A commercial lien is a legal right that allows service providers to hold onto a customer's property as security for payment. Think of it as a safety net. If a customer doesn't pay for services rendered, the service provider can use the lien to compel the customer to pay in order to get their goods back.

The Commercial Liens Act who offer the following types of services for physical items:

• Repairs and maintenance: which includes labour or materials for the purposes of restoring, improving or maintaining the condition or properties of goods, like auto mechanics, appliance repair shops, jewelers, and other businesses that fix or restore items.

• Storage: including warehouses and businesses that hold goods for customers.

• Transportation or Carrying: trucking companies, moving companies, and other carriers.

• Towing: businesses that tow vehicles.

• Salvage: salvage yard operators and other related service providers.

• Processing: businesses that work on raw materials or goods to improve them.

• Livestock: people who care for livestock and other animals.

It’s important to note that a lien only applies to requested services. For example, if someone asks a mechanic to fix their brakes, and the mechanic also fixes the transmission, the lien can’t be used to claim back the cost of the transmission fix.

Other types of liens are covered by different laws

The Commercial Liens Act typically does not apply to those working or supplying materials on a construction or renovation project. Instead, a builders lien can help them collect the money they’re owed. Although a situation could arise where both types of liens come into play.

The Commercial Liens Act also does not apply to liens created by the Forestry Service Providers Protection Act, which deals with the contracted forestry sector.

A lien right begins as soon as you start providing services, so long as those services were requested by either the owner of the goods, someone leasing the goods, or someone in possession of the goods. You don't need to wait until the work is finished or the customer fails to pay. The lien attaches immediately to the goods you're working on. 

You don’t have to have possession of the goods to get the lien. An example of this might be a repairer working on a large piece of machinery at the owner’s address or someone caring for livestock. 

Existing liens under previous law (the Repairers Lien Act, Warehouse Liens Act and Livestock Liens Act) continue to exist under the Commercial Liens Act. Also, existing common law liens (these would be liens that arise through specific situations identified by the courts) have to meet the test in the Commercial Liens Act to be a lien. If they don’t, they don’t continue.

Your lien secures payment for the agreed-upon price upon completion of the services or the fair market value of your services if no price was agreed upon. That’s like the difference between a $500 estimate signed off on by the customer to repair the front brakes of a car, or when the customer orally agrees for you to do the work, without signing off on the price. Either way, you can keep the goods in your possession until you get paid. 

It’s up to you whether you want to keep the goods in your possession or return them to the customer who hasn’t paid. Traditionally, lien holders would often keep the goods in order to compel payment or sell them. But you don’t have to; you can return the goods instead. This can give you flexibility in running your business. Say you operate a garage, and don’t have room to store the vehicle you repaired. You can register the lien (we explain how in a moment), return the vehicle, and still be able to enforce payment. Also, the customer gets the use of the vehicle, which may increase the likelihood of you getting paid if the customer needs their vehicle to run their business.

If you want to return the goods, you should be prepared to take a few steps before you give up possession.

• Make sure you have an enforceable lien. Start by ensuring you have documentation that shows the owner of the property. Section 7 of the Commercial Liens Act outlines the requirements for an enforceable lien. 

• Gather all relevant information about the goods. At the very least you should know the VIN or serial number of the goods and the name of the owner. Check out this regulation to see if there’s anything in particular you should keep in mind, depending on the type of goods.  

• Register your lien. If you register a commercial lien in the Personal Property Registry within 15 days of completing the services, this “perfects” the lien. The registration filing includes details about the goods (including the serial number), the customer and, depending on the type of goods, the owner. A small fee is required to register your lien, and you have to notify the owner of the goods, as well as the customer if they are not the owner.

In storing and selling the goods, it’s important for you to keep detailed records of the notice provided, how the sales process unfolded, how much everything cost, and how the sales proceeds were applied to outstanding amounts owed. 

You are required to act in good faith and in a commercially reasonable manner in enforcing their lien (for example, not selling the goods for way below market value just to get paid). You also have to respond to any information requests about the lien — these requests can come from the owner, or from a party that has an interest in the goods (there’s a list of them at section 25 of the Commercial Liens Act.

There are a few steps you can take to get comfortable with enforcing a lien.

