Liening for Tenant Improvement
Can a lien be pursued against a landlord’s interest for tenant improvements?
The Alberta Court of Appeal in Xemex Contracting Inc v Aspen Properties (Northland Place) Ltd, 2025 ABCA 49 clarified when a landlord’s fee simple interest is vulnerable to a construction lien arising from tenant improvements. In Xemex v Aspen, the Court of Appeal held that a contractor hired by a tenant could not maintain a lien against the landlord because the landlord did not receive a direct benefit from the work and there was no privity and consent between the contractor and landlord within the meaning of Alberta’s Prompt Payment and Construction Lien Act.
Key Facts & Issue
Aspen (landlord) leased space to Koor (tenant). Koor retained Xemex to carry out leasehold improvements, funded in part by a tenant-improvement allowance under the lease.
Koor stopped paying. Xemex abandoned the job and registered liens against both Koor’s leasehold interest and Aspen’s fee simple title, then looked to Aspen for payment.
The core appellate question: did Aspen qualify as an “owner” under the PPCLA such that its fee simple interest was lienable. In other words, the work done for Aspen’s direct benefit or with its privity and consent?
The Court’s Decision
The Court of Appeal dismissed the contractor’s appeal and held the lien against Aspen’s fee simple was invalid, including because:
No “direct benefit”: The space was left incomplete and in disarray. Aspen would have to spend significant money to make it marketable. That is not an immediate, tangible benefit to the landlord. A clause in the lease stating improvements became Aspen’s property did not, on these facts, create a direct benefit. The Court emphasized that turnkey, ready-to-lease improvements might be different, but unfinished, unusable work is not.
No “privity and consent”: Aspen’s involvement, including approving plans, supervising for building standards, or insisting on manual, did not amount to direct dealing with the contractor. Landlords can supervise to ensure orderly and safe construction without becoming exposed to lien liability.
Accordingly, the Court held that was not an “owner” under the PPCLA and the lien against its fee simple title was not valid and enforceable.
Practical Takeaways for Contractors
Give landlord notice up front if you intend to preserve the possibility of liening the fee simple; absence of notice and direct dealing will weigh against you.
Assess “benefit” realistically: if the work could be left incomplete or bespoke to a single tenant, the landlord may gain no immediate, marketable benefit—weakening any lien against fee simple.
Contracting chain matters: where feasible, secure payment terms or guarantees with the tenant (or require landlord acknowledgements) rather than relying on a future lien against the fee.
Practical Takeaways for Landlords
Set standards without creating privity: supervising for safety, building rules, or adherence to a tenant-improvement manual generally does not equal “privity and consent.” Keep involvement at policy/oversight level; avoid direct payment flows or instructions to the contractor.
Document the posture: leases and correspondence should reflect that improvements are the tenant’s project and cost—helpful evidence if lien exposure is later alleged.
Practical Takeaways for Tenants
Manage allowances transparently: landlord-funded allowances do not automatically make the landlord an “owner” vis-à-vis the contractor. Ensure progress draws and proof-of-payment protocols are clear to avoid mid-project cash crunches.
Future Implications
Courts signaled that a completed, turnkey fit-out that enhances marketability may constitute a direct benefit to the fee owner. Expect future disputes to turn on whether the finished state of the work delivered an immediate, tenant-agnostic benefit to the premises.
This publication has been prepared for general information only and does not constitute legal advice or create a solicitor-client relationship. No reader should act or refrain from acting on the basis of any information included herein without seeking appropriate legal or other professional advice based on their particular circumstances. LEGALLY BUILT accepts no responsibility for any loss or damage that may arise from reliance on the information contained in this publication.