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Posted 1998/09/10

Information about the Construction Lien Act


This article is several years old.
The author no longer practices in this area and does not give advice on this subject.




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Information in this article is not intended as legal advice.  No warranty exists as to the accuracy of any particular provisions.  Reference should be made to all applicable statutes and caselaw.  You may consult this lawyer or any other for advice. 

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Contractors and suppliers of work, services and supplies to real property have protections controlled by the Construction Lien Act.   You may find the act (R.S.O. 1990, Chapter C-30) on the World Wide Web at http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c30_e.htm.  The key provisions of the act are as follows:

  1.  A lien attaches when the work is done, regardless of privity;
  2.  As long as no one files a notice of lien, the amount of lien is limited to amount owing under contract;
  3.  The contract implies a provision for a 10% hold-back;
  4.  Filing notice in the county land registry office preserves the lien;
  5.  Further perfection of the lien requires the commencement of an action;
  6.  The act provides that rights granted under the act may not be waived.

The basic provision is s. 14 which provides that a lien attaches when work is first performed:  
  The lien applies to everyone providing services regardless of any privity of contract.  Thus a subcontractor may have a lien even if the owner has paid the contractor.  Although the lien takes effect when the work is first done, the property owner has certain protections.  The basic protection is that the lien is limited to the amount owing under the contract.  The act makes this provision: 
  While the lien is limited to the amount owing under the contract, a hold-back provision of 10% applies.  A payer must hold-back 10% of the amount due until 45 days after the completion of the work.  Thus if the contract provides for a payment of $10,000 on a given day, $1,000 must be held back until 45 days after the work is done: 
  The act provides for the expiry of the lien in s. 31.  Section 31 is complicated, dealing with such issues as the certification of completion of certain work and the way substantial completion is defined.  In simple terms it provides that the lien, unless preserved, expires 45 days after the supply of the service or materials. 
  The lien must be verified by affidavit and the normal practice is to serve the party effected with actual notice of the lien.  As a practical matter, a claim for lien is not made unless there has been some default.  To further perfect the lien, an action must be commenced within 45 days of filing the lien. 

Parties cannot contract out of the basic provisions of the act and where a contract does not specifically require a hold-back, one is implied: 

As a practical matter, all contracts should make specific provision for the hold-back.  When that is not done, the owner is entitled to hold-back 10% until 45 after the work is completed provided the owner has no notice of any liens. 

When making a payment, it is best to do a subsearch of the property at the county land registry office to check for any liens that may have been filed. 

I have had occasion to perform such searches for clients.  In certain circumstances, the owner might wish to forgo such a search.  The cost of a subsearch might outweigh the benefit in  obtaining it.  For instance, if the amount owing under a contract is less than $500, the search may not be economic.   In addition to the standard fee for searching a title, the title search involves a government charge of $8.00 for each parcel identification number (P.I.N.).  A property may only have one such P.I.N., but sometimes may have more.   For a property in Essex County, you would be able to determine the number of P.I.N.s if you have the original or a copy of the property transfer/deed.  After January 1, 1996, every property transfer/deed in this county made requires inclusion of all applicable numbers.

Law office of Kenneth W. Golish
 Law office of Kenneth W. Golish.