The Five W's on Construction Liens

Steven J. Gray (Articles / News)

Whether you are a contractor or a homeowner, construction liens can be both a useful tool and a burden. It is useful to understand what a lien is, and how it can impact your interests, whether related to your contractual right to be paid for your services or your property.


Who?

 

All parties involved in a construction or improvement project are part of the “construction pyramid”. The “construction pyramid” is topped off with the people who pay for the project to be done (developer or owner), followed by the people who arrange the job, do the work and supply the materials (contractors, sub-contractors, suppliers and trades). Liens affect everyone in the pyramid. If the payer (the party in the contract required to make the necessary payments) runs out of money, or refuses to pay, the payee (the party to whom payment is due), can lien the property to secure payment.

 

What?


A lien provides a remedy to the contractor/sub-contractor to ensure payment for services and materials provided for the construction/improvement. The lien holder has an interest in the property, if payment isn’t made. In its extremity, a lien holder can force the sale of the property to secure payment for services and/or materials supplied. A lien is only enforceable if properly registered according to law. To protect against lien rights, a payer is obligated to “holdback” at least 10% of the value of the work owed to the payee. This holdback is used to pay out amounts owed to the various parties, according to their priorities in the construction pyramid.

 

When?

 

As a homeowner, you are obligated to holdback 10% of the value of the work until 45 days after the completion of the project. As a lien holder, you need to properly register your lien within 45 days after the last supply of services or materials. After this critical 45-day window, the lien holder may lose all lien rights against the property, including the right to any holdbacks. 

 

Where?

 

A lien is only enforceable if registered against the precise location of the work site of the construction/improvements. As such, it is important to conduct property title searches to determine the legal description of the property where the construction/improvement work was done. Once title is ascertained, the lien needs to be properly filed with the Land Registry Office where the property is located.

 

Why?

 

Without an enforceable lien, it would be difficult to recover any payment from a payer without financial backup. An enforceable lien is the only way to preserve a claim to the holdback and to seek a claim directly against the property to ensure payment for services and/or materials. Enforcement of lien rights is highly technical. For more information, contact a lawyer experienced in lien work, to learn more about your rights and obligations, as soon as you become aware of the possibility of non-payment, or prior to commencement of a project. Timeliness is critical.

Steven J. Gray Read more of my articles Barrister & Solicitor

Steven J. Gray is a commercial practitioner with 33 years experience practicing in the general areas of commercial law. Dickinson Wright LLP is one of the oldest full service law firms in Canada carrying on practice in Canada since 1861.

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