Legal Blog

Lien Strategy

We have already talked extensively in other issues of this newsletter about improper liens and liens for excessive amounts. Even when there is an improper lien, the remedy accorded to the owner must still be appropriate. The owner in Carosi Construction v. Barrie & District Association, a decision of the Ontario Court (General Division), learned this lesson the hard way.

Too Much 

The general registered a claim for lien for all amounts owed from the time that the general first started to work. Unfortunately, the 45 day lien period had long since expired at the time of the registration and the lien was not timely. The owner brought a motion to discharge the claim for lien and was unsuccessful. Why?

There are two time periods for liens for general contracts. The first time period relates to work done up to substantial performance of the contract.  The second period relates to work done after substantial performance and before total performance. Although the time for registration of a lien may have expired for the work done in the first period, the lien rights for the second time period are unaffected.

In the Carosi case, the general had supplied $80,000 of work after substantial performance and the lien period for that work had not yet expired. Accordingly, the judge allowed the lien to remain but only as to the work performed in the second period. Because the judge did not discharge the lien, the owner was unsuccessful in its motion and had to pay costs of the motion to the general in the amount of $1,500.00.

Even though only $80,000 constituted a lien against the lands, the action to enforce the lien could include a claim for all the monies outstanding. Any monies found owing above the $80,000 would not be a lien on the lands but would still be a personal judgment against the owner and could be enforced like any other personal judgment.

Alternatives

The general should have liened for the proper amount. It should not have included work done prior to substantial performance. It put itself in a vulnerable position whereby the owner could have made a claim for damages for an excessive lien or a claim for solicitor–client costs.

The owner knew that the lien was for an improper amount but should also have known that the lien itself was valid. If the owner wanted to clear title and wanted to post security for an appropriate amount, the owner should have brought a motion to reduce the value of the security. It would have been successful and would have obtained an award of costs against the general.