What is a Construction Lien?
Under Part III of Ontario's Construction Act, a construction lien is a registration on title to a property and is available to any person who is under a contract and has supplied services or materials to the “improvement” of the property in Ontario. In accordance with the Act, an “improvement” to the land includes, but is not limited to: an alteration, addition, capital repair, demolition or installation.1
A lien provides all people working on the building process with a legal claim on the property, and thus, a method to collect money owed to them. It allows the lien claimant to sell the debtor's property and seek payment before anyone else. It is beneficial in that it provides “security” because the debtor's asset will belong to the lien claimant, especially in the event of bankruptcy. A lien can also entitle payment of holdback funds that are to be retained.
A lien's value is the price of services and materials that one provides to the project and includes any direct costs incurred as a result of the delay.2 However, the value does not extend to interest or any indirect costs like overhead costs for a project that has been delayed.3 A lien can be applied when one does work for a tenant, public road or street, or a provincial and municipal property. With respect to public infrastructure, and provincial or municipal government property, a lien does not attach to the title of the property, instead, it attaches by writing to certain people.
To pursue a construction lien, an individual must preserve it by registering the lien against title to the property or providing a copy of the lien to the owner of the land (i.e. when the land is owned by the provincial or municipal government). The lien of a contractor must be registered no later than 60-days from either the date on which a copy of the certificate or declaration of the substantial performance of a contract is published (if there is one), or the date the contract is completed, abandoned or terminated.4 The same limitations for preserving a lien can be applied to a subcontractor or sub-subcontractor, in addition to, no later than 60-days from: (1) when the person last supplied services or materials to the improvement; and (2) when the subcontract is certified to be completed.5
Once a lien is preserved, it must be perfected and enforced by commencing a court action in the Superior Court of Justice. The Act states: “a lien that has been preserved expires unless it is perfected prior to the end of the 90-day period next following the last day, under section 31, on which the lien could have been preserved.”6 When a lien attaches to the premises a lien claimant must also register a certificate of action on the title.
What happens if you miss a deadline?
If a lien claimant misses a deadline, they will lose their right to lien and may not see any payment. Unless a lien is preserved and perfected under the above timelines, it will expire.7 If one loses the enforcement muscle of a construction lien by missing the deadlines, their recourse is through traditional enforcement by commencing a statement of claim.
In addition, according to section 37 (1) of the Act, a perfected lien also expires immediately after the second anniversary of the commencement of the action that perfected the lien unless:
- An order is made for the trial of an action in which the lien may be enforced; or
- An action in which the lien may be enforced is set down for trial.8
When a lien has expired under the section 37 (1) provision, a motion may be made and the court shall make an order dismissing the action to enforce that lien or order that the registration of a claim for lien be vacated.9 If a court declares expiration and dismisses the action, then any amount that has been paid into the court in respect of that action would be returned to the person who paid the amount into court, and any security in respect of that action shall be cancelled.10 As such, a discharge of a lien is irrevocable and the discharged lien cannot be revived .11
“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”
1 The Construction Act, R.S.O. 1990, c. C.3, s. 1(1).
2 Ibid s. 1(1).
3 Ibid s. 1.2.
4 Ibid s. 31 (2)(a).
5 Ibid s. 31 (3).
6 Ibid, s. 36 (2).
7 Ibid, s. 31 (1) and 34 (2).
8 Ibid, s. 37 (1).
9 Ibid, s. 46.
10 Ibid, s. 46 (4).
11 Ibid, s. 48.
48 A discharge of a lien under this Part is irrevocable and the discharged lien cannot be revived, BUT no discharge affects the right of the person whose lien was discharged to claim a lien in respect of services or materials supplied by the person subsequent to the preservation of the discharged lien.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.