Construction Liens – Timing is Critical

Construction Liens – Timing is Critical

James L. McDonald
Posted March 6, 2017 Category: Businesses

It is the nature of the construction industry to delay in registering a construction lien for as long as possible in hopes of resolution of payment disputes. This is natural and makes sense. That said, if you intend to rely on Ontario’s Construction Lien Act and the protections it affords, it doesn’t always pay to let payment disputes linger.

For a primer on construction liens refer here to a previous post.

Most contractors know and appreciate that, when payment disputes arise and they stop work on a project, there is 45 days from when they last supplied services or materials to register a construction lien. This is what lawyers refer to as preserving the claim for lien. While it may seem to be plenty of time on day one, 45 days flies by. Assuming the lien was registered on the last possible day, a lien claimant then has an additional 45 days in order to “perfect the lien”. This is accomplished by commencing a legal proceeding in the Superior Court of Justice and registering a Notice of Action on title to the subject property.

What many contractors don’t appreciate is that the Court can and will carefully scrutinize whether the lien made it on title to the property (i.e., was preserved) in a timely manner and whether the Notice of Action was also registered within 90 days of last supply. Where the lien has not been preserved or perfected in time, the claimant can lose the benefit of the Construction Lien Act. For this reason, the last day a contractor worked on the project becomes critical.

Contractors must appreciate that it is not sufficient to return to the project to “sweep up and retrieve tools” in order to restart the clock for the 45 days. The Court is weary of “ex-post bootstrapping exercises” to artificially extend the time frame for preserving a lien. In this regard, there is a distinction to be drawn between substantive worked performed under the terms of the contract and remedial or trivial work.

In a recent decision of Justice Di Luca arising from a dispute in Orillia, His Honour described the distinction as follows:

Work will be remedial or trivial where it relates to a minor deficiency or rectification of work already completed or where the service performed does not add to the value of the improvement.  While the distinction between the two is at times fine, the courts are on guard against permitting the performance of a minor or trivial amount of work to artificially extend the time for filing a lien.  In making this determination, the court is asked to determine whether the service provided is an attempt to “boot-strap” lien rights.

Obviously, each case is highly fact specific. Nevertheless, contractors must be wary of the facts the timelines imposed by the Construction Lien Act will be strictly construed and there is no room for discretion. The question of timing must always be front and centre when allowing time for negotiation of payment disputes.

Also, keep in mind that while our Construction Law Group can move quickly to get your lien registered and beat the clock, some properties that haven’t been assigned a municipal address or remain in the registry system of land registration, may require time to complete proper searches. A necessary ingredient of every construction lien is an accurate description of the property.

So don’t delay, there is no downside in touching base early so that we can help manage the timelines while you manage the payment negotiations.

James L. McDonald
Posted March 6, 2017 Category: Businesses

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