Why is your contractor blocking your lender from mortgaging your new home?
You deserve to know, because if a contractor or subcontractor places a construction lien on a new build home, it could be a long time before you get clear title.
You need to take immediate action to stop a lien before it stops you from enjoying the home you worked so hard to own.
A Lien Can Stop You From Buying a Home
Liens are like mortgages. They can stop you from buying a house by burdening you with legal claims or debt collection schemes. In an extreme example, a contractor may get court approval to sell your property to collect their debt.
How Long a Construction Lien Lasts
A lien stays on title to your property until you reach agreement with the contractor, the claim goes to court, or it expires. That can actually improve your position, because a judge will allow construction to proceed as long as you pay the lien amount, plus 25% of costs, into court. You win again if you stop a lien by going to court. Your money is returned and the lien is cleared from the title. How to Work With an Infill Home Builder.
Filing a Construction Claim in Ontario
But what if a lien is unfair? If you’re the buyer, a lien could hold up your property purchase by tying up the seller in a wrongful lawsuit. Let’s say Bob, an Etobicoke plumber, installs a leaky shower stall. The home seller refuses to pay. That works for you. Who wants a mouldy shower stall? Besides, it’s not the tile you would have picked. How to buy a new build house.
Bob is craftier than that. He heads to his local Service Ontario office and discovers the home seller’s sister is on the property title. Armed with this newfound fact, he files a claim for lien against the home seller and his sister. He wants $3,090 for labour, materials and taxes, minus what he’s already been paid. Register or search for Ontario liens.
Tracing the trouble to its source, you discover the home seller listed a small shower leak on the realtor’s property condition statement. And that’s not all. Bob used drywall instead of a waterproof liner behind the tiles. Tips for buying new construction homes.
Who Pays for Repairs When You Buy a Home
Now you have two aggravations: Bob’s construction lien and the cost of fixing the wall and replacing the shower and tiles. This could be a good opportunity to get that subway tile you want. First you have to stop a lien from blocking your ability to buy the home. Can you sell a house with open permits in Ontario?
10% Holdback for Home Repairs
The home seller is smarter than Bob presumed. He’s contracted for repairs before and understands you don’t always get what you pay for. The seller has paid up front, but relied on Sections 22(1) and (2) of Ontario’s Construction Act to hold back 10% ($180) of the price Bob quoted him ($1,800) until the contract was completed. He’s disputing the rest of the bill, which is $1,290 over estimate. Read Section 22.
Dispute a Home Repair Bill
Bob has an explanation for the bill being substantially more than he quoted. He claims the home seller asked for a more expensive tile and removing the old tile took longer than he planned. Your home seller doubts that. The marble tile may have been slightly over budget (by $500), but Bob was three weeks late showing up and a slow worker. Bob says he had to import the tile (from the Hamilton Home Depot) and the seller was never home. When you need permits for basement renovations.
Time is of the Essence in Legal Contracts
Bob, who has mixed reviews on Yelp, argues he has the seller where he wants him. The home can’t be sold or refinanced until the lien is settled or expires. He’s right about that. Mortgage lenders won’t advance funds to buy a home with a lien because if the home buyer defaults, the lien gets paid before the outstanding mortgage.
Unfortunately for Bob, he kept the crumpled up paperwork in his pocket too long. Under the new Construction Act, he had up to 60 days from the last day he supplied any of the originally contracted services to give the home seller a claim for lien, and 90 days after making the claim to start a lawsuit.
Bob met the first deadline, but failed to follow up with a certificate of action by day 90. (Contractors have 45 days to present a claim for a lien for projects started before July 1, 2018.)
How to Remove a Construction Lien in Ontario
Since Bob’s claim is out of time, overturning it is easy. An Ontario real estate lawyer can remove the construction lien from the property title. Success, the house is yours! Time to pick out tile (and a new plumber). Remove liens on property you buy or sell.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
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Book Legal Appointments Online or By Phone
Call Axess Law’s real estate lawyers to search property titles for liens. They give you legal advice on what to do if your home purchase gets tied up by a seller’s debts. You can video conference with our virtual lawyers 7 days a week. Day or evening in person meetings are available at our conveniently located Greater Toronto Area or Ottawa law offices. Dial toll free to 1-877-552-9377 or call our 647-479-0118 lawyer line in Toronto. Booking takes just minutes when you use our online booking form instead.
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