Construction Liens in Small Claims Court Before the Amendments

ABB Law - Construction Liens

The new Ontario Construction Act came into effect on July 1, 2018. It was previously the Construction Lien Act. The new Act brought significant changes to the construction lien legal landscape. Previously, in order to perfect a lien claim, the claimant (a contractor or subcontractor) had to commence an action in the Ontario Superior Court of Justice. Prior to this time there was no provision for lien claims in the Small Claims Court. Claimants therefore had two choices: 1. to either sue for breach of contract in the Small Claims Court; or, 2: incur significantly higher costs by pursuing a lien claim within the Ontario Superior Court of Justice.

Construction Lien Claims and Small Claims Court

Currently, the Small Claims Court has jurisdiction in any action. This can be for the payment of money or the recovery of possession of personal property where the amount/value being claimed is $25,000 or less, exclusive of interest and costs. The Ontario Courts of Justice Act provides that an action commenced in the Ontario Superior Court of Justice may be transferred to the Small Claims Court. This is however contingent on consent of the parties before the trial commences. It is also if the only claim is for the payment of money or the recovery of possession of personal property. The claim must also be within the jurisdiction of the Small Claims Court.

Benefits of a Construction Lien Claim

One of the benefits of a construction lien claim is that the lien attaches to the property where the construction work was completed. It also provides the claimant, if successful, with the opportunity to seize and sell that property in order to collect the debt owed to them. The claimant is not seeking to recover possession of their personal property, but rather is seeking possession of the property of the owner. Prior to the new Construction Act coming into effect, a claimant was therefore unable to transfer their action into the Small Claims Court, even if the amount of the claim was less than $25,000.

What Does the New Act mean for Construction Lien Claims?

Now, the Construction Act provides a mechanism for transferring a lien claim action into the Small Claims Court. The claimant is still required to register the lien, within the time prescribed by the Act, and perfect the lien by issuing a Statement of Claim in the Ontario Superior Court of Justice. The claimant must also register a Certificate of Action on title to the subject property. However, if the claim falls within the monetary jurisdiction of the Small Claims Court, then any party can bring a motion to a judge and request that the action be transferred to the Small Claims Court. Additionally, a judge at the trial of the claim can also direct that the action be transferred to the Small Claims Court. A deputy judge in the Small Claims Court then has the power and authority to hear and resolve all matters and questions arising in the action.

If the Construction Lien Claim is for less than $25k, is it Worth Pursuing?

While this is a significant change, the question still remains whether it is worth pursuing a lien claim for a monetary amount of less than $25,000.  The benefit of pursuing a claim in the Small Claims Court is that the costs incurred by each party are generally substantially less than those incurred in an Ontario Superior Court of Justice action. This is because the Small Claims Court has a more streamlined process. So not only will the costs incurred be less, but the action can typically be resolved (whether settled or through a trial) much faster. However, a lien claim action will cost more than a claim for breach of contract. The claimant must still:

  1. pay the registration fees to register the lien;
  2. issue the claim in the Ontario Superior Court of Justice;
  3. register the Certificate of Action; and,
  4. bring a motion to transfer the action into the Small Claims Court.

The claimant will also incur the legal fees to take each of these steps. However, a simple claim for breach of contract will not allow the claimant to obtain an order for possession and sale of the subject property. The fear of having one’s property sold may aid in resolving a claim faster. It will certainly get the attention of the opposing party(s) and often brings those parties to the negotiating table.

Weigh your Legal Options

There are, therefore, both pros and cons in pursuing a construction lien claim action in the Small Claims Court. Speak to a lawyer about the various options that are available to you.

 

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