Legal Blog

Mortgage Priority & Holdbacks

BCIMC Construction Fund Corp v. 33 Yorkville Residences Inc. 2022 Ont SCJ

Section 78(1) of the Construction Act notes that, subject to exceptions (e.g. see ss. 2), liens arising from an improvement have priority over mortgages of the owner’s interests. Section 78(2) gives a lien priority to the extent of the deficiency in any holdbacks the owner is required to maintain. In this case, the owner had two building mortgages. Had the owner only one building mortgage, the lien claimants would have had priority over $x of the deficiency in the holdback. But, because there were two mortgages, the lien claimants argued that they had priority of $x over each mortgage. The judge held that they were limited to $x in aggregate.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.