How Long Do You Have to Preserve a Construction Lien?

A construction lien can be a powerful tool to assist with the collection of invoices for the supply of services or materials to an improvement to a property.

Under the Construction Act, the first step to take to obtain the benefit of a construction lien in Ontario is to preserve the lien by registering it against title to the subject property. The Ontario Construction Act imposes a strict 60-day time limit within which this step has to be taken.

Because the preservation period is so short, it is crucial to know exactly what events can trigger the 60-day period in order to know when the 60-days to register the lien will run out.

Triggering Events

For a general contractor who contracts directly with the owner, the following events can trigger the preservation period:

1. The publishing of a certificate or declaration of substantial performance; and

2. The completion, abandonment, or termination of the contract.

For a subcontractor or sub-subcontractor, the following events can trigger the preservation period:

1. The publishing of a certificate or declaration of substantial performance;

2. The final provision of services or materials to the project;

3. The completion, abandonment, or termination of the prime contract; and

4. The certification of the subcontract as completed.

The 60-day preservation period begins to run after the first of the possible triggering events has occurred.

In order to understand when the 60-day period starts, it is important to understand when completion, abandonment or termination occurs.

Completion

A contract is deemed completed under the Construction Act when the cost to complete the project or to correct any known defects does not exceed the lesser of:

1. 1% of the contract price; or

2. $5,000.00.

The date on which the contract is completed may not be the same day that work concludes.  Even if there is still work to be done, the preservation period may have already begun to run if there is less than 1% of the contract price or $5,000 left of work to be done.  Someone seeking to claim a construction lien should keep track of the progress of the contract and know exactly when the project has been completed or deemed completed under the Construction Act.

Abandonment

A contract has been abandoned where the contractor, knowing that the contract was not completed, has declined to carry the project to completion. This is a factual determination that can be disputed in court and will be decided based upon the circumstances of the contract and work. Construction projects can stall for a number of reasons, but a project is abandoned only if the work has permanently ceased.

Abandonment does not require blameworthy conduct from either party. A contract may be abandoned because the parties mutually agree to cease the work, or because the purpose of the contract has been frustrated (cannot be completed). A court may determine that a project was abandoned even where the parties did not intend to permanently abandon the project if a reasonable person would conclude that the contract is effectively at an end.

Termination

A written construction contract may have its own provisions that determine when and how a party may terminate it.  In addition, parties to a contract may attempt to declare that they are terminating the contract without abiding by any of the termination provisions in the written contract. Even where a contract is not properly terminated, in compliance with the written termination provisions, the preservation period may begin to run on the basis that the contract was abandoned (as the party declaring it terminated may then be held to have declined to carry the project to completion).

When the updates to the Construction Act that received Royal Assent in late 2024 come into force, those will require a party to publish a notice of termination within the first seven days of a contract’s termination. For the purposes of the lien preservation period, this will then mean that the termination date will be the date of the earliest published notice of termination.

Every single day matters when contemplating trying to claim and pursue a construction lien. Potential construction lien claimants should seek advice from a lawyer as soon as possible to determine exactly when their lien rights may expire and how best to protect their interests.

The next blog in this series on construction liens will address the concept of perfecting the lien, the process of starting a legal action, such as a lawsuit, to enforce the lien and registering a certificate of action on the title to the property.

Perfecting the lien is a crucial step in ensuring that it remains valid and enforceable. Stay tuned.