Overview

The new Builders’ Lien Act of the Northwest Territories (the “BLA”),[1] came into force on September 1, 2025. The BLA replaces the Mechanics Lien Act (the “MLA”),[2] and brings NWT lien legislation into closer alignment with lien legislation in other Canadian jurisdictions. Despite these advancements, the BLA still lacks certain provisions that have recently been incorporated in many provincial lien statutes.

This post summarizes key updates found in the BLA and comments on how it compares with lien legislation in other Canadian jurisdictions. The updates to the BLA include substantial amendments regarding the extent of, and procedure regarding, rights and remedies on construction projects generally – including trusts with respect to project funds, substantial completion, holdback, and surety bonds, as well as the expiry, preservation, perfection of, and priority between liens.

What’s new in the BLA

1. Trust provisions

The MLA contained no trust provisions. Part 2 of the BLA introduces a detailed trust framework that applies to multiple levels of payment in construction projects. The specifics of the new trust framework implemented under the BLA are outlined below:

  1. Owner level:[3]
    • The owner is expressly made a trustee over certain amounts that are deemed to constitute trust funds, namely:
      • All amounts received by an owner for the purposes of financing an improvement on lands (including amounts to be used in paying the purchase price of the improved lands and the payment of prior encumbrances);
      • All amounts payable by the owner which are received on a certificate by a payment certifier; and
      • Where substantial performance is certified or declared by a court, an amount equal to the unpaid price of the substantially performed work received by the owner.
    • The owner is expressly prohibited from appropriating or converting any part of the trust funds until the contractor is paid all amounts owed to them by the owner in connection with the improvement on the lands.
  2. Contractor and subcontractor trust:[4]
    • All amounts owing to, or received by, a contractor or subcontractor (whether or not due and payable) are deemed to constitute a trust fund for the benefit of:
      • The subcontractors; and
      • Other persons who have supplied services or materials to the improvement and who are owed amounts by the contractor or subcontractor,
    • Every contractor or subtractor who receives or are owed the trust funds is expressly declared to be a trustee.
    • Every contractor and subcontractor who is a trustee is expressly prohibited from appropriating or converting any part of the trust funds until the beneficiaries are paid.
    • Every trustee under these provisions is required to comply with express requirements regarding:
      • The deposit of trust funds into a bank account; and
      • The maintenance of written records regarding the trust funds.
  3. Vendor’s trust:[5]
    • If the owner’s interest in a premises is sold by the owner, the funds received through the sale (less reasonable expenses arising from the sale and amounts paid to discharge existing mortgage indebtedness) constitute a trust fund for the benefit of the contractor and over which the former owner is trustee.
    • The former owner is expressly prohibited from appropriating or converting any part of the trust funds until the contractor is paid all amounts owed to them by the former owner in connection with the improvement on the lands.

General trust provisions

The BLA also contains the following general provisions regarding trusts:[6]

  1. Where a trustee makes a payment for materials or services supplied to the improvement on the lands to the person who the trustee is liable for payment to (i.e., if the trustee properly issues a payment in accordance with their obligations), the trustee’s liability is discharged to the extent of the payment made.
  2. A trustee can properly withdraw or retain funds out of the trust fund where:
    • they make a payment to the beneficiary of the trust out of funds separate from the trust fund; or
    • they make a payment to the beneficiary of the trust out of funds that are loaned to them.
  3. There is a mechanism by which a trustee over trust funds for the benefit of a contractor or subcontractor may properly set-off amounts for which the contractor or subcontractor is liable to the trustee, including debts, claims and damages against the trust fund. If the contractor or subcontractor is solvent, the amounts set off must relate to the improvement. However, if the contractor or subcontractor is insolvent, the amounts set off do not need to relate to the improvement.

With respect to liability for breach(es) of trust obligations:[7]

  1. A person (including a director, officer, employee or agent) who assents to or acquiesces in conduct that they know or reasonably ought to know amounts to a breach of trust by a corporation is, themselves, liable for the breach of trust; and
  2. Where more than one person is found liable or admitted liability for a breach of trust, they are jointly and severally liable and are presumptively entitled to recover contribution from any other person also liable for the breach in an amount so as to result in equal contribution by all parties liable (subject to any court determination that may be otherwise).

2. Substantial completion

The BLA provides a fulsome definition of a contract’s substantial completion, which is also referred to as substantial performance.[8] Per this definition, a contract is substantially performed when it is mostly ready for its intended use or when it can be completed at a cost of not more than 3% of the contract price.

Substantial performance of a contract, and the certification thereof, is an important piece of lien legislation as it carries implications on holdback, lien expiry dates, and trust provisions.

3. Holdback

The MLA contained a single provision on holdback. This provision did not require but rather entitled an owner to retain a 10% holdback for 45 days after the completion of a contract.[9] Conversely, Part 4 of the BLA is dedicated to the holdback and includes the following key points:

  1. Retaining the holdback is mandatory.
  2. Owners are liable to valid lien claimants for up to the amount of the holdback that an owner is required to retain, equal to 10% of the price of the services or materials.
  3. The BLA details the conditions that must be met for the holdback to be paid out, primarily being the expiry or satisfaction of any lien claims.
  4. Conditions are provided for the valid non-payment of the holdback.
  5. Provisions are included that allow a party (such as an owner) to pay out a lien holder who is lower and not directly linked in the contractual chain (such as a subcontractor) by bypassing the intermediate party (such as a contractor) for the purpose of discharging the lower party’s lien and being credited with the amount paid against the contract with the intermediate party.

