Guide to Defending Against Construction Lien Claims
Jan. 23, 2025
Construction lien claims represent a significant aspect of commercial litigation. These liens allow contractors, subcontractors, suppliers, and others involved in a construction project to secure payment for work completed or materials supplied.
However, construction lien claims can often be contentious and complicated, particularly when disputes arise regarding payment or project completion. Understanding how to defend against such claims is crucial for property owners, contractors, and anyone else involved in a construction project.
Based in Toronto, Ontario, Matthew R Harris Law P.C. is experienced in helping clients work through construction lien claims. Continue reading for more information on how a skilled lawyer helps defend against these claims.
An Overview of Construction Liens in Ontario
Construction liens are governed by the Construction Act (formerly the Construction Lien Act) in Ontario. This law allows those who have provided services or materials for a construction project to register a lien against the property they’ve worked on if they aren’t paid for their services.
The lien essentially acts as a claim on the property, making sure that the claimant can be paid before the property is sold or transferred.
The Construction Act sets out detailed procedures and deadlines for filing a lien, and it’s essential to understand these rules to determine whether a lien is valid or whether a defense against it can be mounted.
A lien claimant may include contractors, subcontractors, suppliers, and other service providers who haven’t been paid for the work or materials supplied to a project. The lien itself provides a form of security that makes sure the claimants are paid for their efforts.
Let’s take a look at some of the most common defenses lawyers use against construction lien claims.
Key Defenses Against Construction Lien Claims
When defending against a construction lien claim, there are several potential defenses that can be used depending on the circumstances. The following defenses all aim to challenge the validity of the lien, the work performed, or the payments made.
Improper or Late Filing of the Lien
One of the primary defenses against a lien claim is improper or late filing. The Construction Act imposes strict time limits for filing a lien. In Ontario, a lien must generally be filed within 60 days after the completion of the work or the supply of materials. If the lien is filed after this period, the claimant loses their right to enforce the lien.
Additionally, the lien must be properly registered with the Land Registry Office to be valid. If the lien isn’t properly registered, it can be challenged and dismissed by the court.
For a property owner, defending against a lien on the grounds of improper filing requires proof that the lien was submitted after the statutory deadline. It’s important to scrutinize the dates provided by the claimant to make sure that the lien was filed within the permissible timeframe.
Non-Completion or Defective Work
Another common defense is that the claimant didn’t perform the work as agreed or that the work was incomplete or defective.
The Construction Act provides that a lien claimant must be entitled to payment for the work they have completed or materials they have provided. If the work wasn’t completed, or if it was done defectively, the property owner may challenge the lien based on non-performance or substandard work.
In cases of defective or incomplete work, it’s crucial for the property owner to gather evidence of the issues. If the owner can demonstrate that the work wasn’t done as required or was subpar, they may have grounds for defending against the lien.
Payment Already Made
In some instances, a defense against a lien claim can be based on the argument that the claimant has already been paid for the work they performed. This defense often arises when the construction project involves multiple layers of subcontractors and suppliers, and payment issues occur due to misunderstandings or disputes between parties.
If a property owner can show that payments were made in full or that they’ve received proof of payment, they may have a valid defense against a lien claim. This can be especially challenging if there are disputes about the amount paid or if payments were made directly to subcontractors rather than the general contractor.
Documenting the payments, such as payment receipts, invoices, and correspondence with the contractor or subcontractor, is essential for presenting this defense.
Lack of Written Agreement or Contractual Relationship
A significant defense against a construction lien claim is that the claimant had no valid contractual relationship with the property owner. For instance, if the person filing the lien is a subcontractor who worked for a general contractor but didn’t have a direct contract with the property owner, they may not be entitled to file a lien.
In Ontario, the Construction Act allows claims by parties who have a direct contract with the property owner or those who have provided materials or services that are part of the overall construction project.
The lien may be invalid if there’s no contractual agreement between the owner and the claimant. A property owner can challenge the lien by demonstrating that there was no direct contractual relationship, thus eliminating the legal basis for the lien.
Breach of the Terms of the Contract
Another defense arises when the claimant has failed to fulfill the terms of their contract. This could include instances where the claimant didn’t perform the work as specified or breached key terms of the agreement, such as not following safety protocols, failing to adhere to project timelines, or using inferior materials.
For this defense to be successful, the property owner must provide documentation, such as the original contract, amendments to the contract, change orders, or performance reports, showing that the claimant didn’t fulfill their obligations. If the owner can prove the breach, they may be able to argue that the lien should be dismissed.
Now, let’s take a look at the steps one can take to defend against a construction lien.
Practical Steps for Defending Against a Construction Lien
Defending against a construction lien claim involves several practical steps that can help strengthen the case for dismissal or reduction of the lien amount. These steps include:
Reviewing the claimant’s lien and documentation: Begin by carefully reviewing the lien documents filed against the property. Make sure the lien is valid and complies with all statutory requirements, including the timeline and content of the lien. If the lien contains errors or is incomplete, this may form the basis for a defense.
Investigating payments and agreements: Check all payment records to verify that payments have been made, or that the claimant isn’t entitled to further payments. Gather all contracts, invoices, and receipts to support your claim that payments were made.
Engaging professionals: If the defense is based on incomplete or defective work, consider hiring construction professionals or inspectors who can assess the quality of the work and provide a report. Insider opinions can play a significant role in proving that the work wasn’t performed properly or was defective.
Negotiating or settling: Many construction lien claims can be resolved through negotiation or settlement, avoiding prolonged commercial litigation. Working with legal counsel to reach a resolution can save time and costs, especially in cases where there are competing claims or complicated issues.
Filing a motion to discharge the lien: If a lien has been filed improperly or is otherwise invalid, it’s possible to file a motion to discharge the lien. A motion to discharge requests the court to remove the lien from the property, typically based on the arguments that the lien is invalid or was filed improperly.
Engaging in commercial litigation if necessary: If a settlement can’t be reached, commercial litigation may be necessary. In such cases, legal representation is critical to make sure the defense is presented effectively in court. This could involve arguing that the lien doesn’t meet legal requirements, challenging the validity of claims, or showing that payments have been made.
Reach Out to a Commercial Litigation Lawyer for Support
Given the details involved in commercial litigation in construction disputes, consulting with experienced legal professionals is crucial. Rest assured that reliable support is available.
Located in Toronto, Ontario, and serving Hamilton, London, and Ottowa, Matthew R Harris Law P.C. aims to help protect clients from unwarranted lien claims. Contact Matthew R Harris today to schedule a consultation.