Construction projects can involve owners, general contractors, subcontractors, suppliers, consultants and lenders. When a party is not paid, a construction lien may provide a way to secure payment against an interest in the improvement or the property, depending on the applicable provincial or territorial legislation.
Because construction lien law is not uniform across Canada, the right process depends on where the project is located, the type of work performed and the claimant’s relationship to the project. A missed deadline or defective filing can put an otherwise valid claim at risk.
What is a construction lien?
A construction lien is a legal claim connected to unpaid work or materials supplied to an improvement. It is generally intended to protect parties who contribute labour, services or materials to a construction project. The precise requirements vary by jurisdiction, including who qualifies, what property interest may be affected and how the claim must be preserved and enforced.
A lien is not the same as a judgment for payment. It is a security remedy, and additional steps may be required to enforce it or resolve the underlying payment dispute.
Who may have lien rights?
Potential lien claimants can include:
- General contractors and construction managers, where the legislation permits their claim;
- Subcontractors and trades;
- Suppliers of materials or equipment;
- Architects, engineers and other professionals in circumstances covered by the applicable statute; and
- Other project participants recognized by the governing provincial or territorial legislation.
Eligibility is fact-specific. The contract, the work performed, the chain of contracts and the connection between the contribution and the improvement may all matter. A party should not assume that being unpaid automatically creates a lien right.
Why deadlines are critical
Construction lien statutes commonly impose strict time limits for preserving a lien and, in some circumstances, commencing an action or taking another enforcement step. These periods may run from events such as the last supply of services or materials, publication of a certificate, completion of the contract or termination of the project. The triggering event and deadline depend on the jurisdiction and the facts.
Waiting for negotiations to conclude can be risky. Before a deadline approaches, a claimant should identify the applicable statute, confirm the relevant triggering date and obtain advice on the required notices, registration or court documents.
Records that can support a claim
Clear project records can help establish the amount claimed, the work supplied and the dates that may affect a limitation period. Useful records may include:
- The signed contract, purchase orders, change orders and applicable terms;
- Invoices, payment applications, delivery tickets and proof of delivery;
- Daily reports, timesheets, photographs and site instructions;
- Correspondence about deficiencies, delays, disputed work or non-payment;
- Accounts showing payments received and the outstanding balance; and
- Details identifying the project, property and parties above and below the claimant in the contractual chain.
Records should be organized chronologically and preserved in their original form where possible. A written payment demand should accurately describe the amount owing and avoid overstating the claim.
Risks for owners and contractors
Owners can face lien claims even when they have paid a general contractor if money has not reached subcontractors or suppliers. Contractors and subcontractors may also face claims, set-offs or counterclaims involving deficiencies, delays, changes to the scope of work or incomplete performance.
Payment administration is therefore an important risk-control measure. Project participants should understand the applicable holdback requirements, track payment flows, respond promptly to notices and address disputed invoices in writing. The rules governing holdbacks and prompt payment differ across Canada, so project documents should be reviewed against the law applying to the project.
Practical steps when payment is disputed
- Review the contract and identify the party responsible for payment.
- Confirm the amount owing and separate undisputed amounts from disputed items.
- Gather invoices, delivery records, change orders and project correspondence.
- Determine which provincial or territorial legislation applies.
- Calculate all preservation and enforcement deadlines from verified project dates.
- Send a focused written demand or notice where appropriate.
- Obtain legal advice before registering, vacating or enforcing a lien.
Get advice early
Construction lien law is technical and varies across Canada. The correct remedy may involve a lien, a contractual claim, an adjudication or another dispute-resolution process, and more than one remedy may have its own deadlines. Early legal review can help identify the correct claimant, amount, property interest, documents and next steps.
This article provides general information only and is not legal advice. Anyone dealing with a construction payment dispute should obtain advice based on the province or territory, project documents and specific facts.
