Legal Blog

Last Screw (2)

A claim for lien arises the moment that a sub provides work to an improvement. It expires 45 days after the earlier of the date that (i) the subcontract is certified to be (totally) complete, (ii) a certificate of substantial performance is published for the entire project, and (iii) the sub performs its last work for the improvement. What happens when the sub seemingly performs its last work on day 100, but then performs more work on day 150? Does it lose its lien rights at day 146? As always, it depends. The issue was discussed in Applewood Glass & Mirror Inc. v. Baun Construction Inc., a 2009 decision of a Master of the Ontario Superior Court of Justice. You may also review our newsletter of January 1999 (Last Screw) for more information on this subject.

Last Gasp

A sub had a contract with its general to supply and install doors and materials to a project. The sub invoiced for $50,300 and was paid nothing. With one exception, the sub completed the last work on June 9. On August 21, the sub replaced an ordinary butt hinge with an electric butt hinge. The work took mere minutes. The cost of the electric butt hinge was less than $560. We do not know the cost of an ordinary butt hinge. The sub registered its lien outside of the 45 days if June 9 was the day of the last work and inside the 45 days if August 21 was the day of the last work.

The sub candidly (stupidly?) agreed that it had not rectified the deficiency earlier because it wanted to keep its lien rights alive. We assume that it was hoping that the general was going to pay and that it would not need to register a lien.

Rules

The Master first commented on a decision of a judge of the Superior Court in which the judge stated that as soon as 45 days passes from the last time a sub works on a project, the sub’s lien rights expire regardless of later work that is done. The Master disagreed with this proposition, as do we. It would mean that if a contract called for materials or services over a long period and work could not be done for, say, 60 days because the general had to perform other work before the sub could complete its work, then the sub would lose its lien. This is incorrect.

Accordingly, the fact that 45 days had elapsed from June 9 was not determinative as to whether the sub’s lien rights had expired by August 21.

The Master, however, gave further propositions from other cases with which he did agree:

1.   Performing work to rectify defective or improper work does not extend the time for registering a claim for lien.

2.   A trivial amount of work performed or services supplied after completion of a contract will not extend the time in which to register a lien.

Decision

Applying the facts to each of the propositions set out above, the Master held that June 21 was the last day of a legitimate supply of goods and services. The sub’s work to replace the butt hinge was the mere completion of a deficiency and, in addition, the work was trivial.   

The Master also held that the lien was not valid because the sub installed the butt hinge solely in an attempt to create an insurance policy to extend its lien time. This may have application to the two propositions, but we cannot see that, in itself, the reason to postpone further work somehow invalidates the validity of that work. If there was real and legitimate work that was done on August 21, which was neither trivial nor deficiency work, then the motives for the sub doing the work should be and are irrelevant.

Upshot

The one-day hearing dealt with the owner’s holdback of $13,300. The owner had already properly paid the balance of its contract price to the general. Accordingly, even before its action, the sub was out $37,000. Subs should not rely on their lien rights alone to protect themselves. Often, lien rights are insufficient to protect subs, as this case demonstrates.