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    • Tag: Liens

    Construction Law 101: Explaining Construction Liens

    What is a Construction Lien?

    Under the Construction Act a person who supplies services or materials to an improvement for an owner, contractor or subcontractor, has a lien for the price of the services or materials over the interest of the owner on the premises. In this respect, a lien functions as a security interest, securing payment of the individual providing services or materials.

    A lien arises and takes effect as soon as a person first supplies services or materials to the improvement. It is also important to note that a lien does not attach to the premises where the Crown (defined broadly under the Construction Act) is the owner of the premises.

    Preservation and Perfection of Liens

    Construction liens are typically (but not always) registered on title and recorded in the Land Registry Office. This means that the registered lien will be publically accessible to anyone seeking information about that property.

    However, not every construction lien can be registered on title ( i.e. when the land subject to the improvement is owned by the Crown) In such cases, a copy of the lien is given to the owner of the land.

    In order to perfect a lien, the claimant must commence an action in the Superior Court of Justice. Where the lien attaches to the premises, a lien claimant must also register a certificate of action on the title.

    There are strict deadlines for the preservation and perfection of liens.

    If you require assistance, pertaining to construction law matters, involving liens, holdbacks and contractual disputes, please contact the construction lawyers at Devry Smith Frank LLP to discuss your rights and options.

    *This blog was co-authored by Law Student Amar Gill*

    “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”

    By Fauzan SiddiquiBlog, Construction Law

    Leaning on Liens for Payment

    Construction and renovation work can sometimes involve multi-layered contractual relationships between the various players in a construction project, where there are numerous complex areas of consideration. An owner or developer may hire a general contractor, who will then contract with subcontractors for various jobs such as carpentry, plumbing, and electrical work. In the same way, subcontractors may hire sub-subcontractors, those sub-subcontractors may hire sub-sub-sub contractors, and so on. This is often referred to as the “construction pyramid”. The pyramid dictates not only who works for whom, but also who pays whom: the owner pays the general contractor, who then pays its subcontractors, and who in turn pays the sub-subcontractors, all the way down to the bottom.

    One of the purposes of the construction lien is to ensure that the general contractor and any subcontractors down the pyramid are remunerated for the services and materials that they have supplied towards improvement, as stated in a recent discussion regarding proposed changes to the Construction Lien Act. Thus, a lien secures the payment that is due to the general contractor and subcontractors. A lien is one means of enforcement provided under the Construction Lien Act that allows a contractor the ability to potentially take steps to sell the property and gives the contractor and subcontractors priority over certain creditors who may have claims against the owner of the property.

    As soon as a contractor begins providing services or materials to improvement, it has a lien for the value of services or materials actually supplied to the improvement. However, that lien will expire unless certain steps are taken: (1) the lien must be “preserved”; and (2) the must then lien is “perfected”.

    To preserve a lien, a contractor must register it on the title to the property where the work was done. To perfect the lien requires the contractor to commence an action and register a certificate of action on the title to the property. There are strict deadlines for the preservation and perfection of liens, typically triggered by either the date of last supply or the publication of a certificate of substantial performance, although the complete framework for the timing of preservation and perfection of liens is somewhat complicated and depends on when the work was actually performed. Once a lien has been perfected, the action by which it was perfected must be set down for trial within two years of having been commenced otherwise the lien will expire (although the legal action itself may continue).

    For more information or any other questions regarding construction liens, please contact our construction lawyers.

     

    “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”

    By Fauzan SiddiquiBlog, Real Estate