• Review your current practices. Examine your current service agreements to make sure they are clear on price and other expectations. And consider whether registration or possession works better for your business, depending on the size of the goods and how much space you have.

• Train your staff. Ensure staff understand lien rights. You can train personnel on registration procedures, and establish clear procedures for handling customer goods.

• Set up registration systems. You can register your business with the Personal Property Registry if you haven't already. Also, take time to learn how to register a lien, and develop your own system to track registration deadlines. 

• Develop enforcement procedures. Create procedures for giving proper notices to customers who don’t pay, establish relationships with sale agents or auctioneers, and develop systems for handling sale proceeds.

Having a system in place will ensure you don’t miss any key deadlines or important documentation. Getting some or all of these things set up before you encounter problems with customer payments (every business has these!) will make enforcing a lien much easier when needed. 

Help with liens is available

Getting the help of a company that deals with liens and registration of security interests can be very helpful in registering a lien. There are many service providers in this area. Be sure to shop around. And keep in mind, a lien has to be valid in order to be registered — a service provider can only be helpful in correctly moving the process along.

You might have already done this. If not, send an email or letter letting your customer know that they haven’t paid and that the payment was due on a particular date. This helps to get the clock running on the whole process, and might incentivize them to pay up.

If you haven’t been paid for your services, you can decide to sell the goods or keep them as payment.

If you decide to sell 

You can provide a written notice to specific parties that you intend to sell the goods. You have to wait at least 30 days from the date they defaulted on payment.

These parties include the owner of the goods, the person who owes the fees (often, these are the same person), and anyone who had a registered security interest in the goods at the time the goods were left for storage. For the last one, check the Personal Property Registry to see if there are any prior claims on the goods you’re holding onto.

The notice must:

• describe the goods and the storage arrangements, 

• include an itemized statement of the charges and any expenses (more on expenses below), 

• show the amount due at the time of the notice, and 

• explain that you plan to sell the goods by a certain date, no less than 20 days from the delivery of the notice.

If you choose to keep the goods as payment

Instead of selling the goods, you can propose to the owner, any secured creditor or other lien holder that you keep the goods to satisfy the lien. If that’s what you want to do, say that in the written notice. Those people would then have 15 days to object. If you don’t hear from them, you can keep the goods. If they do object, you can move on to selling them.

You can claim other fees related to expenses

You can claim reasonable costs related to caring for the goods (like storage fees) and costs related to enforcing your lien (like any legal or registration costs). Include any expenses incurred to date in your initial notice, and then keep track of them throughout the process to ensure you.

If you decide to sell the goods, there are many ways you can do so:

• A private sale, where you seek out a buyer and sell for a reasonable or market price.

• A public auction or tender, where you notify the customer and advertise the date and time of the auction. This can be done at auction or through a tender process where interested buyers can reach out. This is often more suitable for high value items.

• A partial sale, if possible, where you sell just part of the goods.

• A lease, where you lease the item to generate payment (but you’d need the consent of the customer to do this, so it can be more difficult).

What happens after the sale

If sale proceeds are less than what's owed, the customer still owes the difference. You can still sue the customer for the remaining amount in court (here’s a guide to doing this in small claims court, for amounts between $5,000 and $35,000) .

If sale proceeds exceed what's owed, you must return the surplus to the customer. You cannot profit from the sale beyond what's legitimately owed.

Also, if you registered your lien, you have to discharge that registration within 30 days of receiving full payment. 

No. The Commercial Liens Act provides a lien for storage services, not for rental of storage space. Self-storage operators do not provide storage services; they rent space. So they would not be entitled to a lien.

You don’t lose your lien if you give the goods up. But if you do, registering your lien in the Personal Property Registry, along with having the right documentation on hand means you can still enforce your lien. Check out the guidance above for more.

Say you’ve given up the goods, but still haven’t been paid, and want to get them back. You can hire a commercial or licensed bailiff to seize the goods. Careful, though — it must be a commercial or licensed bailiff, and you have to pay the bailiff for this service to keep your lien valid.

The staff at BC Registries or the Personal Property Registry can help with questions about the registry system, like how to access it and the steps to take to register a lien on the system.

But they won’t, for example, tell you whether the information you are including in a filing is correct. This can certainly be frustrating! But they cannot provide legal advice on your particular situation — you’d need a lawyer for that.