Liens Expire Faster Than You Think – Contractors Beware!

You are a contractor who just finished a small construction project today and the owner has told you that he cannot afford to pay you for your work.  You have 45 days from today to preserve a construction lien, right? WRONG! You probably have less time than you think.  The Construction Lien Act (Ontario) (the “Act”) sets very brief time-lines within which you can preserve your construction lien before it expires.

For smaller projects (where typically no certificate or declaration of substantial completion is published), contractors are generally required to preserve their construction liens during the  forty-five day period following the date their contracts are completed. However, don’t think that because you still need to complete a minor part of the project that it is incomplete and you still have time to preserve your lien. The term “completed” is defined by the Act to mean something other than literal completion.For the purposes of the Act,  a contract is deemed complete even when it remains incomplete! When the price of completion, correction of a known defect, or last supply is equal to or less than $1,000 or 1 per cent of the contact price (whichever amount is less), then the contract will be deemed complete. Once a lien expires, it is gone forever.  The effect of an expired lien can be severe, since liens are usually the most valuable remedy for builders. A lien grants security in the owner’s land, enjoys better priority over the claims of other ordinary creditors, and creates a charge in the holdbacks required to be retained under the Act.The Act is filled with traps for the unwary.  The time-lines for preserving liens differ for contractors and subcontractors and several factors can impact both.   Don’t forget, even if you preserve your lien successfully, you still need to perfect it properly within 45 days of the last day that it could have been preserved.Given the severe consequences of failing to properly preserve and perfect construction liens, it is strongly recommended that whenever you experience or expect difficulty in receiving payment on a construction project, that legal advice be obtained immediately to ensure that your lien remedy (often the best one) is not jeopardized.