Overview

This chapter covers the legal mechanisms that allow a person to protect an unregistered interest in land, primarily caveats and builders’ liens, as well as other encumbrances such as unregistered leases and condominium liens. In Alberta, the Land Titles Act and the Builders’ Lien Act govern these instruments. Understanding when and how these protections arise, their priority, and the consequences of failing to register them is essential for any real estate professional advising buyers, sellers, or lenders.

The chapter also examines the principle of notice and how a purchaser’s obligations to inspect a property can affect their rights. The interplay between registered and unregistered interests, the rules for priority, and the remedies available when a caveat is improperly registered are all key topics.

Key Concepts

Caveats

Definition and Purpose

A caveat is a statutory notice registered on the title to land under the Land Titles Act. It alerts anyone searching the title that a person other than the registered owner claims an interest in the property. A caveat does not give the caveator the right to possess the land or to transfer it; it merely warns third parties of the existence of the claim.

Who Can Register a Caveat

Any person who claims an unregistered interest in land may register a caveat. Examples include:

A buyer under an agreement for sale (who has not yet received title)
A tenant under a lease that has not yet been registered (but note the special rules for long leases)
A holder of an option to purchase land
A beneficiary of a restrictive covenant or easement that has not yet been perfected
A person claiming an equitable mortgage (often created by depositing title documents)

A personal loan that is unsecured by an interest in land cannot be protected by a caveat. Registering a caveat without a genuine claim to an interest in the land is improper and may lead to liability for damages.

Requirements for Registration

To register a caveat in Alberta, the applicant must provide:

A statutory declaration setting out:

The nature of the interest claimed
The grounds on which the claim is based
A description of the land sufficient to identify it
The declaration allows the Registrar to verify the apparent legitimacy of the claim before accepting the caveat for registration.

Effect of a Caveat

Constructive notice to all persons who search the title.
The caveat binds subsequent purchasers and mortgagees who register after the caveat appears on title. For example, if Sophie registers a caveat to protect her option to purchase, and later Robert sells the land to Marc (who registers title), Sophie’s caveat remains on title and her option is enforceable against Marc.
A caveat does not give the holder an immediate right of possession or any right to take the land; it only preserves the holder’s ability to pursue their claim.

Lapse and Discharge

The owner of the land (or any “interested person”) can request the Registrar to issue a lapse notice to the caveator. This notice requires the caveator to commence legal proceedings within 60 days to assert their right. If no proceeding is started, the caveat will be removed from the title. The lapse procedure does not decide the merits of the underlying claim; it merely tests whether the caveator is willing to actively pursue it.

Discharge of a caveat removes the protective notice from the title. However, it does not extinguish the underlying substantive right. The holder may still sue the owner for damages (if the right is not tied to possession of the land), but that right will no longer bind subsequent good‑faith purchasers.

Wrongful Registration – Remedies for the Owner

If a person registers a caveat without reasonable grounds and causes harm (e.g., blocks a sale or refinancing), the owner may apply to the court to have the caveat removed and may also seek damages for any loss suffered. The court examines the merits of the claim. An owner cannot simply remove the caveat without court authority; the correct procedure is to apply for an order discharging it or to trigger the lapse process.

Priority Between Competing Caveats

Generally, registered interests (including caveats) take priority according to the chronological order of registration on the land title. The first claim registered will be satisfied before later ones in a forced sale. The amount claimed or alphabetical order does not affect priority. Exceptions exist (e.g., under the Builders’ Lien Act), but the default rule is “first in time, first in right.”

Builder’s Liens

Statutory Basis and Purpose

The Builders’ Lien Act (Alberta) creates a special lien in favour of persons who provide work or materials for an improvement to land. The lien is registered on the title like a caveat, but it confers a priority claim that may rank ahead of other encumbrances in certain circumstances.

Who Can Claim a Builders’ Lien

Contractors, subcontractors, workers, and suppliers of materials who have not been paid for their contribution to an improvement.
The improvement must be on or to land, and the claimant must have a direct or indirect contractual relationship with the owner or a party in the chain.

Time Limits for Registration

Suppliers of materials (who are not contractors): must register their lien within 45 days from the date they last delivered materials or last performed services (or from the abandonment of the contract).

Contractors (prime contractors): the deadline is calculated from the date of substantial completion of the entire project, but subject to the same 45‑day window after that date.
These deadlines are strict. Late registration renders the lien unenforceable.

Proceeding to Enforce the Lien

Once a builder’s lien is registered, the claimant must commence legal action to enforce it. The lien expires unless a statement of claim is filed and registered on title within 180 days after the date the lien was registered. This period is specific to the Builders’ Lien Act and is not the same as the 60‑day lapse period for ordinary caveats.

Priority of a Builders’ Lien

A builders’ lien often takes priority over previously registered mortgages or other encumbrances, but only to the extent of the value added to the land. This is a special statutory exception to the usual “first in time” rule. However, a lender that advances funds after a builders’ lien has been registered may be subordinated to the lien.

