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Preserving Lien Rights During Arbitral Proceedings
Introduction
The Assignment of Lien provision of Ontario's Construction Act is a strong but underutilized tool. A party holding lien rights can assign their rights (including rights to connected court litigation or arbitration) to a third party. Except for the need that the assignment is done in writing, the Construction Act does not give any assistance to parties considering making or accepting a construction lien assignment. Although lien rights cannot be enforced through arbitration, many construction contracts require it. The Alberta Court has addressed how arbitration agreements and liens may coexist in West Coast Installations, Inc. v. Frazier Industrial Co.[1] This isn't new legislation, but it does provide valuable clarification on a topic that comes up frequently.
Construction liens are a way for contractors to protect themselves from not being paid for services or materials given during the improvement of real estate. Lien rules in Florida compel the lienor to file a court action to enforce the claim within a certain time frame. The lienor's lien rights will expire if this does not happen. Complex difficulties pertaining to the execution of a lien and the arbitration agreement might arise when construction contracts contain arbitration clauses as an alternative to dispute resolution.
Lien claim with Arbitration Proceeding
Despite the inclusion of a required arbitration provision, the lien claimant sued in the West Coast Installations case. (In fact, the lien claimant was likely left with little choice but to litigate in order to protect its lien rights under the Builders' Lien Act.) The court granted the counterparty's request for a stay of proceedings. That is, the court ordered that the disagreement be addressed through arbitration and that the parties may only return to court after the arbitration was completed, or after the dispute was settled, for the court to provide directions regarding the claimant's lien rights. The court procedure would be halted in this manner, the parties' substantive disagreement would be settled by an arbitrator, and a judge would subsequently (if required) give effect to the arbitrator's judgment by enforcing the claimant's lien rights.
There is little question that lien rights and arbitration provisions may coexist if small differences in the procedure are taken into account. In many situations, there would be no genuine disagreement over coexistence; instead, the court proceedings would be halted ("stayed") by agreement while the arbitration took place.
According to Florida case law, a lienor's right to enforce a lien is not preserved by asking for arbitration on a lien claim within the statutory time limit. As a result, lienors must be cautious while exercising their right to arbitrate in order to avoid losing their construction lien rights.
Conclusion
When arbitration is possible, it is frequently found essential to file (1) an action to foreclose on the claim of lien in a court of law; (2) a move to stay the lawsuit; and (3) a request for arbitration all at the same time to guarantee that your lien rights are protected. Taking these procedures will assist to safeguard your lien rights as well as your right to arbitrate the issue.
[1] 2015 ABQB 257.
(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)
- Introduction
- Introduction Lien claim with Arbitration Proceeding
- Conclusion
