Important Deadlines for Preserving and Perfecting a Construction Lien

By Emily Hives

What is a construction lien?

Generally, a lien is a charge granted upon real or personal property to secure the payment of a debt or the performance of some obligation.

A construction lien is a specific type of lien which helps protect contractors, subcontractors and suppliers from nonpayment related to the provision of goods or services to a construction project. In Ontario, construction liens are governed by the Construction Act (the “CA”) (previously known, before 2018, as the Construction Lien Act (the “CLA”)).

In particular, the CA provides that a person who supplies services or materials to an improvement for an owner, contractor or subcontractor has a lien upon the interest of the owner in the premises improved for the price of those services or materials. The lien arises and takes effect when the person first supplies services or materials to the improvement.

An “improvement” is defined broadly in the CA as:

1. Any alteration, addition or capital repair to the land;
2. Any construction, erection or installation on the land, including the installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works; or
3. The complete or partial demolition or removal of any building, structure, or works on the land.

Application of the Construction Act or the Construction Lien Act

The CA (and the previous CLA) sets out strict deadlines which must be met in order for a lien claimant to preserve and perfect a construction lien.  The deadlines in the CA are different from the deadlines in the CLA.  

Although it has been several years since the CLA became the CA, it is possible that the previous CLA (including its deadlines for preserving and perfecting construction liens) could still apply to some construction projects.

Pursuant to s. 87.3 of the CA, the provisions of the CLA will continue to apply if:

1. The prime contract was entered into before July 1, 2018;
2. The procurement process for the improvement was commenced by the owner before July 1, 2018; or
3. The property in question is subject to a leasehold interest which was first entered into before July 1, 2018, and a contract for the improvement was entered into or the procurement process for the improvement was commenced on or after July 1, 2018 and before the day subsection 19(1) of Schedule 8 to the Restoring Trust, Transparency and Accountability Act, 2018 came into force.

If the deadlines to preserve and perfect a construction lien are not met, the lien claimant may lose their right to utilize this special form of security. It is therefore imperative for a lien claimant to ensure that they know whether the CA or CLA applies in the circumstances and to adhere to all deadlines in that Act.   

Preservation of a Lien

A lien claimant must “preserve” their lien. Generally, this means they must register the lien in the land registry office on the title to the premises where the material or services were provided (except in some limited circumstances where the lien does not attach to a premises; different requirements to preserve the lien will apply in those cases).

If a lien claimant is a contractor who is subject to the CA, the contractor must preserve their lien within 60 days of the earlier of:

1. if applicable, the date on which a copy of the certificate or declaration of the substantial performance of the contract is published;
2. the date the contract is completed; or
3. The date the contract is abandoned or terminated.

If a lien claimant is a contractor who is subject to the CLA, the contractor must preserve their lien within 45 days of the earlier of the events described above.

Similar deadlines apply to the construction liens of other parties who supply services or materials to an improvement but are not contractors as defined by the CA or CLA. However, these parties may be subject to other triggering events from which the 60-day or 45-day timelines begin to run.

Perfecting a Lien

Once a lien has been preserved, it must be “perfected” by commencing an action to enforce the lien and, if the lien attaches to a premises and no order to vacate the registration of the lien has been made, registering a Certificate of Action on title to the premises.

If a lien claimant is subject to the CA, the statutory deadline for perfecting a lien is 90 days after the last day on which the lien could have been preserved. If a lien claimant is subject to the old CLA, the statutory deadline for perfecting a lien is 45 days after the last day on which the lien could have been preserved.

Setting an Action Down for Trial

Pursuant to s.37 of the CA, a perfected lien will expire two years after the date the action was commenced, unless an action is set down for trial or an order is made for the trial of the action. Put plainly, “setting an action down for trial” means filing the necessary documents to advise the court that you want to move the case forward towards a trial.

Conclusion

As this article sets out, there are strict time constraints involved in a construction lien. It is important to be cognizant of these deadlines as the failure to preserve and perfect a construction lien on time is usually fatal to a lien claim.

We always recommend consulting with a lawyer before commencing the process of preserving and perfecting a construction lien. Please reach out to myself, Emily Hives (ehives@sorbaralaw.com), or to other members of our litigation team if you require any legal assistance with construction lien matters.