In a construction action, when a contractor or subcontractor is owed money, they can register a construction lien on title to the property where the work was performed, or material was supplied.
The Construction Lien
Construction liens are preserved when the lien is registered on title to the property where the work and/or materials were supplied. There are strict timelines within the Construction Act as to when a lien was must be preserved by. There are also exceptions for when a lien has to actually be registered on title to the property. For example, liens cannot be registered on title to property owned by the government.
Once a construction lien has been preserved, it must be perfected by the lien claimant issuing a Statement of Claim and registering a Certificate of Action on title to the property. Again, there are strict timelines in the Construction Act for when the lien must be perfected.
Vacating A Construction Lien
Vacating a lien refers to the removal of the registration of a preserved lien under section 44 of the Construction Act, RSO 1990, c C30 and, in the event that the lien has been perfected, the removal of the certificate of action that perfected the lien. Construction liens can be vacated if the required security is posted or paid into Court in the correct form. When an order is made vacating a construction lien upon the posting of security under section 44 of the Construction Act, the lien becomes a charge on the security posted and not on the land.
The amount of security to be posted or paid into Court is the full amount of the lien, plus HST if claimed, plus the lesser of $50,000 or $25% of the lien for costs.
Security can be in the following forms:
- Certified cheque or bank draft;
- Lien bond; or,
- Letter of credit.
To vacate a lien, the party must bring a motion in the Ontario Superior Court of Justice for leave to post or pay the security into Court and for an order to vacate the lien. This motion may be brought without notice to the lien claimant. Once the order has been obtained and the security has been posted or paid into Court, an Application to Delete Construction Lien (with a copy of the Order vacating the lien attached) is registered on title to the property.
Why Vacate A Construction Lien?
The simple answer is – you don’t always have to. However, some construction contracts will require that the general contractor remove any liens that are registered on title to the property within a specified number of days. If you obtained financing to fund your construction project, a term of that financing agreement might be that before funds are advanced, there must be no liens registered on title. Moreover, you may be required to vacate a lien in order to renew your mortgage.
Whatever your reason for vacating a construction lien, this can be a complicated and very detailed oriented process. It is always best practice to have a construction lien lawyer assist you! Contact our construction lien lawyers at Augustine Bater Binks LLP to see how we can help.