired Xemex to renovate Koor's leasehold space. After Koor stopped paying its invoices, Xemex registered liens against Aspen's and Koor's interests and obtained two judgments against Koor totaling $263,242.10 plus costs. Xemex's recovery efforts against Koor have been fruitless. It now looks to Aspen for payment of its invoices.”

Xemex was successful at the first level of the Court of King’s Bench as the Applications Judge ruled that Aspen was an owner under the meaning of the PPCLA as the work was impliedly done at the landlord's request and it benefited from the work. Aspen appealed to a justice of the Court of King's Bench who reversed the Application Judge's decision on the basis that although the work was done impliedly at Aspen's request, it did not receive a direct benefit.

Whether or not work was done on the credit of or on behalf a landlord is easily (dis)proved. The other two alternatives of having done the work with the privity and consent or direct benefit of the landlord is much less black and white and is subject to a number of factual considerations. It appears that the facts did not support the argument that Aspen benefited from Koor’s renovation project which was not completed and left in “a state of disarray”.

On appeal, Xemex pressed with the alternative argument that Aspen was an owner by virtue of the work done by Xemex having been done with Aspen's "privity and consent". The Court of Appeal made it clear that a finding that Aspen impliedly requested Xemex do the work did not equate to a finding that there was privity and consent. There must be something in the nature of "direct dealing" between a landlord and the tenant’s contractor notwithstanding the absence of direct contractual relations. The Court of Appeal agreed that Aspen was actively involved with the work of Xemax but should not be exposed to lien liability because it facilitated “an orderly and safe construction program".

Takeaways

The Xemex case and previous rulings make it clear that whether work done by a tenant’s contractor was with the privity and consent or the direct benefit of a landlord owner is fact specific and would include consideration of the landlord's involvement with design, permitting, invoicing, payments, supervision, inspections and approval of the work subject of the lien. The lease itself would be of interest including consideration of whether the tenant’s project was an obligation as opposed to an option of the tenant, whether the project was funded by the Landlord, whether the work effected a lasting benefit to the property, and whether the work would need to be torn out at the expiry of the lease or revert to the landlord. Another inquiry to be made is whether the landlord is entitled to some form of profit or revenue sharing with the tenant’s commercial use of the improved premises.

A contractor performing tenant improvement work should do so with caution as it may not be the case that it can later secure collection of unpaid invoices by way of a construction lien. Xemax is the cautionary tale of an unpaid contractor suffering insult to injury in the form of the legal fees costs incurred and payable to the opposing party in a series of judgments in the Alberta Courts.

Given the complexities of landlord/tenant liens, it is always advisable to consult a lawyer who works in this specialized area of construction law. Contact Todd Kathol or Anthony Burden in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law’s Construction Group for assistance.

Links to decisions:

• Xemex Contracting Inc v Koor Energy Ltd, 2023 ABKB 577
• Xemex Contracting Inc v Aspen Properties (Northland Place) Ltd, 2025 ABCA 49