Legal Blog:

General Lien

Most, if not all, contractors recognise that, under the Construction Lien Act, they have lien rights against a project on which they worked. We suspect that not as many contractors recognise that they have possible rights to a general lien.

What is It

If an owner enters into a single contract with a general contractor to perform work on several premises (or projects), section 20(1) of the Act allows the contractor or a subcontractor to register a general lien against all of the projects for monies owed for all of the services or materials supplied to all of the projects. In essence, the contractor is not limited to separate liens for the separate amounts claimed on each project; it can claim the full amount against each project. The utility of a general lien usually arises in subdivision or condominium projects, but we can envisage a situation in which an owner has two commercial buildings being renovated under one contract.

A general lien gives as good or better security for monies due than specific liens on specific projects. For example, $30,000 may be owed on project #1 and $20,000 may be owed on project #2. It is far better to have a general lien of $50,000 on both projects than $30,000 on one and $20,000 on the other. One project may be deficient in equity or in holdback and that deficiency can be offset by a surplus in the other.

Constraint

Be warned, however, that what the Act giveth, the Act (can sometimes) taketh away. Section 20(2) of the Act eliminates the right to a general lien if the relevant contract provides that all liens must arise and expire on a lot-by-lot basis. Thus, the parties can contract out of the right to the general lien that section 20(1) gives. Once the written contract between an owner and general eliminates the right to a general lien, the general is limited to liens on a project-by-project basis. What happens when the contract between the owner and the general eliminates the right to a general lien, but the contract between the general and the sub does not? Does the sub have a right to a general lien or is the sub bound by the prime contract? This question was answered in Yorkwest Plumbing Supply Inc. v. Nortown Plumbing (1990) Ltd., a 2016 decision of the Ontario Court of Appeal.

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