CONSTRUCTION LIEN: Basics
Basically, a construction lien is a remedy available for someone who improves someone else’s property by way of supplying materials and or labour. If that person is owed monies for their product and or service, he/she may have a right to securitize his interest in the property that was improved until he/she is paid what they are owed.
One of the reasons the lien remedy is available is because the construction industry is one where materials and services are supplied on credit. Often, a contractor and an individual or a contractor and a sub-contractor will enter into a contract for the supply of materials and labour required for a construction project and typically a deposit is paid and the remainder of payment is either advanced in stages as the project progresses or at the completion of the project. The nature of the construction industry is fraught with many potential disagreements, delays and variables.
What is lienable in a construction lien is an interesting and lengthy discourse, however the general rule is found in Section 14 of the Construction Lien Act R.S.O. 1990 (the “Act”) which simply provides that a person has supplied services or materials to an improvement, has a lien against the interest of the owner in the premises improved for the price of the services or materials. Through case law, the courts have held that the materials and or services must go towards actually conferring a benefit to the owner of the premises and that the improvement have an integral element to the premises. For example, assembly machines bolted to a factory floor are not lienable because the machines are not an integral element to the structure of the premises.
Time lines are critical in a lien. According to Section 15 of the Act, a lien arises upon the supply or lienable services or materials to an improvement. Once a lien arises, it must be preserved within forty-five (45) days of completion or abandonment. Preservation happens when a Claim for Lien is registered on title of the subject property. In order for the lien to continue, a preserved lien must be perfected. Perfection occurs when a construction lien statement of claim is filed with the Ontario Superior Court of Justice within forty-five (45) days of the last day the lien could have been preserved.
Many construction industry clients of Levy Zavet PC are quick to decide that they want register a lien on a subject property. However, we make sure that they understand that simply preserving a lien does not guarantee or force a debtor to pay. In cases where a debtor is in the process of selling the subject property, only preservation may force their hand because a prudent buyer would not take title to a property with a registered lien. However, if the debtor is not selling the property, a preserved lien will expire after forty-five (45) days. Therefore, a claimant must be prepared to go the distance which can sometime mean a lengthy trial. The monies involved in a lien claim should be sufficient enough to warrant this, otherwise, a claimant may be better suited to initiate an action in small claims court which is much more expedient that a construction lien trial. However a small claims action does not securitize a lien claimant’s interest in a subject property.