For those involved in Ontario’s multi-billion-dollar construction industry, the trickiest part of a project isn’t always in the planning, design,or execution phase: it’s getting paid.
However, in construction liens, the industry has its own flexible, streamlined and powerful enforcement mechanism, reflecting the unique needs of such a cash-intensive and time-sensitive business.
In basic terms, a lien is a legal claim registered on the debtor’s title that remains in place until the debt is paid, unless a court orders otherwise, and which must be satisfied first from the proceeds of any future sale of the asset.
In this post, we will review the most frequently asked questions our law firm receives about construction liens and provide straightforward answers to help you confidently navigate this essential aspect of the construction industry.
Who can register a construction lien?
General contractors are among the most common users of the construction lien process, but Ontario’s Construction Act opens the door to any person under contract who has supplied services or materials for the “improvement” of the property, which could include alterations, additions, repair work, or even complete or partial demolition.
That means a much wider group of construction professionals — including sub-contractors or architects — may be able to obtain a lien on a property depending on the precise nature of the work they were hired to do on the property.
How long do I have?
In keeping with the overall speediness and efficiency of the process, claimants need to move quickly to pursue a construction lien against a property owner.
There are two critical deadlines for claimants to keep in mind. If you miss either of the limitation periods for registering a lien, you may still be able to make a regular civil claim against the property owner in Superior Court, but your chances of recovery will be on much shakier ground without the security of a registration on title. That’s especially true if other contractors or subcontractors successfully registered their own liens, putting themselves at the front of the collection queue when the property is sold.
- Under the first step, known as “preservation” of a lien, claimants have just 60 days to register their lien on title from the date their contract was completed, substantially performed, abandoned or terminated. The clock begins ticking from whichever of these four possible events happened earlier.
- The second stage of the process, known as “perfection” of the lien, involves commencing an action in court or registering a certification of action to enforce the lien. This must have occurred within 90 days of the last day on which the client could have been preserved — in other words, 150 days after the date of completion, substantial performance, abandonment, or termination.
Can the property be sold with liens on title?
As speedy as the construction lien process can be, not all disputes will be resolved before a deal is in place to sell or refinance the subject property. In these cases, the outstanding liens do not have to be a barrier to the sale.
The Construction Act allows a lien to be removed from title in exchange for a cash bond worth 125 per cent of the lien’s value. The funds are paid into court and held until the case is resolved, providing security for the full amount of the contract plus legal fees while allowing the property to change hands or allow a refinance.
What information should I give to my lawyer?
Good recordkeeping is essential to pursue a construction lien against a property owner. To meet the strict deadlines laid out by the Construction Act, your lawyer will need certain critical information at short notice:
This includes the address of the property where the work was done, the names of the parties you supplied with services or materials, the total price of the contract and the amount outstanding, as well as the start and end dates of the project and the scope of the work performed.
If you’re having trouble collecting payment for your work on a construction project and would like to discuss your situation with a lawyer, please reach out to a member of our team.