The involvement of many parties with a stake in the game can make the construction process complex, and often generates disagreements. A construction lien can give parties with a legal claim security in disputes that may arise during construction projects.

What is a construction lien?

A construction lien is a legal claim against a property for the payment of goods or services supplied to improve that property. A property “improvement” includes most construction activities and essential equipment installations, though it does not typically extend to services like preventative maintenance and minor repairs. This legal tool is used by those supplying labour and/or materials to a construction project in order to minimize the risk of non-payment by encumbering the property and giving the claimant certain rights to eventually recover payment from the property.

For the lien to be of use, there are several requirements a claimant must meet. Failing to follow the rules and deadlines set out in the Construction Act can result in an obsolete or expired lien that is of no use to the claimant. Specifically, a construction lien must be first “preserved” and then “perfected”.

Preserving a lien

To “preserve” a lien, one must register the lien on title to the property to which they supplied labour and/or materials. This registration must happen within 60 days of the completion, abandonment or termination of the contract, or the publication of the certificate of substantial performance. On account of a legislation change in 2018, if the contract was entered into before 2018, the preservation period is instead 45 days. This registration can help secure payment by putting those who may seek information about the property, such as a lender or potential purchaser, on notice of the encumbrance on title. If the property is sold or purchased while a construction lien is registered on title, funds from the transaction may be forwarded to the lien claimant in order to clear the encumbrance from title.

Perfecting a lien

The lien claimant then has 90 days from the last day on which the lien could have been preserved to “perfect” the lien, failing which the lien will expire. The lien is perfected by commencing an action to enforce the lien, often by filing a Statement of Claim at the Superior Court of Justice. The claimant must also register a Certificate of Action on title, putting interested parties on notice that there is an impending/ongoing action that may impact title to the property. Pursuant to the Construction Act, if a perfected lien is not set down for trial within two years of the action having been commenced, the lien will expire.

Removing a lien

Removing a lien is often the end goal of both interested parties; the claimant wants to be paid and to no longer have an interest in the property, and the owner wants clear title to the property. “Vacating” and “discharging” are two methods of removing a construction lien from title. A lien is “vacated” if it has been removed in exchange for an alternate form of security, such as paying the relevant funds into Court. Vacating a lien removes the registration from title, however it does not end the lawsuit related to the lien. A “discharge,” on the other hand, permanently removes the claimant’s right to a lien. A lien may be voluntarily discharged by the lien claimant in light of a mutual agreement, or by motion brought by the owner of a property, for example when a lien remains on title but has expired.

If the requirements of the Construction Act are properly met, the construction lien can be a powerful legal tool to protect the interests of those who supply labour and materials for the improvement of a property. If you think you may have a claim for lien or would like to learn more about the lien process, please don’t hesitate to contact our office.

Written by Jacklyn Tuckey and Blair Tinkham