- A registered lien is a claim against the property, not necessarily proof that the underlying debt is valid or that it will ultimately be enforced.
- Construction liens have their own statutory timeline under Ontario's Construction Act.
- Which mechanism applies depends on the type of lien, whether it's disputed or undisputed, how close to expiry its statutory preservation or perfection deadlines are, and how much is at…
Closing day arrives, funds are ready to move, and a title search comes back showing a lien still registered against the property — maybe a construction lien from a renovation contractor, maybe something else entirely. For a buyer, the instinct is to panic. In practice, an unresolved lien on closing day is a manageable problem lawyers deal with regularly, provided it's handled correctly.
This article explains what a lien on title on closing day generally means, why it doesn't automatically kill the deal, and the mechanisms — holdbacks, undertakings, and title insurance — that lawyers commonly use to let a closing proceed while the lien gets sorted out.
Why a Lien Doesn't Automatically Stop a Closing
A registered lien is a claim against the property, not necessarily proof that the underlying debt is valid or that it will ultimately be enforced. Sellers are generally expected to deliver title free of liens and encumbrances (other than ones the buyer has specifically agreed to accept), but "free of liens" doesn't have to mean "no lien was ever registered" — it typically means the lien is dealt with, one way or another, as part of the closing mechanics.
Buyers' and sellers' lawyers handle this routinely, particularly on properties that have had recent renovation or construction work, where a construction lien is the most common type of unresolved registration encountered at closing.
Construction Liens Specifically: The Numbers That Matter
Construction liens have their own statutory timeline under Ontario's Construction Act. As of mid-2026, a person who supplied services or materials to a project has a 60-day window after the last supply of services or materials (or after other statutory triggers, such as substantial performance) to preserve their lien claim by registering it — verify this period is still current before relying on it. If they don't act within that period, the lien right expires.
Once preserved, the claimant then has a further statutory window to perfect the lien (through a court action and registration of a certificate of action) or the lien similarly expires.
Separately, anyone paying for construction services or materials on an Ontario project is currently required to hold back 10% of the price of the services or materials actually supplied (again, a figure worth confirming is still current), specifically to protect unpaid subcontractors and suppliers further down the payment chain. This holdback exists independently of any particular lien dispute — it's a standing statutory protection.
How Lawyers Typically Handle an Unresolved Lien at Closing
| Mechanism | How it works |
|---|---|
| Payout at closing | If the lien amount is known and the seller has sufficient proceeds, the lawyer pays the lienholder directly from closing funds and obtains a discharge, sometimes registered shortly after closing rather than before. |
| Holdback from sale proceeds | The seller's lawyer retains an amount from the sale proceeds (often the disputed amount plus a cushion) in trust until the lien is formally discharged or resolved. |
| Undertaking to discharge | The seller's lawyer provides a written undertaking — a professional promise — to obtain and register a discharge within a set period after closing, sometimes paired with a holdback as security for that promise. |
| Title insurance | The buyer's title insurance policy may cover certain undischarged liens that existed at closing but weren't caught or resolved, subject to the policy's specific terms. |
Which mechanism applies depends on the type of lien, whether it's disputed or undisputed, how close to expiry its statutory preservation or perfection deadlines are, and how much is at stake relative to the sale price.
A Practical Closing-Day Checklist for Buyers
- [ ] Has the specific lien been identified — amount, claimant, and registration date?
- [ ] Is the lien within its statutory preservation/perfection window, or has it already expired?
- [ ] Does the seller have sufficient proceeds to pay it out, or is a holdback needed?
- [ ] Is there a written undertaking from the seller's lawyer, and does it have a clear deadline?
- [ ] Does your title insurance policy address undischarged liens present at closing?
- [ ] Has your lawyer confirmed the plan in writing before you release closing funds?
What Happens If the Lien Isn't Resolved on the Undertaking Timeline
If a seller's lawyer's undertaking to discharge a lien isn't honoured within the promised timeframe, the buyer's lawyer generally has recourse — first through direct follow-up and, if necessary, through a complaint process available for undertakings between lawyers, since an unfulfilled professional undertaking is treated seriously within the profession. A holdback retained specifically for this purpose is what typically funds the eventual resolution if the seller doesn't act.
Disputed vs. Undisputed Liens
Not every lien on title reflects a legitimate debt. A seller may dispute the underlying claim entirely — for example, if the work was defective or the amount is inflated. In a disputed case, closing can often still proceed with a larger holdback (sometimes with an amount fixed by court order) while the underlying dispute between the seller and the lienholder is resolved separately, without holding the real estate transaction itself hostage to that fight.
Frequently asked questions
Can I refuse to close if there's a lien on title?
Whether you can refuse to close depends on your Agreement of Purchase and Sale's specific terms about delivering clear title and the nature of the lien. In many cases, a properly structured holdback or undertaking satisfies the "clear title" requirement without needing to delay closing — but this is a fact-specific and contract-specific question worth confirming with your lawyer before you act.
How is a construction lien different from a mortgage on title?
A mortgage is a voluntarily granted security interest tied to a loan; a construction lien is a statutory claim that can be registered unilaterally by an unpaid contractor, subcontractor, or supplier, without the property owner's agreement, provided it's registered within the statutory preservation window.
Does title insurance always cover an undischarged lien?
Not automatically — coverage depends on the specific policy, when the lien arose relative to the policy date, and whether it was disclosed. Review your policy or ask your lawyer rather than assuming coverage applies.
What if the lien is only discovered after closing?
If a lien surfaces after closing that wasn't caught during the title search, your recourse may run through your title insurance policy, a claim against the seller, or both — depending on the specific facts. This is a different (and generally more complicated) situation than a lien identified and managed before closing.
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