Put a Lien on It: Construction Liens and How to Get Paid
Construction liens are a creature of statute. The Construction Lien Act, RSO 1990, c C.30, gives contractors and subcontractors who perform any work or service or provide materials for the construction or repair of a real property the right to register a lien on title to the property.
The Act was overhauled last year by Construction Lien Amendment Act, 2017, SO 2017, c 24 (“the Act”). This blog post discusses your lien rights in connection with the new law.
Prompt Payment (coming into effect on October 1, 2019)
One of the novelties of Bill 142 is the prompt payment requirement. The owner must pay its contractor within 28 days upon receipt of a proper invoice in the form prescribed by s. 6.1 (s. 6.4). If the owner disagrees with the invoice in part or in full, he or she must deliver to the contractor a notice of non-payment within 14 days, in the prescribed form and manner, stating the amount that is not being paid with reasons for the non-payment.
In turn, the contractor must pay its subcontractor(s) within 7 days from the date it got paid by the owner or, if the owner has not paid, within 35 days of the contractor’s delivery of a proper invoice to the owner. The requirement to pay does not apply, if the contractor delivers to the subcontractor a prescribed notice of non-payment within 7 days of receipt of the subcontractor’s invoice. This notice must be accompanied by an undertaking to refer the matter to adjudication within 21 days of the delivery of the notice (s. 6.5).
A subcontractor must pay 7 another subcontractor within 7 days if the subcontractor has been paid in full by the contractor, or in part, for the portion that was paid relating to the work or services invoiced by the second subcontractor.
Adjudication (coming into effect on October 1, 2019)
The notice of adjudication may not be given after the subject contract has been completed, unless both parties agree. To learn more about the new adjudication procedure, please contact our firm for a free initial consultation.
Failing payment, a contractor or subcontractor, has a right to a lien equal to the price of the services or materials provided or the amount remaining unpaid under the contract or invoice. To enforce the lien the contractor must take certain steps.
1. Preservation of Lien
Under Bill 142, a contractor must register its claim for lien within 60 days after the contract is completed, substantially completed, or abandoned. Under the Act, a contract will be deemed completed when the value of the remaining work is not more than 1% of the contract price or $5,000, whichever is less. For subcontractors, the 60-day period starts to run from the date the materials and services were last supplied under the subcontract. The lien claimant must notify the owner of the lien by delivering a copy of the registered document to the owner.
After October 1, 2019, the time to register a lien could be extended for matters that are the subject of adjudication in accordance with the Act.
2. Perfection of Lien
The claimant must commence a court action within 90 days from the date of registration. The court will issue a certificate of action which will be registered on title to the property notifying all interested parties that the lien has been perfected. If a court action is not commenced within this time period, the lien will expire and the lien rights will be lost.
The contractor or subcontractor will still have recourse through the courts for a breach of contract, subject to the applicable time limits under the Limitations Act, 2002, SO 2002, c 24, Sched B.
The owner is mandated to release the holdback once all requirements for release under the Act are satisfied. The owner will be allowed to assert a set-off if they publish a notice in the prescribed form within 40 days (s. 27.1).
Construction is hard work, both physical and mental. It can be frustrating when you are not paid at the conclusion of the job and are stuck with significant out-of-pocket expenses. Bill 142 has made it easier and faster for persons in the industry to get paid provided the parties follow the technical and strict timelines and manners of giving notice and invoice. Call us today and we will help you navigate the waters in the landscape of Bill 142.