Construction and infrastructure projects are crucial for regional development in every area or province. They also attract significant public interest due to their impact. As such, it's essential to resolve disputes among construction project parties promptly for the public's benefit. This is achieved through strict regulations like Ontario’s Construction Lien Act.
How does the Construction Lien Act in Ontario work?
Ontario’s Construction Lien Act works by protecting the interests of a lien claimant for the work they’ve done, or for the supplies they’ve provided, for a construction project. A lien claimant can be a:
- contractor
- subcontractor
- supplier
- labourer
The law ensures that these claimants are properly paid. Payment disputes are solved through different legal remedies, such as:
- prompt payment scheme: deadlines are set by law on when prompt payment must be done by the project owner, the contractor, and the subcontractor
- trust fund: requires the creation of a monitored trust fund for the benefit of the lien claimants to satisfy the debt owed to them by the project owner or any payer
- adjudication process: establishes a dispute interim adjudication process that can be used by parties in a construction project in resolving their issues
- construction liens: sets up a lien over the constructed, renovated, or improved property for the non-payment of the claimants’ services and materials
- holdbacks: require owners to hold back 10% of the services or materials until all construction liens are discharged or satisfied
A construction project, to which this law applies, covers both private and public projects, with more specific provisions for the public ones.
The old Construction Lien Act in Ontario
The Construction Lien Act in Ontario was amended in 2017 through the enactment of the Construction Lien Amendment Act. The last of its provisions that came into force are the prompt payment and adjudication provisions on October 1, 2019.
The new Construction Act in Ontario now covers all new and existing construction projects in the province. If you’re unsure whether the old or new law applies to your construction project, it’s best to consult a building construction lawyer.
Here’s an introduction to the changes that the new Construction Act has brought:
Hear more about Ontario’s Construction Lien Act from one of the Lexpert-ranked best construction lawyers in Ontario.
Eligibility criteria for filing a construction lien in Ontario
Any of the lien claimants (e.g., contractor, etc.) can file (or register) a construction lien if it’s “preserved” and “perfected” according to the periods mentioned below.
The liens can be for the services or materials supplied for any of these activities:
- alteration
- capital repair
- construction
- installation
- demolition or removal of a building or structure
Deadlines and timeframes to file a construction lien in Ontario
Lien claimants must be aware of the new deadlines to file and perfect a construction lien under the amended Construction Lien Act of Ontario:
60 days
Lien claimants now have 60 days (from the previous 45 days) to “preserve” or register a lien over the title of the subject property. This period runs starting from one of the following, whichever is earlier:
- the date when the contract was completed or when the copy of the certificate or declaration of the contract’s substantial performance was published
- the date when the contract was abandoned or terminated
90 days
Lien claimants have 90 days to “perfect” the lien over the subject property. A lien is perfected when both these conditions are met:
- the claimant starts an action to enforce the lien
- the claimant registers a certificate of action on the title, except where an order is made to vacate the registration of the lien
Lien claimants have 150 days to preserve and perfect the lien on the subject property, which runs from the date the contract was completed, abandoned, or terminated.
Dispute resolution and adjudication process
The amended Construction Lien Act of Ontario provides for an interim dispute resolution process for construction projects. As an interim process, it means that parties may appeal to the court after a decision is reached.
Almost all construction disputes may be raised through the adjudication process. Parties may also agree, through their contract, what issues may be raised, the process itself, among other agreements on the adjudication.
What is a construction lien holdback in Ontario?
A holdback under the amended Construction Lien Act of Ontario is a security for any construction liens that may be registered or preserved against a project. The law requires that every payer hold back 10% of every payment that they make to the payee. A payer, who shall hold back a part of their payments, can be:
- the project owner, as to their payment to the contractor
- the contractor, as to their payment to the subcontractor
- the subcontractor, as to their payment to the sub-subcontractor
As a rule, a payer must pay the amount of holdback if the period to preserve or register a lien expires (i.e., 60 days from the dates mentioned above). An exception is when the project owner publishes a notice of nonpayment within 40 days.
The owner is also required to notify the contractor of such notice. The amended law now allows the release of the holdback on an annual or phased basis.
How much does it cost to put a construction lien on a property in Ontario?
While the costs of registering a construction lien in Ontario will depend on each case, here are some of the fees that a lien claimant must consider:
- preparation and discharge fees: will depend on the complexity of the dispute, as handled by a construction lawyer
- registration fees: $71.20 as of March 2023
How to remove a construction lien in Ontario
According to Ontario’s Construction Lien Act as amended by the new Construction Act, a construction lien can be removed through one of these means:
- payment of the debt to the lien claimant
- a court order to remove the construction lien
- the sale of the property by court order to pay the lien claimant
To know more about the other provincial laws similar to Ontario’s Construction Lien Act or the new Construction Act, consult with the best construction lawyers in Canada as ranked by Lexpert.
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