Construction Liens in Ontario What They Are and How They Work
Under Ontario's Construction Act, contractors, subcontractors, suppliers, and workers who are not paid for work or materials on a project have the right to register a lien against the property. A lien can affect a sale, a refinancing, or a new mortgage and every property owner and lender needs to understand how they work.
What Is a Construction Lien?
A construction lien is a statutory claim against real property registered by a person who has supplied services or materials to the improvement of that property and has not been paid. The lien attaches to the owner's interest in the land and gives the lienholder a security interest the right to share in the proceeds of any sale of the property, up to the value of the unpaid claim.
Construction liens in Ontario are governed by the Construction Act (formerly the Construction Lien Act), which was significantly reformed in 2018 and 2019 to modernize the lien and prompt payment regime.
Who Can Register a Construction Lien?
Any person who has supplied services or materials to an improvement of the property and has not been paid can register a lien. This includes:
- General contractors
- Subcontractors (at any tier)
- Material suppliers
- Architects and engineers
- Workers directly
- Equipment rental companies (in some circumstances)
Critically, a subcontractor can register a lien against the property owner's land even if the owner paid the general contractor in full if the general contractor did not pay the subcontractor. The lien right runs against the property regardless of who caused the non-payment in the contracting chain.
The Mandatory Holdback
One of the core protections of the Construction Act is the mandatory holdback. An owner is required to hold back 10% of the value of services and materials supplied (as certified or stated in each certificate or progress payment) until the lien period has expired and all liens have been discharged or expired.
The holdback is a trust it is held for the benefit of all potential lienholders. An owner who releases the holdback before the lien period expires does so at their own risk: they may be personally liable to lienholders if the holdback was insufficient to satisfy claims.
Lien Deadlines Critical Time Limits
The Construction Act contains strict limitation periods for registering and perfecting liens. Missing these deadlines extinguishes the lien right entirely:
| Action | Deadline |
|---|---|
| Register a lien (general) | 60 days after the date of last supply of services or materials to the contract |
| Register a lien (where a Certificate of Substantial Performance is published) | 45 days from publication of the Certificate of Substantial Performance |
| Perfect a lien (commence action and register certificate of action) | 90 days after the lien was preserved (registered) |
What Happens When a Lien Is Registered?
When a lien is registered against a property:
- It appears on the title search results, visible to any prospective buyer or lender
- It must be resolved discharged, vacated, or bonded over before a property can be sold with clean title or before a new mortgage can be registered in first priority position
- The property owner must respond: either pay the claim (leading to a discharge of lien), dispute it (and defend any action to enforce it), or have the lien vacated by court order on payment into court or posting of security
Vacating a Lien by Posting Security
If a lien is registered and the owner disputes its validity or amount, the owner can apply to the court to have the lien vacated by paying the amount of the lien (or an amount ordered by the court) into court or by posting a lien bond. This removes the lien from title the property can then be sold or refinanced while the underlying dispute is resolved in litigation.
Vacating a lien by posting security is common in construction disputes where the owner cannot wait for the litigation to resolve before completing a sale or refinancing.
Prompt Payment and Adjudication (2019 Reforms)
The 2019 reforms to the Construction Act introduced a prompt payment regime and a statutory adjudication process for resolving payment disputes quickly during construction (rather than waiting for full litigation):
- Owners must pay contractors within 28 days of receiving a proper invoice
- Contractors must pay subcontractors within 7 days of receiving payment from the owner
- Disputes about payment can be referred to a Construction Adjudicator a specialized dispute resolution process designed to produce a binding determination within 30 days
- Adjudicator decisions are provisionally binding they must be complied with during construction, even if later challenged in court
The Navigating Lien Rights in Modular Construction (Publication)
I co-authored a publication on Navigating Lien Rights in Ontario's Modular Construction Landscape (July 2024), which examined how lien rights apply in the context of modular construction where components are manufactured off-site and delivered for assembly. If you're dealing with lien issues in a non-traditional construction context, the analysis of how the Construction Act applies to off-site manufacturing is worth reviewing.