What is a construction lien?

In Ontario, a construction lien (called a builders’ lien or mechanics’ lien in other provinces), is a claim for payment for goods or services that have been supplied to improve construction of a property.

A person who supplies services or materials for an improvement in land has a lien upon the premises that were improved for an amount equal to the price of the services or materials. As long as services or materials were provided, it does not matter if the services or materials were provided directly to the owner, to a contractor or to a subcontractor.  The law governing construction liens in Ontario is the Construction Lien Act.

What to do when served with a construction lien

Once an owner is served with a construction lien claim, they have a time limit of 20 days from the date of service in which to deliver a Statement of Defence, a cross-claim, a counterclaim or a third party claim.

If the owner fails to deliver a Statement of Defence within the time allowed, he or she may be noted in default, and will not be permitted to contest the claim, or to file a Statement of Defence unless they have the permission of the court. The defendant will be deemed to admit all allegations of fact that have been made against him or her in the claim and will not be entitled to notice of, or to participate in, any step in the action. If the owner does not file the defence in time, the action will continue and the court may give judgment against him or her.

In addition to filing a Defence, the owner may also counterclaim against the person who named him or her as defendant. The counterclaim may be based on any matter and is not limited to issues related to the construction project. The owner may also cross-claim against anyone else being sued, called a co-defendant. A cross-claim can only relate to matters pertaining to the construction project. In general, a cross-claim or counterclaim must accompany the Statement of Defence.

In addition, the defendant may bring a person who is not a party to the action, into the lawsuit as a third party. The purpose of bringing someone else into the lawsuit is so that the defendant can show how this third party is also responsible. The defendant will claim contribution or indemnity from the third party. However, a person may only be added or joined as a third party with the permission of the court. Permission from the court is obtained on a motion made with notice to the owner and all individuals having subsisting or perfected liens at the time of the motion.

The court will not agree to have the third party brought into the lawsuit unless the court is satisfied that the trial of the third-party claim will not unduly prejudice the ability of the third party or of any lien claimant or defendant to prosecute his or her claim or conduct or his or her defence, or will not unduly delay or complicate the resolution of the lien action.

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