There’s a saying in the construction sphere – measure twice, cut once. This wisdom especially applies to construction liens. Once a lien is preserved (by registration or service), it can no longer be amended to address any errors in the lien[1]. The implications? Devastating. While Section 6 of the Construction Act (the “Act”) prevents liens being invalidated due to minor irregularities,[2] this protection extends mainly to procedural errors and does not typically cure more substantive issues in liens.[3]
Indicating the Correct Value of the Lien
One common and dreadful error found in liens is parties securing an incorrect amount owed in their claim for lien. For example, in Ontario, there have been cases where parties omitted the HST amount when indicating the quantum of their claim for lien or the price of their (sub) contract. It is a general preposition that, irrespective of whether a contract is based on a fixed price, time and material, or contingently priced, HST is added to that amount for a total contract price that includes HST.[4] Subsequently, the amount owed or amount paid is credited against the total contract price. Therefore, when securing a construction lien, the claimant must include HST if they want to be secured for the full amount owed.
What happens if the claimant does not include HST? Suppose you’re owed $100,000.00 + HST and, in your claim for lien, you only indicate $100,000.00. This means that you are now limited to a security of $100,000.00, even though you may be owed $113,000.00. While you are still able to claim payment for breach of contract in the amount of $113,000.00 in the Statement of Claim, you may not increase the quantum of your preserved and secured lien to this amount.[5]
Properly Identifying the Parties and Property
Since lien rights are a statutory remedy protecting non-payment under contracts, it is important that the claimant properly identify the parties to their contract. In the event that parties are corporations, it is crucial that the entities are named with the proper spelling and grammar (such as identifying whether the corporation is “Ltd.”, “Inc.”, etc.). While Section 6 has been used to cure minor misnomers in a corporation’s suffix,[6] a lien that indicates a wrong entity could result in the lien being discharged.[7]
Another crucial feature that must be verified by all claimants is the proper identification of the property against which the lien is preserved. Under section 34(5)(e), claimants must identify the property to include the property index number as well as the property description. Failure to correctly include this information results in an improperly registered lien and is also not saved under Section 6.[8]
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] Engineered Construction Ltd. v. Arena Entertainment Corp (2006), 2006 CarswellOnt 8685.
[2] R.S.O. 1990, c. C.30, s. 6.
[3] Yorkwest Plumbing Supply Inc. v. Nortown Plumbing (1998) Ltd., 2016 ONCA 305.
[4] Beta Construction Inc. v. Chiu, 2015 ONSC 5288.
[5] Favot Construction Ltd. v. Maplecrest Developments Inc. (1990), 1990 CarswellOnt 672.
[6] Stubbe’s Precast Commercial Ltd. v. King & Columbia Inc., 2018 ONSC 995.
[7] Brock Contracting v. Kozikowski, 2018 ONSC 7618.
[8] See I.B.E.W. Trust Fund, Local 353 (Trustees of) v. Metropolitan Toronto (Municipality) (1996), 1996 CarswellOnt 2306.
