09 Aug Construction Liens: What are they and how can they affect a residential homeowner?
The existence and concept of a construction lien is not new, however unless you are involved in the construction industry it is unlikely that you have ever had to deal with one. If you are considering having construction work done on your home or want to embark on the journey of building your own home, it is a good idea to familiarize yourself with what a construction lien is, what you can do to protect yourself from having a construction lien registered against the title to your property, and what to do if or when a construction lien is registered on title.
What is a construction lien?
A construction lien is a legal claim for payment of supplied ‘services or materials for the ‘improvement’
at a property¹. As such, a construction lien can be registered on title to your property by almost any
person who has supplied labour or materials to it for the purposes of improving your home.
The Construction Act, R.S.O. 1990, c. C.30, which has undergone several significant changes in the last 5
years, is the governing legislation for construction liens in Ontario. It outlines the timelines and steps that
a lien claimant must follow in order to register a construction lien against title to a property and the
litigation process for such claims².
How can the registration of a construction lien affect you?
Firstly, once a construction lien is registered on title to your property it is considered an encumbrance
(like a mortgage) on title to your property and can only be deleted by the lien claimant or by way of a
court order.
Secondly, the registration of the construction lien can be a term of default under your current mortgage
loan agreement and/or can impact your ability to arrange financing. In particular, if you have a secured
home equity line of credit, access to those funds can be suspended by your lending institution until such
time as the construction lien is deleted from the title and/or the matter settled.
The takeaways: if you are arranging to have an improvement done on your property, keep the following in mind:
1. Before any work is commenced or materials supplied to you, it is important to have a clear
understanding of the scope of work/ services and/or materials that are being supplied and the
agreed cost for same;
2. If your contractor/supplier requires you to sign a contract, it is prudent to have a lawyer review
the same prior to signing and prior to work being commenced; and
3. If a construction lien is registered on title, get a lawyer involved right away to help you navigate
the process, and (hopefully) reach an early resolution.
Unfortunately, disputes sometimes occur no matter what; however if you are diligent and keep these
points in mind, it might make your home improvement project a little less stressful.
1 The terms ‘services’, ‘materials’, and ‘improvement’ are specifically defined within the Construction Act and can
be contentious issues in litigation.
2 Construction lien litigation is a niche area of litigation, that has its own procedural rules and timelines.
*Originally posted on August 9, 2023
Amanda Maio focuses primarily in the area of commercial litigation. Through the continued mentorship and guidance of the experienced litigation lawyers at FIJ, Amanda works with both large financial institutions and individual clients to support their litigation needs.