In the August 1990 and January 1991 editions of Construction Werks we looked at the law of liens as we believed that liens cause uncertainty and debate amongst contractors. In this edition we re-visit the topic of liens from a different perspective, namely that of the sub-contractor. To the extent that this edition of Construction Werks overlaps with previous editions we believe that the principles bear repetition. This edition will be of interest not only to those in the construction industry but also to those involved in property development generally.
A lien is the right to retain physical control over property owned by another to secure payment for what one has expended in money or money’s worth on that property. A lien is nothing more than a form of security for payment which arises by operation of law.
There are two types of liens –
- debtor and creditor liens
- real liens
A debtor and creditor lien secures an amount owing by a debtor to a creditor in terms of a contract for expenses incurred by the creditor on the property pursuant to the contract. Real liens have their roots in the doctrine that nobody may enrich himself at the expense of another. Unlike a debtor and creditor lien a real lien does not flow from a contract. A real lien arises where a person expends money or labour on another’s property which is necessary to maintain or protect that property or which enhances the market value of the property if the owner of the property is enriched thereby.
This article covers real liens because except in certain exceptional circumstances the owner of property shares no contractual privity with the sub-contractor. The owner’s contract is usually with the contractor only.
Requirements for a sub-contractor to have a lien
For a sub-contractor to have a lien in respect of money or money’s worth which he has expended on the owner’s property, he must establish that –
- he is in possession of the property; and
- the owner has been enriched by his expenditure (and that he himself has consequently been impoverished).
We will begin by looking at the second requirement, ie the enrichment of the owner.
Many sub-contractors wrongly believe that because they have expended money on the property of another they automatically have a valid lien over that property. This is not necessarily the case as often the owner of the property has not been enriched as he has paid the contractor in terms of the contract between them. Even if his property has been improved by the efforts of the sub-contractor the owner will not be enriched if the value of his total estate has decreased because of payments to the contractor. If this is the position the sub-contractor will not have a lien over the property. This is the principle laid down by the Appellate Division in WYNLAND CONSTRUCTION (PTY) LIMITED v. ASHLEY-SMITH EN ANDERE 1985 (3) SA 798 (A). This was a decision of the full bench of the Appellate Division delivered by the then Chief Justice, Mr Justice Rabie. Sub- contractors should take alternative steps to ensure that they are paid rather than to rely on a lien which may not exist.
The second requirement for a valid lien (whether the lien is a real lien or a debtor and creditor lien) is possession. In order to hold a lien the party claiming the lien must firstly be in physical control of the property and, secondly, have the intention of possessing that property. Our courts will only consider a party to be in physical control if the possession is continuous and uninterrupted. Although it has been held that a brief absence from the property, eg absence from a building site overnight, will not destroy physicalcontrol. Caution should nevertheless be exercised when leaving the property. Fortunately, it is possible to exercise physical control over property without actually being there. For example, it may be sufficient to place a representative/security guard on the property or to retain the keys to a building if it is close enough to completion to be locked.
A final point that is often lost sight of is that a lien is merely a form of security for payment. An owner can always regain possession of his property from the holder of a lien by furnishing alternative security such as a bank guarantee for the amount owed.
The preceding portion of this article has demonstrated that the sub-contractor runs the risk of not having a lien if the owner has paid the contractor. If a sub-contractor is in possession of the property but does not have a valid lien over it because the owner has paid the contractor the owner is not entitled to take the law into his own hands and deprive the sub-contractor of such possession. To do so would be an act of spoliation and the sub-contractor may then approach the court to have possession restored by means of a mandament van spolie. However, an owner can regain possession by court action.