As a homeowner undertaking a renovation project on your property, you may or may not be aware that the title to your property could become encumbered by a construction lien. Construction liens can create serious problems when you want to sell or mortgage your property. They also can affect your credit rating. Construction liens are a very complex and technical area of law. These actions are governed by the Construction Lien Act and have many different requirements than any other court action. If you find yourself in a construction lien dispute, you should speak to a lawyer with experience in construction liens to help you deal with the situation and avoid any possible costs and delays.
What is a Construction Lien?
A lien is a security interest registered against the title to real property by a person who supplied labour or materials to your property. It can prevent you from selling or re-financing your property. It can also be a threat to your current mortgage, and your current mortgage may even have a provision requiring you to remove a lien from your title. In an extreme case, a lien claimant may be able to force a sale of your home.
Who Can Register a Construction Lien?
A construction lien can be registered by almost any person who supplied labour or materials related to construction, demolition or other improvements to your property. A lien can be registered by your contractor, a sub-contractor, or even the business from which your contractor bought your fixtures and materials.
To the surprise of many homeowners, there does not have to be a direct contractual relationship between the person who registers the lien and the homeowner.
There are two situations that commonly arise that homeowners should be aware of:
Scenario #1 – General Contractors and Sub-Trades
If you, as a homeowner, hire a general contractor to oversee the construction project and the general contractor hires a tradesperson to complete a specific aspect of the project, that tradesperson could register a construction lien against the title of the property even though there was no direct contract between the homeowner and the tradesperson.
Scenario #2 – The “Renovation-Happy” Tenant
Another example of where a construction lien might be registered against the title to a property is where the homeowner leases the property in question to a tenant. If the tenant contracts with someone to carry out work on the property and doesn’t pay that contractor, that contractor might register a lien against the home. However there are some important additional restrictions on the right of a supplier who works for a tenant to lien the owner’s title.
Timelines and Construction Liens
The right to lien a property arises when the person first supplies services or materials to the property. In order to keep a lien alive, the lien claimant must do a number of things within a number of deadlines. The lien claimant must preserve the lien, which usually means registering a claim for lien on title, usually within 45-days after the lien claimant’s last substantial supply or work. Then the lien must be perfected , which usually means starting a court action and registering proof of that on title, usually within 90 days after the last day of supply or work.
There are other deadlines and quite a few variations and exceptions to these rules. Complying with the all the requirements established by the Construction Lien Act can be complex but is essential to creating and keeping a valid lien. If the lien claimant has failed to follow the correct procedure, you may be able to get the lien taken off your title much more easily than would otherwise be the case. It is important therefore to consult a lawyer that specializes in this area as soon as possible.
How to Remove a Lien
There are two primary ways to remove a construction lien from the title to a property:
Consent and settlement
If the dispute can be settled and an agreed amount paid to the lien claimant the lien claimant can register a discharge of the lien from your title. Even if you cannot agree on how much the lien claimant should be paid, you might be able to agree to have someone else hold an agreed amount as security for the lien claim until the dispute is resolved, and have the lien clamant register a discharge of the lien.
Payment into Court
If it is not possible to reach an agreement, a property owner can pay the amount of the lien claim plus 25% as security for legal costs into court. The court will then issue an order discharging the lien against the title. An owner doesn’t even need to tell the lien claimant that he or she is going to do this.
If you have strong evidence that the lien is for an excessive amount, an owner can also ask the court to decide on a lesser amount to be paid into court. In this situation, however, you have to tell the lien claimant about your request and give the lien claimant a chance to tell the court his or her side of the story.
In both situations described above, the money paid into court, or held in trust by an agreed upon person, will be held until the lien claimant continues with the construction lien court action and the court decides how much, if any, the lien claimant should be paid.
Construction liens are complex, technical and time consuming. The information provided above has really only scratched the surface of the area of construction liens. There are many other aspects of construction liens that impact someone involved in a construction lien action. For this very reason, it is important to consult with a lawyer that has experience in this area as soon as possible. The team at Augustine Bater Binks LLP would be happy to consult with you on any issue with respect to construction liens.