The construction sector is a massive industry in Canada, employing approximately 1.2 million men and women or 7.1 of the Canadian workforce. The construction industry in Ontario, in particular, is a multibillion-dollar-industry that imports billions of dollars per year, more than half of which come from the United States. If U.S. based businesses are selling to the Canadian construction industry, there’s a good chance that they will be selling into Ontario.
For this reason, the Government of Ontario has long recognized that the construction industry is a volatile industry in need of some measures of protection for those companies and individuals supplying labour and materials to jobsites. The latest method of protection under which suppliers can obtain security for unpaid materials and services is known as the Construction Act. The Construction Act serves to provide a complete overhaul of the existing Construction Lien Act that was enacted in 1983, with minimal amendments to introduce prompt payment and adjuration. Essentially, it creates a procedural scheme through which disputes can be resolved in a more summary fashion than that which is ordinarily available.
In this article, we’ll be reviewing everything you need to know about filing a lien under the Construction Act, including who can file a lien, how to maintain your lien, and what you can do to preserve your lien rights in Ontario. In the event that your construction business is involved in a dispute as a result of a lien registered against the project owner’s property, it’s important for you to get in touch with one of the Toronto construction dispute attorneys from Cotney Canada as soon as possible.
What Is a Construction Lien?
A construction lien is a claim made against a property by a contractor, subcontractor, or other construction professional who has not been provided payment for work performed or materials provided for that project. It may be easier to think of it as a mortgage. When you obtain a mortgage, the bank loans you money and registers the mortgage on the title to your home. In the event that you fail to pay your mortgage, this gives the bank the ability to sell your home and get paid before anyone else.
A construction lien gives the lien claimant this same ability. Once filed, the lien encumbers title to the owner’s property, preventing it from being sold or mortgaged until the lien is dealt with. In the event that the lien is not dealt with, the lien claimant can have the property sold and use the proceeds to pay the debt. For any assistance understanding the lien requirements, filing a lien, or maintaining a lien after it has been filed, get in touch with a Toronto mechanic’s lien law attorney.
Who Can Lien?
There are three major requirements that a party must establish in order to be entitled to a lien in Ontario. First, the party must supply services or materials. Second, the supply of these services or materials must be to an improvement. And third, the supply of these services or materials to the improvement must be for an owner, contractor, or subcontractor. Below, we go over each of these requirements in greater detail.
Supply of Materials
Under the Construction Act, supplying services includes not only those supplied by individuals directly to an improvement but also the supply of rental equipment, designs, plans, drawings, or specifications, so long as those designs or plans enhance the value of the improvement. Supply of the materials, on the other hand, is exclusive to that of moveable property that becomes part of the improvement, is intended to become part of the improvement, is used directly in the creation of the improvement, or is used to facilitate the improvement. This would include the supply of rental equipment without an operator.
There has been a great deal of disagreement in Ontario over the last decade as to where the “improvement” line is drawn. The latest amendment to the Construction Act, for example, expanded the definition to include any of the following means of improvement:
- Any addition, alteration, or repair to the land
- Any construction, erection, or installation on the land or structure on the land that is essential to its intended use, including the installation of equipment
- The complete or partial demolition or removal of any building, structure, or works on the land
Under these new stipulations, in the construction of an assembly plant, almost all the services and materials required to get the line up and running would be lienable.
Owner, Contractor, or Subcontractor
Not unlike the disagreement over “improvement,” there has been a great deal of debate over who can be considered an “owner” for the purposes of the Construction Act. This is likely because the concept of ownership as a whole has grown more complex over time due to an increase in the types of contractual agreements in use. Construction is also sometimes carried out under “licenses” that grant access to the land without an interest in the land.
Despite this debate, the definition of “owner” has not yet been amended. Instead, an owner means any person at whose request and upon whose credit, behalf, with whose consent, or for whose direct benefit, an improvement is made to the property. Ideally, there should be only one owner with respect to the improvement, and the owner should be the entity that requests the improvement from the contractor. If you’re unsure whether the entity that has requested an improvement on the property qualifies as an owner under the Construction Act, don’t hesitate to reach out to a Toronto construction lien lawyer.
How Do I Preserve and Perfect my Lien?
Once a material or services provider has determined that it has a lien, it must take steps to preserve and perfect the lien within the strict time limits under the Construction Act. Under section 31 of the Construction Act, contractors have 60 days within which to preserve their liens, counting from either the declaration of substantial performance, publication of the certificate, or the contract is completed or abandoned. Once the lien has been preserved, the next step in maintaining the lien is “perfection,” in which a statement of claim is issued in respect of the work or materials and a certificate of action is registered on title to the property materials or services were supplied to. This process must be completed within 150 days of the earliest of the triggering events previously described.
Failure to properly maintain a lien is a common problem faced by construction professionals in Ontario, Canada. For this reason, it’s important to always consult with one of our Toronto construction lien lawyers to obtain an assessment of your lien rights. We recommend doing this at the soonest hint of a possibility of a payment dispute arising because pursuing an improper lien can lead to damages against any party involved in registering the lien (including that party’s representative).