Unregistered Leases and Implied Notice

The Rule for Leases

In Alberta, a lease of more than three years must be registered under the Land Titles Act to be enforceable against a good‑faith purchaser who relies on the register. An unregistered five‑year lease, for example, would not bind a buyer who had no actual knowledge of it.

Exception – Occupation as Implied Notice

At common law, occupation of the land by a tenant constitutes constructive notice to any person dealing with the property. If the tenant is in actual possession, a purchaser is deemed to know of their rights. Therefore, a good‑faith purchaser who buys land without discovering the tenant’s presence cannot rely solely on the register; they are charged with the knowledge that a reasonable inspection would have revealed. The tenant may remain in possession even without a registered lease.

Practical Implication

Real estate professionals should always:

Conduct a physical inspection of the property before closing.
Ask the seller about any tenants or occupants.
Ensure that leases longer than three years are registered or that appropriate indemnities are obtained.

Agreement for Sale and the Need for a Caveat

An agreement for sale (also called a contract for deed) gives the buyer an equitable interest in the land before the seller transfers legal title. To protect that interest against a subsequent sale to another person, the buyer must register a caveat on title. Without a caveat, a later good‑faith purchaser who registers first will take the land free of the buyer’s interest. The original buyer may then sue the seller for damages but cannot recover the property.

Condominium Corporation Liens

Under the Condominium Property Act (Alberta), a condominium corporation can register a caveat on the title of a unit for unpaid common expenses, special assessments, or other contributions owed by the unit owner. No minimum amount is required before the caveat can be registered. This caveat gives the corporation a priority claim against the unit, and it may eventually lead to a forced sale to recover the debt. This is a statutory exception to the general rule that a debt must be connected to an interest in land.

Important Regulations, Procedures, and Professional Obligations

Code of Ethics and Professional Conduct

Real estate licensees must act with reasonable care and skill when advising clients about caveats, liens, and encumbrances. Key obligations include:

Disclosure: Inform a buyer of any caveats or liens found on title.
Due diligence: Advise clients to obtain title searches and, if appropriate, title insurance.
Protection of client interests: For a buyer under an agreement for sale, recommend registering a caveat as soon as possible to protect their equitable interest.
Avoiding improper advice: Do not suggest registering a caveat for a personal debt or any other interest that does not relate to land, as that could expose the client to liability for damages.

Key Procedures to Remember

Relationship Between Caveats and Lien Types

Caveat vs. Builder’s Lien: Both are registered on title and give notice. However, a builder’s lien arises by statute for unpaid work/materials, has shorter registration deadlines, and confers special priority. An ordinary caveat can protect any unregistered interest in land (e.g., an agreement for sale, an option, an easement).

Caveat vs. Mortgage: A mortgage is a registered charge that gives the lender security and often the right to take possession or force sale. A caveat does not give possession; it merely preserves a claim until the underlying right is established in court.

Common Relationships Between Concepts

Priority: “First in Time, First in Right”

A caveat registered before a mortgage takes priority over that mortgage in the distribution of proceeds from a forced sale.
Between two caveats, the one registered earlier prevails.
Exception: A builder’s lien may take priority over earlier mortgages for the value of the improvement, depending on when the lien is registered and when the mortgage funds were advanced.

Notice and Good‑Faith Purchaser

A good‑faith purchaser who registers without notice of an unregistered interest generally takes free of it.
Actual possession of the land by a tenant or other claimant provides constructive notice to the purchaser, even if the interest is not registered. Therefore, the purchaser must inspect the property.
A caveat on title provides actual notice to anyone searching the register.

Consequences of Failing to Register

Unregistered lease > 3 years: Does not bind a subsequent good‑faith purchaser unless the tenant is in occupation (implied notice).
Agreement for sale: Without a caveat, the buyer loses priority to a subsequent registered buyer.
Personal debt: Cannot be turned into a caveat; improper registration risks damages.

Lapse vs. Enforcement

A lapse notice under the Land Titles Act (60 days) applies to ordinary caveats. It is triggered by an owner’s request.
A builder’s lien does not lapse under that procedure; it must be enforced within 180 days by filing a statement of claim, or the lien ceases to exist.

Buyer’s Pre‑Closing Checklist

When a potential buyer reviews a title and finds a registered caveat, the prudent course is:

Negotiate with the seller to have the caveat discharged before closing (e.g., by settling the underlying claim or obtaining a release).
If discharge is not possible, obtain title insurance that covers the risk.
Do not close the transaction without addressing the encumbrance, as the caveat may remain on title and affect the buyer’s ownership.

This chapter provides the foundational knowledge needed to understand how caveats, liens, and similar encumbrances operate within Alberta’s land registration system. Real estate professionals must be vigilant in advising clients about the importance of prompt registration, the effect of possession, and the strict time limits that govern these instruments.

Chapter 2: Caveats, Liens and Encumbrances