Our general contractor filed for bankruptcy mid-project. What are our rights under the Builders' Lien Act to recover deposits in Alberta?

In Alberta, your rights are protected under the Prompt Payment and Construction Lien Act (PPCLA), not the Builders' Lien Act. When a general contractor files for bankruptcy mid-project, you have several legal avenues to recover deposits and protect your interests, though the process can be complex.

Immediate Steps and Lien Rights

Under Alberta's PPCLA, you may be able to place a lien on your own property to preserve funds for completion of the work. This seems counterintuitive, but it's a legal mechanism to protect money that should go toward finishing your project rather than disappearing into the bankruptcy estate. You have 45 days from when the contractor's work substantially ceased to file a lien, so time is critical.

Any subcontractors or suppliers who haven't been paid by your bankrupt general contractor can also place liens on your property. However, as the property owner, you're protected by the concept of "no double payment" - you shouldn't have to pay twice for the same work or materials. If you can prove you already paid your general contractor for specific work or materials, you may not be liable to pay those subcontractors again.

Holdback Requirements and Bankruptcy

Under the PPCLA, you should have been holding back 10% of all progress payments (called "lien holdback") until 60 days after substantial completion. If the project isn't complete due to bankruptcy, this holdback money should still be in your possession and can be used to pay legitimate subcontractor and supplier claims or to help complete the work. If you released holdback early or didn't maintain proper holdback, you could be personally liable for subcontractor claims up to the amount you should have held back.

Recovery Through Bankruptcy Proceedings

Your deposit and any overpayments become unsecured claims in the bankruptcy proceedings. Unfortunately, unsecured creditors typically recover very little in construction company bankruptcies - often just pennies on the dollar. You'll need to file a proof of claim with the bankruptcy trustee, but don't expect significant recovery through this route.

Insurance and Bonding Options

Check if your contractor had performance bonds or if your homeowner's insurance includes coverage for contractor bankruptcy or abandonment. Some insurance policies include limited coverage for situations like this. If the contractor was working on a new home, they should have been registered with the Alberta New Home Warranty Program (ANHWP), which provides some protection, though this typically applies to new construction rather than renovations.

Next Steps and Legal Action

Contact a construction lawyer immediately to review your contract and assess your specific situation. The lawyer can help you navigate the lien process, deal with subcontractor claims, and determine if you have grounds for legal action against bonding companies or other parties. Document everything - all payments made, work completed, materials on site, and communications with the contractor.

You'll also need to secure your property and any materials on site, as these may be claimed by the bankruptcy trustee. Take photos of all work completed and materials delivered before they can be removed.

Find verified contractors in our Calgary directory to get quotes for completing the abandoned work - you'll need these estimates for insurance claims and legal proceedings.

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