Quirky Liens – Part 1 


November 24, 2009 - (Construction Lien Primer and Update, Ontario Bar Association)

Construction Lien Primer and Update, Ontario Bar Association, October 2009. Part 1 of this paper appeared in Lang Michener's Commercial Litigation Brief Fall 2009, and Part 2 appeared in Commercial Litigation Brief Spring 2010

In law, there is the general rule, and then there are the exceptions. This paper, in its entirety, is about the exceptions. More specifically, this article is the first in a series that focuses on some "quirky" construction liens that are not preserved and perfected in the "normal" way, or raise issues that must be considered and dealt with at the preservation stage.

As we will see, sometimes the "quirks" are expressly set out in the Construction Lien Act1 ("CLA") itself. Others are not readily identifiable as "quirky" by reading the CLA, but become so because of other statutory provisions, processes, practices and the case law. We will briefly review the process of preserving and perfecting a "normal" construction lien and then compare and contrast same to construction liens in the context of:

     (i) Crown owned lands, municipal streets and highways and railway right-of-ways;
     (ii) general liens;
     (iii) condominiums and the common elements thereof;
     (iv) leasehold improvements; and
     (v) mines.

Part I – "Normal" Liens

The details of what is and is not lienable, as well as details of the essential elements which give rise to a construction lien, are the subject of other treatises and are not intended to be reviewed in detail in this paper. For purposes of this paper and in particular, for reviewing the process of preserving and perfecting a "normal lien," we start with the assumption that a contractor or subcontractor has supplied services or materials to an improvement that has been requested by an owner and that contractor or subcontractor has not been paid for same.2 In such circumstances, the CLA creates a statutory lien in favour of the contractor or subcontractor upon the interests of the owner in the premises improved for the price of such services or materials.3 That lien arises automatically when the work first commences.4 The lien normally attaches to the interests of the owner in the real property. Unless the lien is preserved, it will expire.5

In the case of a contractor, the lien will expire at the conclusion of the 45-day period next following the earlier of:

a) the date of publication of the Certificate of Substantial Performance (if there is one); and
b) the date the contract is completed6 or abandoned (colloquially expressed as the "last day worked").7

In the case of any other person (i.e. a subcontractor or supplier), the lien will expire at the conclusion of the 45-day period next following the earliest of:

a) the date of publication of the Certificate of Substantial Performance (if there is one);
b) the date the subcontract is completed or abandoned; and
c) the date set out in a Certificate of Completion of Subcontract8 issued pursuant to section 33 of the CLA.9

Assuming the lien attaches to the premises (most liens do attach and the ones that do not are considered "quirky" herein and will be dealt with later), then the lien is preserved by registering the lien against title to the property.10 Prior to the advent of the electronic registration system, this was done by completing a Claim for Lien (Form 8) and Affidavit of Verification (Form 9) and registering the Claim for Lien on title.11

Following the advent of the electronic land registration system, the Claim for Lien is now in electronic form and is completed as such. It does vary in appearance and with respect to some of the wording from Form 8 but, generally speaking, the information required is the same and is still the required information set out in subsection 34(5).12 The electronic form does not provide for an Affidavit of Verification, but it does contain a verification statement. Cases have held that a reading of the Land Registration Reform Act 13 ("LLRA") which implemented the electronic registration system, covers the affidavit of verification requirement of the CLA by way of certain deeming sections.14 However, until that proposition is tested and confirmed in the Court of Appeal, cautious lien practitioners still tend to have their clients complete an Affidavit of Verification at the same time the electronic form is prepared and keep same on file in case it is asked for by the solicitor for the owner (as is often the case).15

Giving written notice of the preservation of a lien is not strictly required where the lien attaches. It is normal to give such notice, even before the lien is registered, so as to increase the owner's "notice holdback" requirement16 and as a practical matter to let all parties know about the lien as a first step in making demand and getting the lien claimant paid. But, strictly speaking, separate notice (apart from registration) is not required to preserve a "normal" lien that attaches.

Once a lien is preserved it must be perfected or else it will automatically expire. A preserved lien must be perfected prior to the end of the 45-day period next following the last day the lien could have been preserved as described above (i.e. pursuant to section 31 of the CLA). To perfect a lien, the lien claimant must commence an action to enforce the lien in the Superior Court of Justice17 and register a Certificate of Action against title to the property (again, assuming the lien attaches).18 Once these steps have been taken, the lien is valid for two years from the commencement of the action.19

An alternative to perfecting the lien as described above is to have the lien shelter under another perfected lien with respect to the same improvement.20 Sheltering carries its own risks and uncertainties which, again, could be the subject of a paper of its own. Most experienced practitioners prefer not to rely on sheltering if they can avoid it and will simply perfect the lien by commencing an action and registering a Certificate of Action.

Next issue: "Liening Crown Lands"

Ed.: Glenn would like thank Dean Melamed, articling student, forhis assistance in the research and preparation of this article.

This article was prepared for the Construction Lien Primer and Update Conference, presented by the OBA Construction Law Section on October 6, 2009. Contact Glenn Grenier to obtain a copy of the entire paper.

This article appeared in Lang Michener's Commercial Litigation Brief Fall 2009.

  1. R.S.O. 1990 c. C-30, as amended.
  2. Each italicized word has a specific meaning within the context of the CLA.
  3. CLA, s. 14.
  4. CLA, s. 15.
  5. CLA, s. 31.
  6. See CLA, s. 2(3) which stipulates when a contract (not a subcontract) is deemed to have been completed.
  7. CLA s. 31(2).
  8. R.R.O. 1990, Reg. 175, as amended s.2 (7) and Form 7.
  9. CLA s. 31(3).
  10. CLA s. 34(1)(a).
  11. CLA s. 34(1) and (6) together with R.R.O. 1990, Reg. 175, s.2(8) and (9).
  12. Every claim for lien shall set out,
    (a) the name and address for service of the person claiming the lien and the name and address of the owner of the premises and of the person for whom the services or materials were supplied and the time within which those services or materials were supplied;
    (b) a short description of the services or materials that were supplied;
    (c) the contract price or subcontract price;
    (d) the amount claimed in respect of services or materials that have been supplied; and
    (e) a description of the premises,
            (i) where the lien attaches to the premises, sufficient for registration under the Land Titles Act or the Registry Act, as the case may be, or
            (ii) where the lien does not attach to the premises, being the address or other identification of the location of the premises.
  13. R.S.O. 1990 c. L 4.
  14. LLRA s. 24 – See Petroff Partnership Architects v. Mobius Corp. (2003), 29 C.L.R. (3d) 277 (Ont Master); followed in 1230027 Ontario Inc. v. Jones (2005), 54 C.L.R. (3d) 232; additional reasons 58 C.L.R. (3d) 63 (Ont. S.C.J.).
  15. It should be noted that counsel in 1230027, who was unsuccessful in having the lien dismissed on the basis there was no sworn affidavit of verification, suggested that that law was uncertain as Master Sandler's earlier decision in Petroff was not binding and the issue was still unsettled. The motions Judge rejected that suggestion, finding that the law was in fact settled authoritatively by Petroff.
  16. CLA s. 24.
  17. CLA s. 36 and 50.
  18. CLA ss. 36(3)(a)(b).
  19. CLA s. 37(1).
  20. CLA ss. 36(4).