Section 3: Labour Relations and Record Keeping

Lesson 5: Securing and Collecting Debts

Credit is of considerable importance to the economy and is used by governments, businesses, and consumers for a variety of reasons. Governments use credit to build or buy office space and equipment, and to maintain schools, hospitals, roads, airports, water reservoirs, and recreation areas. Businesses utilize credit to pay for land, offices, plants, equipment and raw materials, and they offer it to their customers as a means of increasing sales. Consumers take advantage of credit for the purposes of buying houses, cars, furniture, clothes, meals, groceries, vacations, and just about any other product or service you can name.

The above serves to illustrate that credit plays an integral role in our society. In fact, a considerable industry has developed around the practice of lending money and granting credit, and various procedures have been established to protect the interest of the creditor. Legislation to control and regulate credit transactions are primarily under provincial jurisdiction.

Methods of Securing Debt

Creditors need to take certain steps to protect their interests, as the contract agreement does not necessarily guarantee they will be repaid. Therefore, in order for debtors to persuade creditors to lend them money, they must be able to provide some form of assurance that they will be repaid even in the event of insolvency . This normally requires some form of security, and several means have been developed in order to satisfy this requirement.

Both real and personal property can be used to create security. Real property pertains to land and buildings. Personal property, on the other hand, may take the form of tangible chattels (personal property) or intangible rights to collect a debt.

Like real property, personal property can be used as security. This provides the creditor with the right to seize the property upon default. In the meantime, the debtor is able to use the property and derive enjoyment from it.

Builder's Lien

A builder's lien (also referred to as a mechanic's or construction lien) is designed to protect the right of workers, contractors, and suppliers. Legislation allows the aforementioned parties to claim an interest in property for the goods (material) or services (labour) they integrate into it. The Builder's Lien Act regulates this type of security. The right to claim a lien arises when work is done on the property or when materials are delivered. A lien claim must be registered in the Land Registry Office in the jurisdiction where the land is situated. A notice of the lien must be given to the property owner, as well.