CONSTRUCTION LIEN BASICS
By ALLISON J. CHERON , (former) Civil Litigation Department
There is a Statute in Ontario called the Construction Lien
Act which creates a lien in favour of those who have supplied
services or materials to a job site for an owner, contractor
or subcontractor. The lien is only for the price of the
services or materials. You can claim interest and legal
costs in your action, but they are not included in your
Claim for Lien. This Statute was created to prevent owners
from getting the benefit of the supply of services, materials
or labour without paying for them. Therefore, a lien claimant
may get certain preferences over other creditors of the
person who owes them the money.
The first step is to determine who is the owner of the property
on which the work has been done. You must also determine
the legal description of the property. In calculating the
amount of your lien, you should remember that the Construction
Lien Act limits the lien of the contractor to the amount
owing for the work done for that particular improvement.
In a case where there is a certificate or declaration of
substantial performance, a contractor’s lien rights
expire at the end of 45 days following the earlier of the
date on which a copy of the certificate of declaration of
substantial performance is published in a construction trade
newspaper and the date the contract is completed or abandoned.
Where there is no publication of a declaration of substantial
performance, a contractor’s lien rights expire at the
conclusion of the 45 day period following the earlier of
the date the contract is completed or the date the contract
is abandoned. If a lien is not preserved within the applicable
period of time, the lien is lost and cannot be revived.
If is important that the Claim for Lien be completed properly.
You will also be required to swear an Affidavit of Verification
with respect to the details of your Claim for Lien. Registering
a Claim for Lien in the prescribed form in the Land Registry
Office where the lands are located preserves the lien. In
some cases, where the lands are owned by the Crown, or the
work was done on a public street or highway, the Claim for
Lien is not registered. In those cases, written notice of
the lien is served in accordance with the Act.
Further steps must be taken to perfect the lien. A lien
claimant’s rights expire 45 days following the last
day on which his or her Claim for Lien could have been preserved.
You perfect the lien by issuing a Statement of Claim in
the Ontario Court (General Division). If the lien attaches
to land, you must also register a Certificate of Action
against the land. The Construction Lien Act says that the
Statement of Claim must be served within 90 days of the
date it is issued.
We recommend that you consult a lawyer with respect to
commencing an action. In addition, the Rules of Civil Procedure
for the Ontario Court (General Division) say that a corporation
must be represented by a lawyer. Therefore, unless you operate
under a sole proprietorship or a partnership, you will not
be able to represent yourself in court.
After an action is commenced, your lawyer will try and
resolve matters with the owner or the general contractor.
If that is not possible, further procedural steps must be
taken. The lien will expire two (2) years after the Statement
of Claim is issued if the action is not set down for trial
or an Order for the trial of the action is not obtained.
In order to avoid problems developing, we recommend that
contractors and subcontractors review their contracts with
a lawyer before signing them. In addition, we recommend
that they consult their legal counsel as soon as problems
getting paid develop. It is very difficult for the lawyer
to obtain the necessary information and register a proper
lien if a lawyer is not consulted until just before the
expiry of the 45 day period. While most people would obviously
prefer avoiding the expense of involving lawyers to collect
amounts owed to them, sometimes a lien is the only protection
available to ensure payment and it is important that you
contact a lawyer early enough that the lawyer can obtain
the necessary information to register a lien within the
time period. A lien allows for the sale of the land and
payment of the lien from the proceeds, in some circumstances.
Therefore, it is better protection that just a judgment
against somebody who might not have any money to pay the
judgment.
If you would like further information about Construction
Liens, or require a lawyer to assist you with respect to
a lien claim, please do not hesitate to contact our civil
litigation department.
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The above is not intended to constitute
legal advice. Please contact a lawyer to clarify your
legal rights.
