Construction liens are a way to ensure that owners, contractors or sub-contractors pay the people they contract to do work for them. There are few other protections for contractors or subcontractors to ensure that they get paid, so the provincial and territorial laws tried to balance that by creating act that would offer some kind of financial protections for them.
Every province and territory has an act dealing with construction liens. Typically, statutes that deal with liens are usually known as the builder’s lien act or construction lien act.
What the builder’s lien act mandates, amongst other things, is that there be monetary holdback that owners, contractors and sub-contractors are supposed to hold until the end of the job, providing all contracts have been satisfied or a certificate of potential performance has been issued. In most provinces that holdback is 10% of what the materials and the work are worth.
For example, in Alberta, the lien has to be held until 45 days from:
- The date that a certificate of substantial performance of the contract was issued; or
- Where a certificate of substantial performance is not available, then the date of completion of the contract.
Time limits for making a claim or enforcing a claim
There are quite a few time limitations placed on registering a claim or enforcing a claim.
Each provincial or territorial act sets out specific time limitations. Again, while lien acts may be similar, they also differ and you will have to consult the lien act of your province or territory to get the correct time limits and due dates.
In Ontario and British Columbia, the person making the construction lien claim, or claimant, has no more than 45 days to register the claim after the contract has been completed, abandoned or terminated.
In terms of enforcing the lien, in Ontario, that has to be done within a 45 day period as well. Those 45 days start from the last date that the lien could have been registered. If either these time limits is not upheld, the right to claim a lien will be lost.
What happens after a construction lien claim has been made?
Once a construction lien claim has been made, the lien is placed against the property of the person or company against whom the claim has been made. In order for the person or company to get rid of the lien, they have to pay the exact amount or a negotiated amount.
If the person or company chooses to ignore the lien, they won’t be able to do so for too long. They cannot sell the property with a lien on the title. Generally under provincial law, a property can’t be transferred from a seller to a buyer if there is a lien.
It’s also important to be mindful that dealing with a lien against a property can take quite a bit of time.
If you have been hit with a construction lien claim or are planning to file one, contact a construction lien lawyer as soon as possible.
Construction Lien Act Ontario
Builder’s Lien Act Alberta