A Construction Lien Primer

Parties Entitled to a Lien

The Construction Lien Act, R.S.O. 1990, c. C.30 (the “Act”) governs the rights of a party in Ontario that has supplied services or materials to improve land. In short, the Act sets out strict deadlines that must be followed should such a party wish to assert a lien claim against any land to which services and materials were supplied. In the interpretation, being section 1(1), to the Act:

1. "improvement” means, in respect of any land, (a) any alteration, addition or repair to the land, (b) any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works, or (c) the complete or partial demolition or removal of any building, structure or works on the land;
2. “materials” means any moveable property that (a) becomes or is intended to become, part of the improvement, or that is used directly in the making of the improvement, or that is used to facilitate directly the making of the improvement, and (b) includes equipment rented without an operator for use in making of the improvement; and
3. “supply of services” means any work done or service performed upon or in respect of an improvement, and includes (a) the rental of equipment with an operator, and (b) where the making of the planned improvement is not commenced, the supply of a design, plan, drawing, or specification that in itself enhances the value of the owner’s interest in the land.

Parties entitled to a lien therefore normally include contractors, subcontractors, labourers, suppliers of materials, lessors of equipment, engineers, and architects.

Preserving a Construction Lien

The first step to a party asserting a lien claim under the Act involves ‘preserving’ the lien. Specifically, preserving a lien is achieved by the registration of a Claim for Lien within forty-five days after the earliest of either the last day of substantial work by a party on land, or, if the term of the contract continues, publication/posting of a certificate of substantial performance of a contract in the publically accessible Daily Commercial News. The applicable commencement date for the preservation period is outlined in section 31 of the Act. While the commencement date for preservation of a lien may vary as outlined above, the resultant deadline is strictly enforced. If a party’s lien is not preserved within the forty-five day period, it will expire and any lien claim will be lost.

Perfecting a Construction Lien

Once a party has preserved a lien claim, the next step enforcement steps that must be taken are the commencement of an action in the Ontario Superior Court of Justice followed by, typically, registration of a Certificate of Action against the title of the relevant land. The combination of these measures is called ‘perfecting’ a lien. To perfect a lien, an action must be commenced, and the Certificate of Action registered, within forty-five days of a lien having been preserved, in accordance with section 36(2) of the Act. Put another way, an action must be commenced within ninety days of either the last day of substantial work by a party on land, or publication/posting of a certificate of substantial performance of a contract. It is only in rare instances that a Certificate of Action does not need to be registered, such as, for example, when a lien is being placed on land owned by the Crown, or when a lien has been vacated prior to perfection. While a lien claim may be perfected by ‘sheltering’ under the perfected lien of another lien claimant if the liens relate to the same land improvement, it is generally advisable that each party commence a separate action.

Lastly, it is important to note that an action commenced to perfect a lien must be ‘set down’ for trial within two years of the action having being started. If a trial date is not set within that time frame, a lien claim will become unenforceable.

Discharging and Vacating a Lien

Assuming the preservation and/or perfection of a lien had the desired effect of compelling payment for work completed, discharge of a lien may occur in accordance with section 41 of the Act. Particularly, section 41 stipulates that a preserved or perfected lien can be discharged by a release registered, in the form prescribed by the regulations to the Act, on title, or by withdrawal in writing to the party to whom written notice of a registered lien was given.

Alternately, if an Owner of a property, or any other implicated party, wishes to dispute a lien preserved or perfected, application may be made to the Ontario Superior Court of Justice, without notice to any party who registered a lien, to obtain an order vacating registration by posting security in lieu of registration. In accordance with section 44(1) of the Act, the security posted to vacate a lien must be equal to the full amount claimed as owing in the associated Claim for Lien, and, as security for costs, the lesser of $50,000.00 or twenty-five percent of the amount claimed as owing in the Claim for Lien. It is important to note that the posting of security in exchange for removal of a registration of lien does not constitute an admission of liability or validity of a lien claim.

Final Remarks

The deadlines imposed by the Act should be followed explicitly, as they are strictly enforceable. A party should not presume a lien claim will be protected because of any ongoing dispute negotiation or mediation. This point was made clear in the case of Logger Town Homes Limited v. Jalil Sadeghian, 2013 ONSC 6056. When Logger Town Homes Limited attempted to argue that it had negotiated an extension to register its lien with the Owner, Jalil Sadeghian, Justice Wilton-Siegel of the Divisional Court specifically held that to permit such an extension of the deadline for preserving a lien is contrary to the purpose of the Act. As such, the lien claim of Logger Town Homes Limited failed despite the consented to extension.

If you have any questions about construction liens, or any other litigation matter, please contact us.

The foregoing should not be considered to be legal advice and should not be relied upon as such. Please consult a lawyer to get advice and an opinion on your unique circumstances.