What is a Construction Lien?March 28, 2019
The Construction Lien Act (Ontario) is designed to protect contractors and the trades who work for them by providing a registered interest against land which interest effectively disallows a property owner from re-mortgaging, selling or otherwise using their land without removing the Lien.
Liens Must be Registered within 45 Days …
The Construction Lien act permits registration by anyone who provides work or services or supplies materials that are used for on and for property. The Lien must be registered within 45 days of work being substantially completed on a property and must be perfected (a Court action must be commenced) within 90 days of substantial completion.
You are Entitled to Hold Back 10%
Under the act, every person paying a contractor is entitled to hold back 10% of the total amount for 45 days to ensure that no liens are registered. This is an important provision for sub-trades (people who have contracts with your General Contractor). While there is no direct contract between the owner of a property and the sub-trades and thus, there would, in the normal course, not be any obligation to pay any money to them, there is a statutory requirement that the owner of a property be responsible for 10% of the amount due and owing to the sub-trade regardless of the lack of contract. Holding back 10% then, allows the owner to ensure that the 10% owing to the sub-trades has been paid and that no additional liens will be filed.
It is common for contractors will tell you that you have no right to hold back any money because it’s not in the contract. That does not matter. The Construction Lien Act stipulates that the 10% holdback is valid even if it is not in the contract
Date of Substantial Completion is Key
The Construction Lien Act means that it is vital that you know the date that Construction was substantially completed. Also, many of the provisions of the Construction Lien Act are not covered here but can be tricky. Consulting a lawyer when dealing with an errant contractor is vitally important in order to ensure that you are protected under the law.