Previously, we have discussed solutions to land purchase issues, such as using the builder’s lien for specific performance of a contract, how to remove certificates of pending litigation, and remedies due to false pre-sale marketing.
On February 11, 2025, the Court of Appeal for British Columbia clarified the remedy of a purchaser’s lien. A purchaser’s lien existed in English law, and it was referred to in BC law but its application was not as frequent as the other remedies discussed above until the Court of Appeal confirmed how to use this remedy.
In British Columbia, a purchaser’s lien is a valuable legal tool that can protect your rights when a land transaction goes wrong. It is a claim that a purchaser of land has over the property they have contracted to buy. This lien secures the deposit paid to the seller, protecting the purchaser’s financial interest in the property.
Purchaser’s Lien Clarified
This case of 1332404 B.C. Ltd. v. 1266685 B.C. Ltd. involved a failed land transaction where the appellant, 1332404 B.C. Ltd., had entered into a contract to purchase subdivided lots from the respondent, 1266685 B.C. Ltd.
The transaction failed due to the seller’s actions in amending the subdivision application, resulting in smaller lot sizes than initially agreed upon. This type of change in land transactions is common, but a dispute over the land purchase contract arose. The purchaser-appellant had paid a deposit to the respondent and filed a Certificate of Pending Litigation (CPL) against the property, claiming a purchaser’s lien to secure the deposit.
The chambers judge cancelled the CPL, but the Court of Appeal overturned this decision. Writing for the Court of Appeal, Harris J.A. clarified that a purchaser’s lien is an interest in land that can support a CPL, providing security for the recovery of the deposit and not conflicting with other remedies like the purchaser’s rescission (termination) of the contract.
What is a Lien?
A lien is a legal claim on a property that provides security for a debt or obligation. It allows the lien-claimant to register the lien at the Land Title Office, and it gives the lien holder the right to sell the property to satisfy the debt if the obligation is not met.
What is a Purchaser’s Lien?
A purchaser’s lien is a specific type of lien that arises when a purchaser has paid a deposit to a seller under a contract of purchase and sale. This lien, similar to a mortgage, secures the deposit and protects the purchaser’s financial interest in the property.
Why Was the CPL Justified in Law?
The Court of Appeal held that the CPL was justified because a purchaser’s lien is an interest in land that can support a CPL.
The court emphasized that the lien provides security for the recovery of the deposit and does not conflict with other remedies sought, such as rescission of the contract.
Legal Basis for Purchaser’s Lien
The legal basis for a purchaser’s lien is found in the common law and equity.
It is an equitable remedy that protects the purchaser’s interest in the land when a transaction fails.
Relevant Case Law
- Pan Canadian Mortgage Group III Inc. v. 0859811 B.C. Ltd., 2014 BCCA 113: This case established that a purchaser’s lien is an equitable remedy that provides a security interest in the property to the extent of the money paid by the purchaser.
- Lehmann v. B.R.M. Enterprises Ltd. (1978) 88 D.L.R. (3d) 87: This case confirmed that a purchaser’s lien exists even though specific performance may not be available.
- Kang v. Steveston Public Market Inc., 2017 BCSC 544 (Chambers): This case characterized a purchaser’s equitable interest in land as arising from the moment the land is validly contracted to be sold.
Circumstances Where a Purchaser’s Lien Remains Valid
Even if the purchaser wanted to terminate (rescind) the contract, a purchaser’s lien can still be valid if it is claimed as an alternative remedy in addition to the other legal remedies, such as rescission or specific performance of the contract. Here are some examples:
- Seller’s misrepresentation: If the seller misrepresented the property or failed to disclose material information, you may be entitled to rescind the contract and still claim a purchaser’s lien to secure the return of your deposit.
- Property defects: If the property has significant defects that were not disclosed by the seller, you may be able to rescind the contract and claim a purchaser’s lien.
- Failure to complete the transaction: If the seller fails to complete the transaction for reasons not attributable to you, you may be able to rescind the contract and claim a purchaser’s lien.
When Can You Claim a Purchaser’s Lien?
You may be able to claim a purchaser’s lien if:
- You have entered into a contract to purchase land.
- You have paid a deposit to the seller.
- The transaction has failed through no fault of your own.
How to Claim a Purchaser’s Lien
To claim a purchaser’s lien, you must:
- File a claim in the Supreme Court of British Columbia. Your claim should include a description of the property, the amount of the deposit paid, and the reasons why the transaction failed.
- Register a Certificate of Pending Litigation (CPL) against the property. This will give notice of your claim to other potential purchasers or creditors.
- Prove your claim in court. You will need to provide evidence to support your claim, such as the contract of purchase and sale, proof of payment of the deposit, and evidence that the transaction failed through no fault of your own.
When You Cannot Claim a Purchaser’s Lien
It’s important to understand that a purchaser’s lien is specific to real estate transactions. In a divorce dispute involving real property, as the Court of Appeal clarified in 1332404 B.C. Ltd. where property division is the primary concern, a purchaser’s lien would not apply. This is because the lien is designed to protect a purchaser’s financial interest in a property purchase, not to resolve matrimonial property division issues.
A purchaser’s lien can protect the purchaser’s financial interest in a property by securing their deposit. It can also give them a leverage in negotiations with the seller.
Clearly, the seller is not left without remedies: as we discussed previously, the seller always has the right to apply to the court to have the lien removed.
Contact Roland Luo in Vancouver for Skilled Advice on Commercial Real Estate Litigation
If you are involved in a land transaction that has gone wrong, it is essential to seek legal advice as soon as possible. Roland Luo can help you understand your rights and options, including the possibility of claiming a purchaser’s lien.
Located in downtown Vancouver, Roland Luo proudly represents clients throughout British Columbia, as well as clients across Canada and the United States. To schedule a confidential discussion, contact us online or by phone at 604-800-4628.