Construction Liens
Contractors, tradespeople, labourers and suppliers of materials who perform work in the course of improving a real estate property are entitled to a lien against the subject property to the extent of the value of their work performed or materials supplied. There is no minimal scope of work required to be able to use this act, and the improvement can include any change made to real property. Change can include addition of removal (demolition) of any part of the property as well as the mere provision of materials.
A typical construction project involves layers of contractors servicing the project and property. The owner (or developer) will usually contract the services of a general contractor which oversees the project and answers to the owner. The general contractor has a direct contractual relationship with the owner, which is also known as privity of contract. The parties to this contract can bring claims against each other based on the provisions of the contract and general contract law. However, sub-contractors retained by the general contractors or other sub-contractors do no enjoy the same privity of contract with the home owner/developer and therefore cannot sue the owner directly based on contractual obligations. The act recognized this problematic situation and in an attempt to preserve the valuable construction industry it gave all related contractors, whether in privity of contract with the home owner or out of such, the right to lien against the property.
The right to lien against the property arises immediately as the services/labour are rendered or when materials have been provided. Once the contractor reaches the understanding that his invoices are not paid he should move immediately towards preserving his lien rights. Such preservation of rights is attained by registering the lien against title within 45 days of the date in which the last provision of services or materials took place.
Practical course of action:
Naturally, it is advisable that the contractor contact the owner and discuss the matter of non-payment. If the home owner refuses to cooperate and pay the amount owed, the contractor should retain the services of a real estate lawyer to register the lien against title. The mere act of registration serves as public notice and an individual notice tendered on the owner is not required, although advisable. Once registered, if the contractor chooses to serve notice on the owner, he should do so without delay and properly set out the facts leading to the matter and his intent to perfect the lien in a court of law within the prescribed time line and before its expiry. Contractors should manage their waiting time for payment well and not run the risk of reaching the end of the 45 days period. Once 45 days have passed since the last provision of services or materials, the lien right expires and the right is lost. If the lien right has extinguished due to expiry, the contractor may still pursue the home owner by contractual claim if privity of contract exists or pursue the general contractor or sub-contractor with whom a service agreement was executed. A lien that has been registered on title should also be served to the owner holding title at the address for service found on title, as that will bind them to withhold the disputed amount from future payments to the general contractor.
Once the lien has been registered, the contractor may use it as a platform to enable negotiation with the home owner. If that fails, the contractor will have to perfect its lien by commencing a claim in a court of law against the home owner. As part of the claim, the contractor can seek to replace the registration on title with a certificate of pending litigation to ensure its rights are protected throughout the lengthy litigation process. The contractor must commence a claim against the owner if the debt has not been settled no later than 45 days following the registration of lien certificate on title. Failing to commence a claim within 90 days from the date of last provision of services or materials will extinguish the lien rights.
Contractors who have lost their lien rights may still recover some or all of their outstanding debt by seeking payment form the funds held back by the contractors who retained them of by utilizing other grounds.
Our law firm provides efficient lien registration services with a view to mitigate dispute costs and getting you the result you need. We will assist our clients to the point of getting the settlement funds and discharging the lien after a successful debt recovery.