You heard the one about the property developer who skipped town with their construction advance and got sued by the bank.
What if the aggrieved private lender is you? Fortunately, you have options — a lien on property against land holders, home sellers, commercial lessors of retail space, or income property owners.
Your lien can stop a property owner from remortgaging, selling, or otherwise using their land until a dispute is settled.
Quick Read
Who can put a lien on property
What types of liens are available
How to register your lien on property
Can you have a lien on your house from a previous owner?
How Liens Work
Even if a dispute is not a land owner’s fault (think new home buyer caught in the middle), you can still register a lien on property. Ontario’s Construction Act gives lenders, contractors, tradespeople, and any reasonable claimant the right to a registered interest against land. Download the Act.
Liens Must be Registered Within 45 Days
In fact, anyone who provides work or services, or supplies materials used for or on property can register a lien on property. Watch the clock! The substantial completion date for a project is key.
You have 45 days from the time work is certified as substantially completed, materials and services provided, or a contract abandoned to register your claim. And 90 days from substantial completion to “perfect” a lien on property by commencing court action.
You Are Entitled to Hold Back 10%
What’s more, the Construction Act requires homeowners or anyone who pays a contractor to hold back 10% of the total owed for 45 days. That hold back ensures no liens on property are registered before you pay the full amount. What Sections 22(1) and (2) of the Construction Act say you must do:
- Hold back 10% of the price of materials and services to allow any liens to be discharged, satisfied, or expire.
- Hold back 10% of the final price after substantial completion of a project. That ensures funds are available to settle any subsequent liens.
- Set aside the amount of any liens you’re notified of, such as legal claims by unpaid subcontractors.
Why a Hold Back is Required
Since sub trades working for general contractors don’t directly contract with you, normally you’d be under no obligation to pay them.
The Construction Act protects subcontractors by requiring property owners to take responsibility for 10% of the amount due to a sub trade. By holding back 10%, you can be assured no additional lien on property will be filed against you if your general contractor hasn’t paid their subcontractors. What to do about new home construction delays.
Don’t be dissuaded by a general contractor from setting aside the hold back. Ontario’s Construction Act states the 10% hold back is valid even if it is not the legal agreement you sign with a contractor. Who is responsible for contractor injuries.
Who Can Register a Lien
- Mortgage lenders
- Home builders
- Renovators
- Subcontractors for building or renovation projects
- Tradespeople, like plumbers, electricians, or gas installers
- Interior designers and architects
- Anyone who supplies goods and services.
What to Do If…
Say you have a dispute with a property owner that goes like this:
- You loan $30,000 to a friend to build a home. They complete the home, but refuse to repay you. Register a lien with Service Ontario and go to Small Claims Courts Claim to recover. Filing construction liens in Small Claims Court. Can you sue God?
- You subcontract your electrical services to a contractor. The work is done, but the contractor disputes the bill. File a legal claim under the Construction Act to contest their complaint.
- You install expensive custom tiles in a condominium corporation lobby. The board hates the look and blames you. You can’t reuse the specialty tile. What about your labour? Use the Construction Act and Condominium Act (sections 10, 11(2), and 5) to register a lien against each condo owner for labour, materials, and shipping.
Ask a real estate lawyer if you think you have a case.
Registering a Lien on Property
Your real estate lawyer can register a lien on property for you, and give you forms to serve on the property owner. Since claimants face a penalty for filing a false liens in Ontario, going through a real estate lawyer is advisable. Registering a lien on property can be trickier than it appears. Search for Ontario liens.
Act promptly if you have a grievance you think fits a lien on property claim. You have a maximum of 45 days from the substantial completion date to preserve your lien. Bring these documents with you:
- the property address
- the legal property owner’s name
- a description of goods, services, or materials supplied and the dispute
- the amount you claim to be owed
- dates you started work and when the project was substantially completed.
Why You Need a Real Estate Lawyer
Buying or selling and worried about a lien on property? An outstanding lien can stop the title transfer, preventing you from selling it. Your lender will hold off on discharging your mortgage until the lien on property is settled. Discharging a mortgage in Ontario.
Your Axess Law real estate lawyer saves you from potential legal and financial grief by searching local land registry records before we make a property title transfer. We add title insurance for home buyers to protect you from errors on land records or title and mortgage fraud.
Affordable Legal Services, Anywhere in Ontario
Access lawyers for less in the Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy a home in the GTA, 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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