If you are an owner, builders liens can cause a great deal of difficulty for you and your project. If you are a developer and you have a bank loan financing the work, then that bank is going to see that lien on the project, and stop you from getting any further draws. If you are a homeowner, your bank who has loaned you money, either for construction or for the renovation, will see that lien on the project and tell you to remove it, because they do not permit liens on their mortgage properties. In these cases, you will need to have tools to be able to remove that lien, fortunately, there are some.
The first is the builders liens act is very strict when it comes to dates, deadlines, and procedure. In terms of the dates and deadlines, a lien must be filed within 45 days of substantial completion of the project. If it is not filed within that time, you can have that lien removed, because it is invalid. Secondly, if the lien doesn’t follow the procedure as required under the act, meaning the wrong parties are named or there is some flaw in the way that the claim of the builders lien is filled out, you can also have the lien removed. Roughly 50% of liens that are filed, are not filed within the timelines or according to the correct procedure.
As an owner you do have some ability to fight back against these builders liens that are being registered against your property. If you want to have a lien removed, there is a procedure for doing that. You can remove builders liens one of two ways. First, you can do it if there is a flaw on the lien, by going to the land titles office and pointing out the flaw with a formal procedure. Alternatively you can go to court and have a judge rule on the issue, if there is a flaw. The second way to get rid of a lien if there is no flaw, is by paying the amount of the lien or the amount of the holdback into court. The amount of the holdback may be significantly less than the amount of the lien. For example, suppose you are doing a project where you have paid a general contractor $1,000,000, the amount of the holdback would be one $100,000. Suppose that general contractor pays an architectural concrete sub-trade around $200,000 for the work and now that sub-trade goes unpaid, they will have a lien for $200,000 but the holdback is only $100,000. You could have their lien removed, by only paying $100,000. To do this, you can either put that money in trust with an agreement with that subcontractor or pay the money into court. If you are getting into this area, we recommend getting a lawyer to help you, you can contact us for more legal advice.
Suppose you are just scrapping a project or need to get a lien off right away so that you can continue your work, you can just pay the total amount of the lien, either into court or by agreement with another lawyer, and that lien can be removed from the title. This is without prejudice to your ability to recover that money later, you will still get the right to fight that contractor or subcontractor over the entitlement to that lien. You are not giving the money away forever, but you are waiting until they start a lawsuit. The second thing you can do if someone files a lien against your property, is send them a notice to commence an action. What this does, is it forces the person who put the lien on the property, to start a lawsuit. They will have 21 days from the date that they receive that notice to commence an action, to start that lawsuit. If they don’t start a lawsuit within those 21 days, then you can have the lien removed from the title because they failed to meet the statutory requirements. This is a very powerful tool, many liens from smaller contractors are removed in this way because it doesn’t make sense for them to sue over $10,000 or $20,000.
If you’re an owner who has a lien on their property and you want to find out what you can do to try and get rid of it, or to fight it in court if you think the contractor is wrong, you can contact our team of construction lawyers at ATAC Law or contact me directly.
