"Coles Notes" on Constructions Liens

If you are a construction contractor or your business involves the supply of services or materials for construction projects, you likely have some knowledge of lien rights.

 

If you have a solid understanding of liening projects, you need read no further.

 

But if you have only a vague understanding of lien rights, then what is below will give you some more insight.

 

If you have not been paid on a project, you have the right to lien for the amounts that are owed to you.  However, you must do this within 45 days of the last date that you provided services or materials to the project or the date that substantial completion of the project was published in the Commercial Daily News, whichever date is earlier.  This is the general rule.  There are some tweaks to this, but this rule will cover most situations.

 

If you want to lien a project, we would search title for you to ensure that we place the lien on the correct property.  You would sign the lien documents and then we would register the lien on title.  By registering the lien documents on title, we have “preserved” your lien rights.  Don’t wait to the last minute to have us register a lien.  Title searching can be complex, especially for subdivision projects where lien rights may be expiring on a lot by lot basis.

 

We would place the owner of the property on notice of your lien, as well as the contractor and any mortgage company who has registered a charge against the property.  The lien will generally stop the flow of construction funds from the mortgage company to the owner.

 

If the lien does not result in you getting paid and us discharging the lien that we registered, then you have to “perfect” your lien.  This means that we have to start a court action no later than 90 days after the last date that you provided services or materials to the project or the date that substantial completion was published, whichever date is earlier.  Once again, this is the general (but not universal) rule.  Notice is put on title that an action was commenced, which then perfects the lien.

 

We then have two years to set the matter down for a trial and we begin to duke it out with the other lawyers.

 

Something else to remember – under the Construction Lien Act, an owner’s liability for the debt owed to you will be restricted to the amount of the holdbacks it has in hand and any portion of the contract not yet paid out to the party above you in the construction chain.

 

When it comes to lien matters, I always recommend that you do your best to ensure you have a strong position going in.  Ensure the contract is signed and all change orders are in writing and signed.  Keep stringent records of all phone calls.  Keep copies of all plans, emails, letters, payments, invoices and purchase orders – and of course, keep my number handy.

 

Paul H. Voorn

%d bloggers like this: