As the great Uncle Ben once said, “with great power, comes great responsibility.” While the Construction Act grants significant protections to members of the construction industry, these rights must be exercised in a timely and diligent manner. Namely, in providing lien rights, the Construction Act imposes truncated limitation periods. The effects of failing to comply with these periods are devastating. The most deadly of these effects is, of course, the expiry of a lien.
How a Lien Expires
There are many ways a lien may expire. Most commonly, liens expire where the time to preserve and/or perfect those liens have run out.[1] This form of expiry is also the most deadly as there is no accommodation or forgiveness where time runs out – even if a claimant is a day late. However, a lien which expired solely by virtue of a claimant’s failure to preserve on time may be revived by a more recent supply of services and/or materials in respect of the same improvement. For example, where a subcontractor leaves a site due to non-payment but fails to preserve its lien rights, that subcontractor may – at a later date – return to site to continue performing its supply obligations and thereby revive its rights. This form of revival is risky as it will always be under scrutiny by opposing counsel and the Courts.
A preserved and perfected lien may also expire where the claimant fails to make an Order for Trial/set the matter down for Trial within two years of the commencement of the Action for the lien. This form of expiry is more common with older liens. For example, where a claimant registers a lien in the 1980s or 1990s, and subsequently that lien is forgotten by all parties, the lien is deemed to expire. In these scenarios, the trick is ascertaining whether default judgment may have been obtained and the claimant merely elected not to enforce its judgment and wait until the property would be sold in the natural course of business. In such a circumstance, where default judgment is obtained, a lien may actually not have expired and is subject to determination by the Court.
Finally, and less common, liens may expire where a claimant fails to serve its Statement of Claim within ninety days after issuance.[2] For example, in MGI Construction Corp. v. 2273865 Ontario Inc.,[3] the Honourable Master Albert discharged a construction lien due to the claimant’s failure to serve the Statement of Claim over nineteen months after the claim was issued. However, this case is an extreme example. It is highly unlikely – and as some Masters may suggest “draconian” – for a lien to be discharged where service was delayed by a few months over the ninety-day requirement. Further, Section 53(2) of the Construction Lien Act and Section 1(2) of the recent Procedures regulation explicitly allows parties to apply for an extension of time to serve their Statement of Claim.
Effect of Expired Lien
For the most part, once a lien expires – that’s that. Subject to strategic resurrection of lien rights (which may always be challenged by opposing counsel), an expiration of a lien is final. Where liens expire under Section 37, there is an additional risk that the Courts will deem the Action itself to also expire under the Limitations Act, 2002. In certain limited circumstances, the Courts may still permit an Action to continue where the lien expires under Section 37.[4]
Where liens expire by virtue of a claimant failing to preserve/perfect in time, parties may also commence ordinary civil proceedings to recover in personam through breach of contract remedies. Additionally, claimants may also rely on the breach-of-trust remedies of Sections 7-9 in lieu of ordinary construction lien protections. Finally, it is always wise to explore whether bonds exist, such as Labour and Material Bonds, in which case claimants may proceed through this venue in an attempt to secure payment.
Ultimately, it is incumbent on members of the industry and lawyers alike to keep track of time in lien proceedings. Irrespective of the method, it is always good practice to note the last day of work, the day a certificate was published, and subsequently the last day to lien. Where an actual proceeding is commenced, it is even better practice to “Bring Forward” all of the major dates, such as putting a reminder six-months prior to the two-year limitation to set the matter down for Trial.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. If you have any further questions, or would like to schedule an appointment for legal advice tailored to your circumstances and business, please contact me at dan@fridmar.com.
[1] Construction Act, R.S.O. 1990, c. C.30, as amended, ss. 31, 34, 36
[2] Ibid, s. 53(2) and O. Reg. 302/18: Procedures for Actions Under Part VII, s. 1(2).
[3] 2015 ONSC 4716 at para. 21.
[4] Ibid at para 24. See also Teepee Excavation & Grading Ltd. v. Niran Construction Ltd. (2000), 2000 CarswellOnt 2335 (Ont. C. A.).
