- A construction lien is a statutory charge against real property that gives unpaid contractors, subcontractors, workers, and suppliers a security interest in the land they improved.
- A lien under the Construction Act arises in two stages: 1.
- The Construction Act requires every owner to retain a statutory holdback — as of writing, 10% of the value of services and materials supplied — from each payment made to the contractor.
Buying a newly built home or a resale home that recently had significant renovations should be exciting. But a construction lien registered against the property — or one that has not yet been registered but is still legally valid — can cloud title and delay or derail your closing. Understanding how construction liens attach to title in Ontario, and how the holdback regime is designed to protect you, can save you from an unpleasant surprise on closing day.
This article explains the basics of Ontario's Construction Act, how liens arise, what your lawyer checks for, and what happens when a lien is discovered.
What Is a Construction Lien?
A construction lien is a statutory charge against real property that gives unpaid contractors, subcontractors, workers, and suppliers a security interest in the land they improved. Ontario's Construction Act (formerly the Construction Lien Act) creates this right automatically — no agreement between the lien claimant and the landowner is required. If someone supplies services or materials to improve a property and goes unpaid, they can register a lien against the land itself.
Who Can Register a Lien?
Any person who supplies services or materials to an improvement of real property in Ontario may have lien rights. This includes:
- General contractors and subcontractors
- Tradespeople (electricians, plumbers, drywallers, etc.)
- Suppliers of building materials
- Architects, engineers, and other design professionals
- Equipment rental suppliers (in some circumstances)
The lien claimant does not need to have a direct contract with the owner — a subcontractor two or three levels deep in the contracting chain can lien your property even though you never met them.
How a Lien Attaches to Title
A lien under the Construction Act arises in two stages:
- Attachment (the right arises). A lien attaches to the owner's interest in the land the moment services or materials are first supplied to the improvement. Attachment is automatic — it does not require registration. This is important: a valid lien may exist even before anything appears on title.
- Perfection (the lien is protected). To preserve a lien against third parties, the claimant must register a claim for lien in the Land Registry within a strict time limit (as of writing, generally 60 days from the last day services or materials were supplied — verify the current deadline). An unperfected lien is not visible on title but can still bind the property between the owner and the claimant.
- Expiry. A registered lien expires if the claimant does not take steps to enforce it (by commencing a court action and registering a certificate of action) within the period required by the Act. Expired liens can be vacated from title on application.
The Holdback Requirement: Your Built-In Protection
The Construction Act requires every owner to retain a statutory holdback — as of writing, 10% of the value of services and materials supplied — from each payment made to the contractor. The holdback is not released until the lien period has expired without a lien being registered, or until any registered liens are resolved.
Why Does the Holdback Matter to Buyers?
When you buy a newly built or recently renovated property, you are entitled to assume that the builder or previous owner complied with the holdback rules. If they did not, subcontractors and suppliers who went unpaid may have lien rights that attach to the property you are buying. Your lawyer will:
- Search the Land Registry for registered liens
- Ask the vendor's lawyer to provide a statutory declaration that holdback obligations have been met
- Require a holdback from the purchase price to cover the residual lien period if the improvement was recent
The holdback your lawyer retains on closing is not a penalty — it is a protective measure that is released once the lien period expires without a claim being registered.
New Builds vs. Resale Renovations
New Construction
Buying directly from a builder on a new build involves the most lien exposure because the entire construction project may still be within the lien period at the time you take title. Your agreement of purchase and sale should address who is responsible for ensuring a clean title at closing. Your lawyer will search for liens and may require that the builder provide occupancy certificates, TARION documentation, and a holdback arrangement.
Resale Homes with Recent Renovations
A resale home where the seller recently completed a significant renovation — an addition, a kitchen gut, a new roof — can have outstanding lien exposure. Even if no lien is currently registered on title, if the last day of supply was less than 60 days ago (verify the current period), a lien could still be registered before you close. Your lawyer should ask targeted questions about recent work and consider whether a post-closing holdback is warranted.
What Happens When a Lien Is Found on Title
If your lawyer discovers a registered lien during a title search:
Option 1: Require the Vendor to Discharge It
The simplest resolution is requiring the seller to pay out the lien and register a discharge before closing. Most purchase agreements include a term requiring the seller to provide vacant possession and clear title.
Option 2: Vacate the Lien by Paying into Court
Under the Construction Act, a lien can be vacated from title by paying the amount of the lien (plus a security percentage) into court. The lien is removed from the register, and the dispute between the lienholder and the party who owes them money is resolved separately. This allows closing to proceed while the underlying dispute continues.
Option 3: Take a Holdback and Undertaking
In less common situations, the parties may agree to a holdback from the vendor's sale proceeds, with the vendor's lawyer giving an undertaking to discharge the lien and remit the holdback once resolved.
Frequently asked questions
Can a subcontractor I never hired lien my new home?
Yes. The Construction Act gives lien rights to anyone who supplied services or materials to an improvement of your property, regardless of whether they have a direct contract with you. If your builder failed to pay a framing subcontractor, that subcontractor can register a lien against your home — even after you have paid the builder in full.
What is a "preserved" lien versus a "perfected" lien?
Preservation means the lien has been registered in the Land Registry within the time limit, making it visible. Perfection means the claimant has commenced a court action and registered a certificate of action, making the lien enforceable against third parties. Preservation without perfection within the required timeframe can render the lien unenforceable. Verify current timelines with a lawyer.
How long does the lien period last?
As of writing, subcontractors and suppliers generally have 60 days from the last day they supplied services or materials to register their lien. The general contractor typically has 60 days from the date the contract is substantially performed or abandoned. These periods can overlap and interact — verify the current rules under the Construction Act.
Should I worry about liens if the previous owner finished renovations a year ago?
If more than the lien preservation period has passed since the last day of supply with no lien having been registered, you are generally protected. Your lawyer will confirm the timeline from the search results and any vendor declarations.
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