As a homeowner undertaking a renovation project on your property, you may or may not be aware that the title to your property could become encumbered by a construction lien. Construction liens can create serious problems when you want to sell or mortgage your property. They also can affect your credit rating. Construction liens are a very complex and technical area of law. If you find yourself in a construction lien dispute, you should speak to a lawyer with experience in construction liens to help you deal with the situation and avoid any possible costs and delays.
What Exactly is a Construction Lien?
A lien is a security interest registered against the title to real property by a person who supplied labour or materials to your property. It can prevent you from selling or re-financing your property. It can also be a threat to your current mortgage, and your current mortgage may even have a provision requiring you to remove a lien from your title. In an extreme case, a lien claimant may be able to force a sale of your home.
Who Can Register a Lien?
A construction lien can be registered by almost any person who supplied labour or materials related to construction, demolition or other improvements to your property. A lien can be registered by your contractor, a sub-contractor, or even the business from which your contractor bought your fixtures and materials.
To the surprise of many homeowners, there does not have to be a direct contractual relationship between the person who registers the lien and the homeowner.
There are two situations that commonly arise that homeowners should be aware of:
Scenario #1 – General Contractors and Sub-Trades
If you, as a homeowner, hire a general contractor to oversee the construction project and the general contractor hires a tradesperson to complete a specific aspect of the project, that tradesperson could register a construction lien against the title of the property even though there was no direct contract between the homeowner and the tradesperson.
Scenario #2 – The “Renovation-Happy” Tenant
Another example of where a construction lien might be registered against the title to a property is where the homeowner leases the property in question to a tenant. If the tenant contracts with someone to carry out work on the property and doesn’t pay that contractor, that contractor might register a lien against the home. However there are some important additional restrictions on the right of a supplier who works for a tenant to lien the owner’s title.
Timelines in construction liens are of the utmost importance. The right to lien a property arises when the person first supplies services or materials to the property. In order to keep a lien alive, the lien claimant must do a number of things within a number of deadlines. The lien claimant must preserve the lien, which usually means registering a claim for lien on title, usually within 45-days after the lien claimant’s last substantial supply or work. Then the lien must be perfected , which usually means starting a court action and registering proof of that on title, usually within 90 days after the last day of supply or work.
There are other deadlines and quite a few variations and exceptions to these rules. Complying with the all the requirements established by the Construction Lien Act can be complex but is essential to creating and keeping a valid lien. If the lien claimant has failed to follow the correct procedure, you may be able to get the lien taken off your title much more easily than would otherwise be the case. It is important therefore to consult a lawyer that specializes in this area as soon as possible.
Construction liens are complex, technical and time consuming. The information provided above has really only scratched the surface of this complex legal area. If you think your property could be subject to a construction lien, or if a lien has already been registered against your property, is important to consult with a lawyer that has experience in this area as soon as possible.
Article written by Lauren Angle.