Construction Liens – A Short Guide

A construction lien is a legal claim against a property for unpaid work or materials supplied during a construction project. The lien is registered on title of the property and will only be vacated if the lien expires (described in detail below); if the lien amount is paid into court; by agreement of the parties; and/or by court order.

The intent of the lien process is to provide some security for amounts owed to a contractor, subcontractor, or supplier. If you are a contractor, subcontractor, or supplier in Ontario and are facing payment issues, you may consider filing a construction lien to protect your interests. Hereis a short guide to construction liens in Ontario.

The Construction Act

You should begin by familiarizing yourself with the Construction Act (formerly the Construction Lien Act). It governs the rights and responsibilities of parties involved in a construction project, including the process for filing and enforcing construction liens. If you have any questions or uncertainties with respect to the Construction Act, consider consulting a construction lawyer for clarification.

Are you eligible for a lien?

Not everyone involved in a construction project has the right to file a lien. Generally, those who have supplied labor or materials, or have performed services, have the right to file a lien. This would include contractors, subcontractors, and suppliers.

Lien Timelines

Construction liens need to be registered within 60 days of a “triggering event”.

In instances where there is a certificate of substantial completion, the “triggering event” is the earlier of the date on which a copy of the certificate or declaration of the substantial performance of the contract is published; the date the contract is completed, abandoned or terminated; or the date on which the person last supplied services or materials to the improvement.

Note that all of the above triggering events have additional factors that need to be considered when calculating timelines. For example – when considering the date on which you “last supplied services or materials to the improvement”, the last supplied services or materials need to be significant in the grand scheme of the project in order to extend your lien rights. This means that you could not, for example, do minor repair work and extend your lien rights.

Once the lien is registered, it must be “perfected” by commencing a court action and issuing a certificate of action within 90 days after the last date on which the lien could have been registered.

To preserve your lien rights, it is absolutely necessary to follow the strict timelines set out in the Construction Act. If your lien is not registered within the prescribed lien timelines, there is no grace period or forgiveness – your lien rights will have been forfeited.

Providing Notice of the Lien

If there is sufficient time between the payment issues arising and the deadline for registering a lien, you may want to consider providing a notice of lien to the proposed payer in the prescribed form (“Form 1” of the Construction Act forms). While this will not extend your lien rights, it will force the proposed payer to retain the full amount of payment amount claimed as owed.

A Notice of Lien should be served upon the owner of the property, the general contractor, and any other relevant parties. This notice should include details about the work performed, the amount owed, and other pertinent information.

I’m Out of Time – Now What?

If your lien rights have expired, you may be worried that you have no more recourse against the entity that you believe owes you payment. Fortunately, this is not the case. While you will not be able to obtain the security of a construction lien and pursue payment in that manner, you can still start a lawsuit for breach of contract.

Seek Legal Advice

Construction liens can be complex, and the process involves strict timelines and legal requirements. It’s advisable to seek legal advice to ensure that you are following the correct procedures and protecting your rights effectively.

Carroll Heyd Chown LLP has lawyers knowledgeable and practiced in Ontario construction law, offering the expertise needed to safeguard your interests and navigate the complexities of the construction lien process successfully.