December 15, 2008
Preserving the claim for lien
By Robert Kennaley
McLauchlin & Associates
As discussed in previous articles, contractors and subcontractors have a lien for the value of the services or materials they supply to an “improvement,” as those terms are defined under the Construction Lien Act. The lien arises as soon as the contractor or subcontractor first commences, whether it is the first shovel in the ground, or the first delivery of materials. The lien is, with some exceptions, a charge against the interest of the owner of the premises.
Contractors and subcontractors will lose their lien rights, unless they follow the necessary steps to “preserve” the lien within an applicable 45-day period. If they do not follow the necessary steps to preserve the lien, the lien expires and cannot be revived. The various 45-day periods have been dealt with in previous articles and will not be covered here. In this article, we will outline how the lien is preserved, with special attention to the steps that may be required where the lien does not attach to the interest of the owner in the premises.
A lien may be preserved in one of two ways. Generally, a lien is preserved through the registration of a claim for lien, in a form determined by the Act and in the land registry office where the lands that have been improved are located. In certain circumstances, however, the lien will not attach to the interest of an owner, and the lien will need to be preserved in an alternative manner.
Where the subject premises are owned by the Crown, are a public street or highway owned by a municipality, or are a railway right-of-way, the claim for lien is not registered against the title to the subject premises. Rather, written notice of the claim for lien, along with a supporting “Affidavit of Verification” must be given to the owner in accordance with the Act. If the claim for lien relates to an interest of the Crown, a copy of the claim for lien and affidavit must be provided to the office prescribed by regulation or, where no office has been prescribed, to the ministry or Crown agency responsible for the improvement made. If the claim for lien relates to a public street or highway owned by a municipality, then a copy of the claim for lien and affidavit shall be given to the clerk of the municipality. Finally, preservation of a lien in relation to a railway right-of-way requires that a copy of the claim for lien and affidavit be given to the manager (or other person apparently in charge) of any office of the railway in Ontario.
In each of these situations, a lien will not be preserved until the designated person, office, ministry or crown agency is given the claim for lien and affidavit of verification. Although this process may sound straightforward, it is not nearly as trouble-free as it may seem. Determining whether or not a lien attaches to the premises is crucial, for if you attempt to preserve through registration, but should have preserved by delivering written notice, you will lose your lien rights.
How do you then determine if your lien attaches to the premises? While in some circumstances the answer is obvious (where, for example, you are working on a municipal street or a railway), in other circumstances research and analysis will be required to determine whether you must preserve by giving the proper documents to the appropriate party, as set out in the Act and its Regulations.
Consider, for example, you are working on an improvement at a community college, a casino, a local museum or art gallery, or other educational, cultural, health or tourist-oriented institution. In some circumstances, preservation may be done through registration, and in other circumstances it may not. Further, there may be circumstances where there will be more than one owner, such that both methods of preservation may be required. Unfortunately for contractors and subcontractors, there is no definite list of institutions that are owned by the Crown, or are Crown agencies, which can make it difficult to determine how to preserve a claim for lien.
The point to remember is that you should not presume, as your 45th day approaches, that the registration of a claim for lien will be sufficient to avoid its expiry. In some circumstances, other steps will have to be taken. In circumstances where you are concerned that you may be providing services or materials to the Crown, to a Crown Agency, to a municipal street or highway, or to a railway right-of-way, you should seek qualified construction law advice to ensure that your rights are protected. More importantly, you should not wait until the 43rd or 44th day to do so. This is because that in many circumstances research and analysis must be performed to determine what, in fact, has to be done to protect your lien rights.
Robert Kennaley practices construction law in Toronto and Simcoe. He speaks and writes regularly across North America. He can be reached for comment at 416- 368-2522, or at kennaley@mclauchlin.ca. This material is for information purposes and is not intended to provide legal advice in relation to any particular fact situation. Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.
McLauchlin & Associates
As discussed in previous articles, contractors and subcontractors have a lien for the value of the services or materials they supply to an “improvement,” as those terms are defined under the Construction Lien Act. The lien arises as soon as the contractor or subcontractor first commences, whether it is the first shovel in the ground, or the first delivery of materials. The lien is, with some exceptions, a charge against the interest of the owner of the premises.Contractors and subcontractors will lose their lien rights, unless they follow the necessary steps to “preserve” the lien within an applicable 45-day period. If they do not follow the necessary steps to preserve the lien, the lien expires and cannot be revived. The various 45-day periods have been dealt with in previous articles and will not be covered here. In this article, we will outline how the lien is preserved, with special attention to the steps that may be required where the lien does not attach to the interest of the owner in the premises.
A lien may be preserved in one of two ways. Generally, a lien is preserved through the registration of a claim for lien, in a form determined by the Act and in the land registry office where the lands that have been improved are located. In certain circumstances, however, the lien will not attach to the interest of an owner, and the lien will need to be preserved in an alternative manner.
Where the subject premises are owned by the Crown, are a public street or highway owned by a municipality, or are a railway right-of-way, the claim for lien is not registered against the title to the subject premises. Rather, written notice of the claim for lien, along with a supporting “Affidavit of Verification” must be given to the owner in accordance with the Act. If the claim for lien relates to an interest of the Crown, a copy of the claim for lien and affidavit must be provided to the office prescribed by regulation or, where no office has been prescribed, to the ministry or Crown agency responsible for the improvement made. If the claim for lien relates to a public street or highway owned by a municipality, then a copy of the claim for lien and affidavit shall be given to the clerk of the municipality. Finally, preservation of a lien in relation to a railway right-of-way requires that a copy of the claim for lien and affidavit be given to the manager (or other person apparently in charge) of any office of the railway in Ontario.
In each of these situations, a lien will not be preserved until the designated person, office, ministry or crown agency is given the claim for lien and affidavit of verification. Although this process may sound straightforward, it is not nearly as trouble-free as it may seem. Determining whether or not a lien attaches to the premises is crucial, for if you attempt to preserve through registration, but should have preserved by delivering written notice, you will lose your lien rights.
How do you then determine if your lien attaches to the premises? While in some circumstances the answer is obvious (where, for example, you are working on a municipal street or a railway), in other circumstances research and analysis will be required to determine whether you must preserve by giving the proper documents to the appropriate party, as set out in the Act and its Regulations.
Consider, for example, you are working on an improvement at a community college, a casino, a local museum or art gallery, or other educational, cultural, health or tourist-oriented institution. In some circumstances, preservation may be done through registration, and in other circumstances it may not. Further, there may be circumstances where there will be more than one owner, such that both methods of preservation may be required. Unfortunately for contractors and subcontractors, there is no definite list of institutions that are owned by the Crown, or are Crown agencies, which can make it difficult to determine how to preserve a claim for lien.
The point to remember is that you should not presume, as your 45th day approaches, that the registration of a claim for lien will be sufficient to avoid its expiry. In some circumstances, other steps will have to be taken. In circumstances where you are concerned that you may be providing services or materials to the Crown, to a Crown Agency, to a municipal street or highway, or to a railway right-of-way, you should seek qualified construction law advice to ensure that your rights are protected. More importantly, you should not wait until the 43rd or 44th day to do so. This is because that in many circumstances research and analysis must be performed to determine what, in fact, has to be done to protect your lien rights.
Robert Kennaley practices construction law in Toronto and Simcoe. He speaks and writes regularly across North America. He can be reached for comment at 416- 368-2522, or at kennaley@mclauchlin.ca. This material is for information purposes and is not intended to provide legal advice in relation to any particular fact situation. Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.