4. Expiry, preservation, and perfection of the lien

Under the MLA, a lien had to be registered within 45 days of the work underlying the claim being completed. A lien claimant then had to commence proceedings beyond the registration of the lien within 90 days of the work underlying the claim being completed or the lien would expire.[10] The MLA did not contain any provisions on the preservation or perfection of liens.

Part 5 of the BLA institutes comprehensive provisions covering the expiry, preservation, and perfection of liens. Specifically, under Part 5, a lien for the supply of material or services expires unless it is properly preserved (registered):

  1. within 60 days of substantial completion; and
  2. if there is no certificate or declaration of substantial completion within 60 days from the earlier of:
    • completion of the prime contract; or
    • termination or abandonment of the prime contract.

To preserve a lien, a claimant must register its claim on the certificate of title of the premises in the land titles office prior to the claim expiring. This claim must include an affidavit that sets out information such as the name of the owner of the premises, the name of the person for whom the services or materials were supplied, the contract price, and the amount claimed.

If properly preserved, a lien will still expire unless it is perfected before the expiry of 90 days from the last day when the lien could have been preserved. To perfect a lien that has been preserved, a claimant must:

  1. obtain (i.e., commence) an action to enforce the lien; and
  2. register a certificate of pending litigation on the certificate of title of the premises with the Registrar of Land Titles.

On application, the court may order that a certificate of pending litigation expires if no significant steps toward trial are taken within two years from the date of registration of the certificate.

5. Priorities

The MLA priority provisions were limited, simply providing that a lien had priority over a prior mortgage for any value by which the work underlying the lien increased the value of the land,[11] and that liens for employee wage claims had priority over other lien claims.[12]

Under Part 10, the BLA provides a much more robust priority system than the MLA. This system includes provisions governing the priority of liens with respect to:

  1. Judgments and court orders;
  2. Mortgages, conveyances, and other agreements;
  3. Bonded or otherwise insured premises upon sale;
  4. Classes of lien claimants;
  5. Workers;
  6. The realization of general liens as against other liens;
  7. Insurance proceeds for destroyed premises; and
  8. Insolvent payers.

6. Surety bonds and local authorities

Part 11 of the BLA specifically addresses surety bonds. Contractors on public contracts must provide, at minimum, both a labour and material payment bond, as well as a performance bond. The BLA further requires that the bonds set out the claims process applicable in respect of the bond.

The BLA also binds municipalities and local authorities as defined in section 1 of the Local Authorities Elections Act.[13] This is distinct from jurisdictions like Alberta where it remains unclear the degree to which municipalities are impacted by lien legislation. However, the BLA[14] does not bind the Government of the Northwest Territories or public agencies as defined in subsection 1(1) of the Financial Administration Act.[15]

Key takeaways

The changes found in the BLA modernize the NWT’s lien legislation in a manner that is distinct from other jurisdictions in Canada. Interestingly, while creating a fulsome and robust trust framework akin to that contained in Manitoba and Saskatchewan lien legislation,[16] the changes do not introduce the prompt payment and adjudication framework that has been incorporated in other provincial lien legislation. A summary of the prompt payment and adjudication provisions found nationwide can be found in our blog post on the topic.

The BLA ushers in a new era in terms of the obligations, rights and remedies impacting parties to construction and infrastructure projects in the NWT. In doing so it provides significantly more protection to unpaid contractors than that provided by the MLA, and more than many Canadian jurisdictions.

All participants at all levels of the contractual chain should understand the following key changes:

Trust framework: The BLA introduces a detailed framework of trust rights and obligations, which automatically applies to all levels of a project involving work that improves land. All parties on construction projects should be alert to these provisions and the obligations imposed on them, both corporately and as individuals.

Alignment with modern lien legislation: The BLA more closely aligns the NWT with the modern lien legislation in Canada and includes amendments covering:

  • Substantial completion;
  • Holdback;
  • Expiry, preservation, and perfection of liens;
  • Lien priorities; and
  • Surety bonds.

All these factors should be considered when entering into and drafting construction contracts.

Prompt payment and dispute adjudication:  Unlike builders’ lien legislation in some other provinces, the BLA does not introduce prompt payment and dispute adjudication provisions.

Changes to lien legislation in the NWT (like those throughout other Canadian jurisdictions) have impacted the rights and remedies of participants on most construction projects. Miller Thomson’s Construction and Infrastructure Group is prepared to help you navigate these changes and ensure you are prepared for whatever project challenges may come your way.

[1] Builders’ Lien Act, SNWT 2023, c 24 (the “BLA”)

[2] Mechanics Lien Act, RSNWT 1988, c M-7 (the “MLA”)

[3] BLA, section 8

[4] BLA, sections 9-10

[5] BLA, section 11

[6] BLA, sections 12-14

[7] BLA, section 15

[8] BLA, section 2

[9] MLA, section 6

[10] MLA, section 24

[11] MLA, subsection 4(3)

[12] MLA, subsection 8(c)

[13] Local Authorities Elections Act, RSNWT 1988, c L-10

[14] BLA, section 3

[15] Financial Administration Act, SNWT 2015, c 13

[16] See Builders’ Liens Act, CCSM c B91, sections 4-9 and The Builders’ Lien Act, SS 1984-85-86, c B-7.1, Part II