Construction and renovation work can sometimes involve multi-layered contractual relationships between the various players in a construction project, where there are numerous complex areas of consideration. An owner or developer may hire a general contractor, who will then contract with subcontractors for various jobs such as carpentry, plumbing, and electrical work. In the same way, subcontractors may hire sub-subcontractors, those sub-subcontractors may hire sub-sub-subcontractors, and so on. This is often referred to as the "construction pyramid". The pyramid dictates not only who works for whom, but also who pays whom: the owner pays the general contractor, who then pays its subcontractors, and who in turn pays the sub-subcontractors, all the way down to the bottom.
One of the purposes of the construction lien, is to ensure that the general contractor and any subcontractors down the pyramid are remunerated for the services and materials that they have supplied towards an improvement, as stated in a recent discussion regarding proposed changes to the Construction Lien Act. Thus, a lien secures the payment that is due to the general contractor and subcontractors. A lien is one means of enforcement provided under the Construction Lien Act that allows a contractor the ability to potentially take steps to sell the property, and gives the contractor and subcontractors priority over certain creditors who may have claims against the owner of the property.
As soon as a contractor begins providing services or materials to an improvement, it has a lien for the value of services or materials actually supplied to the improvement. However, that lien will expire unless certain steps are taken: (1) the lien must be "preserved"; and (2) the must then lien is "perfected".
To preserve a lien, a contractor must register it on title to the property where the work was done. To perfect the lien requires the contractor to commence an action and register a certificate of action on title to the property. There are strict deadlines for the preservation and perfection of liens, typically triggered by either the date of last supply or the publication of a certificate of substantial performance, although the complete framework for the timing of preservation and perfection of liens is somewhat complicated and depends on when the work was actually performed. Once a lien has been perfected, the action by which it was perfected must be set down for trial within two years of having been commenced otherwise the lien will expire (although the legal action itself may continue).
By: Victoria Yang
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