What is a Construction Lien?

The building process can be complicated and usually involves many different players, including owners, construction companies, contractors, subcontractors and material suppliers. Unfortunately, the complexity of the process of construction itself creates an environment where disputes quickly arise. In the event of a dispute, a construction lien gives anyone who has supplied labour or materials for work on that property a legal claim against the property.

 

How does a construction lien affect a Contractor?

From a contractor’s perspective, if you have provided work or materials to a job site that helps to improve the land, you have the right to file a construction lien against the underlying property in the event of a payment default by the project owner or general contractor. A lien claim is for ‘the price of work and material, to the extent that the price remains unpaid’. A construction lien ensures you have a registered interest on the property you are doing work for and will remain in place until the disputed payment is resolved.

 

How does a construction lien affect a Project owner?

From an owner’s perspective, a lien is a security interest registered against the title to your property. Any lien placed on the property, even though its validity must be proven in a court of law, will have the power to stop your project. Generally speaking, a lender will not advance any mortgage money after the lien has been registered because it ranks behind the claim for payment. In extreme cases, the lien claimant may also be able to force the sale of the property to collect the disputed payment.

 

What does ‘Bonding Off a Lien’ mean?

Typically, in order to move forward with the project, the lien must first be removed. To remove a lien as registered against a property without resolution, an applicant has to deliver to the court acceptable security which stands in place of the lien registered on such property. Acceptable forms of security are usually Construction Lien Bonds and Letters of Credit.

 

Learn more: Why you should replace your Letter of Credit with a Lien Bond?

 

How can we help?

As long-standing experts in the Surety Bonding industry we have direct access to the top Surety markets in Canada and through these relationships we are able to deliver Construction Lien Bonds quickly and efficiently to our clients to ensure their projects are able to advance without unnecessary delays.

Contact FCA Surety

Please do hesitate to reach out with questions or for a free second opinion.

1867 Yonge St., Suite 300, Toronto, ON, M4S 1Y5

 

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