By Scott Fairley
The Construction Lien Act (the act) imposes various deadlines within which a contractor, subcontractor or material supplier must take steps to maintain a lien. The 45-day deadline to register a lien is well known, but not always well understood. While this article is not intended to fully explain the deadlines imposed by the act, it should help to clarify the question of when the 45-day lien period begins to run. It is important to note that the 45-day period differs for those who have a contract with the owner and those who are further down in the construction pyramid.
A construction lien is not created by registering it on title to the project. A lien is created by adding value to an improvement, and it comes into existence as soon as a person supplies labour or materials. Once the lien is created, there are steps that must be taken within the timelines under the act in order to keep the lien. The first step is preserving the lien, which usually means registering it on title. It is this step that must be taken within 45 days of the trigger date. If a lien is not preserved in time it will lapse and cannot be revived. The second step is to perfect the lien, which involves commending an action in the Superior Court and registering a Certificate of Action. Perfecting a lien is not dealt with in this article as we are focusing on the 45 days to take the first step before the lien lapses.
The act creates a difference between ‘contractors’ (commonly referred to in the industry as general contractors) and ‘subcontractors.’ The time to register a construction lien starts to run on a different basis for contractors and subcontractors. A contractor, as defined in the act, is any person who has a contract directly with the owner. A contractor’s lien must be registered within 45 days of either i) the publication of a certificate of substantial performance, or ii) ‘completion or abandonment’ of the contract, whichever of i) or ii) occurs first. What constitutes abandonment will depend on the facts of each case. However, in certain circumstances a contractor may be offsite for longer than 45 days with the intention to continue working once the site is ready, and for reasons such as a receivership or other intervening event, doesn’t return to the site. Although the date of last supply may have been months earlier, it is possible that the contract was not completed or abandoned and there is still time to preserve a lien. It is important for those who have contracts directly with the owner to keep in mind that time does not necessarily run from the date of last supply and a lien may not be lost in certain circumstances.
A subcontractor is any person who supplies to an improvement, who does not have a contract directly with the owner. The act simply refers to liens of those who do not have a contract with the owner as liens of ‘other persons,’ although those persons are commonly known as subcontractors, sub-subcontractors, or suppliers. ‘Other persons’ must register their construction liens on title within 45 days of the earlier of the publication of a certificate of substantial performance or the date of last supply of services or materials. The concept of completion or abandonment does not apply to subcontractors.
There are provisions in the act that deem a contract to be completed based on a financial formula. The act provides as follows:
a contract shall be deemed to be completed and services or materials shall be deemed to be last supplied to the improvement when the price of completion, correction of a known defect or last supply is not more than the lesser of:
(a) one percent of the contract price, or;
It is important to note that this formula relates only to a contract between an owner and a contractor, and has no application to subcontract. Consequently, it is only ‘general contractors,’ or persons who have a contract directly with the owner, that need to be concerned with having their contract be deemed to be completed, and the time to lien running, without their knowledge.
Contractors should be aware as a project nears completion that time may be running to register a lien although work remains on site. For most projects in the current market, the $1,000 provision will apply, and time will run when less than $1,000 of work remains. A contractor cannot extend the lien rights by delivering an inconsequential supply or insignificant amount of work or materials once the contract is deemed to be complete as a result of this provision. There is no formula that deems a subcontract to be complete, so the date of last supply can be a delivery of an item with a value that is below $1,000.
Regardless of the date of last supply, or completion or abandonment, the ‘trump card’ is the publication of a Certificate of Substantial Performance. The provisions of the act provide that time runs from the earlier of publication or completion/ date of last supply. This means that time can be running although last supply has not been made, because a certificate has been published. Contractors and subcontractors should monitor the publication of certificates on the website for the Daily Commercial News, at www.dailycommercialnews. com to know when a trump card has been played.
In summary, persons who have contracted with the owner must register a lien within 45 days of the earlier of completion or abandonment, or the publication of a certificate. Subcontractors and others must register a lien within 45 days of the earlier of the date of last supply or publication of a certificate. If that date is missed, the lien has lapsed and cannot be revived.
Prepared by Scott Fairley, partner, Dooley Lucenti LLP. For more information, contact him at firstname.lastname@example.org or at (705) 792-7963.